CHAPTER 19
Managerial Accounting
ASSIGNMENT CLASSIFICATION TABLE
Learning Objectives
Questions
Brief
Exercises
Do It!
Exercises
*1. Identify the features of
managerial accounting and
the functions of
management.
1, 2, 3, 4, 5,
6, 7, 8
1, 2
1
1
*2. Describe the classes of
manufacturing costs and the
differences between product
and period costs.
9, 11, 12, 13,
14
3, 4, 5, 6
2
2, 3, 4, 5, 6,
7, 13
*3. Demonstrate how to compute
cost of goods manufactured
and prepare financial
statements for a
manufacturer.
10, 15, 16, 17,
18, 19, 20, 21
7, 8, 9, 10
3
8, 9, 10, 11,
12, 13, 14, 15,
16, 17
*4. Discuss trends in managerial
accounting.
22, 23, 24, 25,
26
11
4
18
ASSIGNMENT CHARACTERISTICS TABLE
Problem
Number
Description
Difficulty
Level
Time
Allotted (min.)
1A
Classify manufacturing costs into different categories and
compute the unit cost.
Simple
20–30
2A
Classify manufacturing costs into different categories and
compute the unit cost.
Simple
20–30
3A
Indicate the missing amount of different cost items, and
prepare a condensed cost of goods manufactured schedule,
an income statement, and a partial balance sheet.
Moderate
30–40
4A
Prepare a cost of goods manufactured schedule, a partial
income statement, and a partial balance sheet.
Moderate
30–40
5A
Prepare a cost of goods manufactured schedule and a
correct income statement.
Moderate
30–40
BLOOM’ S TAXONOMY TABLE
Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End–of-Chapter Exercises and Problems
Learning Objective
Knowledge
Comprehension
Application
Analysis
Synthesis
Evaluation
* 1. Identify the features of managerial
accounting and the functions of
management.
Q19-1
Q19-2
Q19-3
Q19-4
Q19-5
Q19-6
Q19-7
Q19-8
BE19-1
BE19-2
DI19-1
E19-1
* 3. Demonstrate how to compute cost of
goods manufactured and prepare
financial statements for a
manufacturer.
Q19-19
Q19-10
Q19-20
Q19-21
E19-15
Q19-15
Q19-16
Q19-17
Q19-18
BE19-7
BE19-8
BE19-9
BE19-10
DI19-3
E19-8
E19-9
E19-12
E19-13
E19-14
E19-16
E19-17
P19-4A
E19-10
E19-11
P19-3A
P19-5A
ANSWERS TO QUESTIONS
1. (a) Disagree. Managerial accounting is a field of accounting that provides economic and financial
information for managers and other internal users.
(b) Joe is incorrect. Managerial accounting applies to all types of businesses—service, merchandising,
and manufacturing.
3. Differences in the content of the reports are as follows:
Financial
Managerial
• Pertains to business as a whole and is highly
aggregated.
• Limited to double-entry accounting and cost
• Pertains to subunits of the business and
may be very detailed.
• Extends beyond double-entry accounting
4. Linda should know that the management of an organization performs three broad functions:
(1) Planning requires management to look ahead and to establish objectives.
(2) Directing involves coordinating the diverse activities and human resources of a company to
produce a smooth-running operation.
Questions Chapter 19 (Continued)
7. The differences between income statements are in the computation of the cost of goods sold as
follows:
Manufacturing
Beginning finished goods inventory plus cost of goods manufactured minus
8. The difference in balance sheets pertains to the presentation of inventories in the current asset
section. In a merchandising company, only merchandise inventory is shown. In a manufacturing
company, three inventory accounts are shown: finished goods, work in process, and raw materials.
9. Manufacturing costs are classified as either direct materials, direct labor, or manufacturing overhead.
10. No, Mel is not correct. The distinction between direct and indirect materials is based on two criteria:
(1) physical association and (2) the convenience of making the physical association. Materials which
cannot be easily associated with the finished product are considered indirect materials.
13. (a) X = total cost of work in process.
(b) X = cost of goods manufactured.
14. Raw materials inventory, beginning …………………………………………………………….. 12,000 $
Raw materials purchases ………………………………………………………………………….. 170,000
16. (a) Total cost of work in process ($26,000 + $640,000) ……………………………….. $666,000
(b) Cost of goods manufactured ($666,000 – $32,000) ……………………………….. $634,000
17. The order of listing is finished goods inventory, work in process inventory, and raw materials inventory.
Questions Chapter 19 (Continued)
18. The products differ in how each are consumed by the customer. Services are consumed
immediately; the product is not put into inventory. Meals at a restaurant are the best example
where they are consumed immediately by the customer. There could be a long lead time before
the product is consumed in a manufacturing environment.
19. Yes, product costing techniques apply equally well to manufacturers and service companies. Each
needs to keep track of the cost of production or services in order to know whether it is generating
a profit. The techniques shown in this chapter, to accumulate manufacturing costs to determine
manufacturing inventory, are equally useful for determining the cost of services.
22. In a just-in-time inventory system, the company has no extra inventory stored. Consequently, if
some units that are produced are defective, the company will not have enough units to deliver to
customers.
23. The balanced scorecard is called “balanced” because it strives to not over emphasize any one
performance measure, but rather uses both financial and non-financial measures to evaluate all
aspects of a company’s operations in an integrated fashion.
26. Activity-based costing is an approach used to allocate overhead based on each product’s relative
use of activities in making the product. Activity-based costing is beneficial because it results in
more accurate product costing and in more careful scrutiny of all activities in the value chain.
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 19-1
Financial Accounting
Managerial Accounting
Primary users
External users
Internal users
Types of reports
Financial statements
Internal reports
Frequency of reports
Quarterly and annually
As frequently as needed
for specific decisions
accounting principles
public accountant
BRIEF EXERCISE 19-2
(a) 1. Planning.
BRIEF EXERCISE 19-3
(a) DM Frames and tires used in manufacturing bicycles.
BRIEF EXERCISE 19-4
(a) Direct materials.
(b) Direct materials.
(c) Direct labor.
(d) Manufacturing overhead.
BRIEF EXERCISE 19-5
(a) Product.
(b) Period.
BRIEF EXERCISE 19-6
Product Costs
Direct
Materials
Direct
Labor
Factory
Overhead
(a)
X
BRIEF EXERCISE 19-7
(a) Direct materials used …………………………………………………… $180,000
Direct labor …………………………………………………………………. 209,000
BRIEF EXERCISE 19-8
ROLAND COMPANY
Balance Sheet
December 31, 2017
Current assets
Cash …………………………..…………………………….. $ 62,000
Accounts receivable ………………………………….. 200,000
Inventories
BRIEF EXERCISE 19-9
Direct
Materials Used
Direct
Labor Used
Factory
Overhead
Total
Manufacturing
Costs
(1)
$151,000
BRIEF EXERCISE 19-10
Total
Manufacturing
Costs
Work in
Process
(January 1)
Work in
Process
(December 31)
Cost of Goods
Manufactured
(1)
$151,000*
$189,000
BRIEF EXERCISE 19–11
One implication of SOX was to clarify top management’s responsibility for
the company’s financial statements. CEOs and CFOs must now certify that
financial statements give a fair presentation of the company’s operating
results and its financial condition. In addition, top managers must certify
SOLUTIONS FOR DO IT! REVIEW EXERCISES
DO IT! 19-1
1. False
DO IT! 19-2
Period costs:
Product costs:
Blank CDs (DM)
Depreciation of CD image burner (MO)
Salary of factory manager (MO)
DO IT! 19-3
TOMLIN COMPANY
Cost of Goods Manufactured Schedule
For the Month Ended April 30
Work in process, April 1 ………………………….. $ 5,000
Direct materials ……………………………………….
Raw materials, April 1 …………………………. $ 10,000
Cost of goods manufactured …………………… $335,500
DO IT! 19-4
1. f
2. a
SOLUTIONS TO EXERCISES
EXERCISE 19-1
1. False. Financial accounting focuses on providing information to external
users.
2. False. Line positions are directly involved in the company’s primary
revenue-generating operating activities.
EXERCISE 19-2
1. (b) Direct labor.*
2. (c) Manufacturing overhead.
EXERCISE 19-3
(a)
Bicycle components …………… DM
Advertising expense ………….. Period
Depreciation on plant ………. MOH
Property taxes on plant ………… MOH
Salaries paid to sales clerks … Period
(b) Product costs are recorded as a part of the cost of inventory because
they are an integral part of the cost of producing the bicycles. Product
EXERCISE 19-4
(a) Factory utilities …………………………………………………………….. $ 15,500
Depreciation on factory equipment ……………………………….. 12,650
(b) Direct materials ……………………………………………………….…… $137,600
Direct labor ………………………………………………………………….. 69,100
EXERCISE 19-5
1.
(c)
3.
(a)
5.
(b)*
7.
(a)
9.
(c)
*or sometimes (c), depending on the circumstances.
EXERCISE 19-6
1. (b)
EXERCISE 19-7
(a) Delivery service (product) costs:
Indirect materials
$ 6,400
Depreciation on delivery equipment
11,200
Dispatcher’s salary
Gas and oil for delivery trucks
Drivers’ salaries
16,000
Total
$41,100
(b) Period costs:
Property taxes on office building
$ 870
CEO’s salary
12,000
Office supplies
Office utilities
Repairs on office equipment
180
Total
$19,290
EXERCISE 19-8
(a) Work-in-process, 1/1 …………………………. $ 12,000
Direct materials used ………………………… $120,000
Direct labor ………………………………………. 110,000
Manufacturing overhead
Depreciation on plant ………………….. $60,000
EXERCISE 19-9
Total raw materials available for use:
Direct materials used ………………………………………………. $180,000
Raw materials inventory (1/1):
Total raw materials available for use:
Direct materials used ………………………………………………. $180,000
Add: Raw materials inventory (12/31) ……………………… 22,500
Total cost of work in process:
EXERCISE 19-9 (Continued)
Total manufacturing costs:
Total cost of work in process …………………………... $621,000
Less: Work in process (1/1) ……………………………… 210,000
EXERCISE 19–10
A + $57,000 + $46,500 = $195,650 $252,500 – $11,000 = F
A = $92,150 F = $241,500
Additional explanation to EXERCISE 19-10 solution:
Case A
(a) Total manufacturing costs ……………………………….. $195,650
EXERCISE 19-10 (Continued)
(b) Total cost of work in process …………………………... $221,500
Less: Total manufacturing costs ………………………. 195,650
Work in process (1/1/17) …………………………………… $ 25,850
Case B
(d) Direct materials used ………………………………………. $ 68,400
Direct labor ……………………………………………………… 86,000
Manufacturing overhead ………………………………….. 81,600
Total manufacturing costs ……………………………….. $236,000
Cost of goods manufactured ……………………………. $241,500
Case C
(g) Total manufacturing costs ……………………………….. $253,700
Less: Manufacturing overhead ………………………… $102,000
Direct materials used …………………………….. 130,000 232,000
EXERCISE 19–11
(a) (a) $117,000 + $140,000 + $87,000 = $344,000
(b) $344,000 + $33,000 – $360,000 = $17,000
(b) HORIZON COMPANY
Cost of Goods Manufactured Schedule
For the Year Ended December 31, 2017
Work in process, January 1 …………………………. $ 33,000
Direct materials …………………………………………… $117,000
Direct labor …………………………………………………. 140,000
EXERCISE 19–12
(a) CEPEDA CORPORATION
Cost of Goods Manufactured Schedule
For the Month Ended June 30, 2017
Work in process, June 1……………………….. $ 3,000
Direct materials used …………………………... $20,000
Direct labor ………………………………………….. 40,000
Manufacturing overhead
Indirect labor ………………………………… $4,500
Factory manager’s salary ………………. 3,000
(b) CEPEDA CORPORATION
Income Statement (Partial)
For the Month Ended June 30, 2017
Sales revenue ………………………………………………… $92,100
Cost of goods sold
EXERCISE 19–13
(a)
WASHINGTON CONSULTING
Schedule of Cost of Contract Services Performed
For the Month Ended August 31, 2017
Supplies used (direct materials) ……………………………..
$ 1,700
Salaries of professionals (direct labor) ……………………
15,600
Service overhead:
Utilities for contract operations ………………………….
$1,400
Contract equipment depreciation ……………………….
Insurance on contract operations ………………………
Janitorial services for professional offices ………….
700
Total overhead …………………………………………….
EXERCISE 19–14
(a) Work-in-process, 1/1 ………………………… $ 13,500
Direct materials
Materials inventory, 1/1 ………………. $ 21,000
Materials purchased …………………… 150,000
Materials available for use ………….. 171,000