Managerial Accounting Tools For Business Decision Making 8th Edition Weygandt Solutions Manual

Managerial Accounting Tools for
Business Decision Making 8th Edition

Weygandt Solutions Manual
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ools-for-business-decision-making-8th-edition-weygandt-solutions-manual/
Managerial Accounting Tools for Business Decision Making 8th Edition Weygandt Solutions Manu
CHAPTER 1
Managerial Accounting
ASSIGNMENT CLASSIFICATION TABLE
Brief A
Learning Objectives Questions Exercises Do It! Exercises Problems
*1. Identify the features of 1, 2, 3, 4, 5, 1, 2 1 1

managerial accounting and 6, 7
the functions of
management.
*2. Describe the classes of 8, 9, 10 3, 4, 5, 6 2 2, 3, 4, 5, 6, 1A, 2A

manufacturing costs and the 7, 13
differences between product
and period costs.
*3. Demonstrate how to compute 11,12, 13, 14, 7, 8, 9, 10 3 8, 9, 10, 11, 3A, 4A, 5A
cost of goods manufactured 15, 16, 12, 13, 14, 15,
and prepare financial 16, 17
statements for a
manufacturer.
*4. Discuss trends in managerial 17, 18, 19, 20, 11 4 18

accounting. 21, 22, 23, 24,
25
Copyright © 2018 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 8/e, Solutions Manual (For Instructor Use Only) 1-1
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ASSIGNMENT CHARACTERISTICS TABLE
Problem Difficulty Time

Number Description Level Allotted (min.)
1A Classify manufacturing costs into different categories and Simple 20–30

compute the unit cost.
2A Classify manufacturing costs into different categories and Simple 20–30

compute the unit cost.
3A Indicate the missing amount of different cost items, and Moderate 30–40
prepare a condensed cost of goods manufactured schedule,
an income statement, and a partial balance sheet.
4A Prepare a cost of goods manufactured schedule, a partial Moderate 30–40

income statement, and a partial balance sheet.
5A Prepare a cost of goods manufactured schedule and a Moderate 30–40

correct income statement.
1-2 Copyright © 2018 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
BLOOM’S TAXONOMY TABLE
Copyright © 2018 John Wiley & Sons, Inc.
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 Q1-1
accounting and the functions of Q1-2 BE1-1
management. Q1-3 BE1-2
Q1-4 DI1-1
Q1-5 E1-1
Q1-6
* 2. Describe the classes of Q1-10 Q1-8 BE1-6 E1-4 P1-1A
manufacturing costs and the Q1-9 DI1-2 E1-7 P1-2A
differences between product and E1-2 E1-13
period costs. E1-3
Weygandt, Managerial Accounting, 8/e, Solutions Manual
E1-5
BE1-3 E1-6
BE1-4
BE1-5
* 3. Demonstrate how to compute cost of Q1-7 Q1-11 Q1-13 BE1-9 E1-13 E1-9
goods manufactured and prepare Q1-12 Q1-14 BE1-10 E1-14 E1-10
financial statements for a Q1-15 DI1-3 E1-16 E1-11
manufacturer. E1-8 E1-17 P1-3A
E1-15 P1-4A P1-5A
BE1-7 E1-12
BE1-8
* 4. Discuss trends in managerial Q1-16 Q1-17 Q1-25
accounting. Q1-18 Q1-19 BE1-11
Q1-20 DI1-4
Q1-21 E1-18
Q1-22
Q1-23
Q1-24
Continuing Problems CD1
WP1
Expand Your Critical Thinking CT1-3 CT1-6 CT1-1 CT1-5
(For Instructor Use Only)
CT1-2
CT1-7
CT1-4
1-3
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.
LO1 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Measurement IMA: Cost Management
2. (a) Financial accounting is concerned primarily with external users such as stockholders, creditors,
and regulators. In contrast, managerial accounting is concerned primarily with internal users such
as officers and managers.
(b) Financial statements are the end product of financial accounting. The statements are prepared
quarterly and annually. In managerial accounting, internal reports may be prepared as frequently
as needed.
(c) The purpose of financial accounting is to provide general-purpose information for all users.
The purpose of managerial accounting is to provide special-purpose information for specific
decisions.
3. Differences in the content of the reports are as follows:

Financial Managerial
 Pertains to business as a whole and is highly  Pertains to subunits of the business and
aggregated. may be very detailed.
 Limited to double-entry accounting and cost  Extends beyond double-entry accounting
data. system to any relevant data.
 Generally accepted accounting principles.  Standard is relevance to decisions.
In financial accounting, financial statements are verified annually through an independent audit
by certified public accountants. There are no independent audits of internal reports issued by
managerial accountants.
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.
(3) Controlling is the process of keeping the company’s activities on track.
5. Disagree. Decision making is not a separate management function. Rather, decision making involves
the exercise of good judgment in performing the three management functions explained in the
answer to question four above.
6. Employees with line positions are directly involved in the company’s primary revenue generating
operating activities. Examples would include plant managers and supervisors, and the vice president
of operations. In contrast, employees with staff positions are not directly involved in revenue-
generating operating activities, but rather serve in a support capacity to line employees. Examples
include employees in finance, legal, and human resources.
Questions Chapter 1 (Continued)
7. The difference in balance sheets pertains to the presentation of inventories in the current asset
section. In a merchandising company, only inventory is shown. In a manufacturing company,
three inventory accounts are shown: finished goods, work in process, and raw materials.
LO3 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Measurement IMA: Cost management
8. Manufacturing costs are classified as either direct materials, direct labor, or manufacturing overhead.
9. 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.
10. Product costs, or inventoriable costs, are costs that are a necessary and integral part of producing
the finished product. Period costs are costs that are identified with a specific time period rather
than with a salable product. These costs relate to nonmanufacturing costs and therefore are not
inventoriable costs.
LO2 BT: K Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Measurement IMA: Cost management
11. A merchandising company has beginning inventory, cost of goods purchased, and ending
inventory. A manufacturing company has beginning finished goods inventory, cost of goods
manufactured, and ending finished goods inventory.
12. (a) X = total cost of work in process.

(b) X = cost of goods manufactured.
13. Raw materials inventory, beginning ....................................................................... $12,000

Raw materials purchases ...................................................................................... 170,000
Total raw materials available for use ...................................................................... 182,000
Raw materials inventory, ending ............................................................................ (15,000 )
Direct materials used .................................................................................... $167,000
LO3 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Measurement IMA: Cost management
($12,000 + $170,000 - $15,000 = $167,000)
(Beg. RM + RM purch. – End. RM = DM used)
14. Direct materials used ............................................................................................. $240,000

Direct labor used ................................................................................................... 220,000
Total manufacturing overhead ............................................................................... 180,000
Total manufacturing costs ............................................................................. $640,000
($240,000 + $220,000 + $180,000 = $640,000)
(DM used + DL used + Tot. MOH = Tot. mfg. costs)
15. (a) Total cost of work in process ($26,000 + $640,000)...................................... $666,000

(b) Cost of goods manufactured ($666,000 – $32,000) ...................................... $634,000
[(a: $26,000 + $640,000 = $666,000); (b: $666,0000 - $32,000 = $634,000)]
[(a: Beg. WIP + Tot. mfg. costs = Tot. cost of WIP); (b: Tot. cost of WIP – End. WIP = COGM)]
16. The order of listing is finished goods inventory, work in process inventory, and raw materials inventory.
Questions Chapter 1 (Continued)
17. 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.
18. The 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.
19. The value chain refers to all activities associated with providing a product or service. For a manufac-
turer, these include research and development, product design, acquisition of raw materials, production,
sales and marketing, delivery, customer relations, and subsequent service.
LO4 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Decision Modeling IMA: Strategic Planning
20. An enterprise resource planning (ERP) system is an integrated software system that provides a
comprehensive, centralized resource for information. Its primary benefits are that it replaces the
many individual systems typically used for receivables, payables, inventory, human resources,
etc. Also, it can be used to get information from, and provide information to, the company’s customers
and suppliers.
21. 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.
22. 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.
23. Budgets are prepared by companies to provide future direction. Because the budget is also used
as an evaluation tool, some managers try to game the budgeting process by underestimating
their division’s predicted performance so that it will be easier to meet their performance targets.
On the other hand, if the budget is set at unattainable levels, managers sometimes take unethical
actions to meet targets to receive higher compensation or in some cases to keep their jobs.
LO4 BT: C Difficulty: Easy TOT: 3 min. AACSB: Ethics AICPA PC: Professional Demeanor IMA: Business Applications
24. CEOs and CFOs must now certify that financial statements give a fair presentation of the company’s
operating results and its financial condition and that the company maintains an adequate system
of internal controls. In addition, the composition of the board of directors and audit committees receives
more scrutiny, and penalties for misconduct have increased.
LO4 BT: C Difficulty: Easy TOT: 3 min. AACSB: Ethics AICPA FC: Measurement AICPA PC: Professional Demeanor IMA: FSA, Business
Applications
25. 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.
LO4 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Decision Modeling IMA: Cost management
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 1-1
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
Purpose of reports General-purpose Special-purpose information
for specific decisions
Content of reports Generally accepted Relevance to decisions
accounting principles
Verification process Annual audit by certified No independent audits
public accountant
BRIEF EXERCISE 1-2
(a) 1. Planning.
(b) 2. Directing.
(c) 3. Controlling.
BRIEF EXERCISE 1-3
(a) DM Frames and tires used in manufacturing bicycles.

(b) DL Wages paid to production workers.
(c) MO Insurance on factory equipment and machinery.
(d) MO Depreciation on factory equipment.
BRIEF EXERCISE 1-4
(a) Direct materials.

(b) Direct materials.
(c) Direct labor.
(d) Manufacturing overhead.
(e) Manufacturing overhead.
(f) Direct materials.
(g) Direct materials.
(h) Manufacturing overhead.
BRIEF EXERCISE 1-5
(a) Product.
(b) Period.
(c) Period.
(d) Period.
(e) Product.
(f) Product.
BRIEF EXERCISE 1-6
Product Costs
Direct Direct Factory
Materials Labor Overhead
(a) X
(b) X
(c) X
(d) X
BRIEF EXERCISE 1-7
(a) Direct materials used ............................................................ $180,000

Direct labor ............................................................................ 209,000
Total manufacturing overhead ............................................. 208,000
Total manufacturing costs ............................................ $597,000
(b) Beginning work in process .................................................. $ 25,000

Total manufacturing costs ................................................... 597,000
Total cost of work in process ....................................... $622,000
BRIEF EXERCISE 1-7 (Cont’d)
($25,000 + $597,000 = $622,000)
(Beg. WIP + Tot. mfg. costs = Tot. cost in WIP)
LO3 BT: AP Difficulty: Easy TOT: 5 min. AACSB: Analytic AICPA FC: Measurement IMA: Cost Management
BRIEF EXERCISE 1-8
ROLAND COMPANY
Balance Sheet
December 31, 2020
Current assets
Cash................................................................... $ 62,000
Accounts receivable ......................................... 200,000
Inventories
Finished goods.......................................... $91,000
Work in process ........................................ 87,000
Raw materials ............................................ 83,000 261,000
Prepaid expenses ............................................. 38,000
Total current assets .......................... $561,000
LO3 BT: AP Difficulty: Easy TOT: 5 min. AACSB: Analytic AICPA FC: Reporting IMA: Cost Management
[$62,000 + $200,000 + ($91,000 + $87,000 + $83,000) + $38,000 = $561,000]
[Cash + Accts. rec. + (Fin. gds. + WIP + Raw mat.) + Prepd. exp. = Tot. current assets]
BRIEF EXERCISE 1-9
Total
Direct Direct Factory Manufacturing
Materials Used Labor Used Overhead Costs
(1) $151,000
(2) $81,000
(3) $144,000
BRIEF EXERCISE 1-10
Total Work in Work in

Manufacturing Process Process Cost of Goods
Costs (January 1) (December 31) Manufactured
(1) $151,000* $189,000
(2) $133,000
(3) $58,000
*$40,000 + $61,000 + $50,000 (data from BE 1-9)
BRIEF EXERCISE 1-11
One implication of SOX was to clarify top management’s responsibility for

the company’s financial statements. CEOs and CFOs must certify that
financial statements give a fair presentation of the company’s operating
results and its financial condition. In addition, top managers must certify
that the company maintains an adequate system of internal controls to
safeguard the company’s assets and ensure accurate financial reports. Also,
more attention is now paid to the composition of the company’s board of
directors. In particular, the audit committee of the board of directors must
be comprised entirely of independent members (that is, non-employees) and
must contain at least one financial expert. Finally, to increase the likelihood
of compliance with these and other new rules, the penalties for misconduct
were substantially increased.
LO4 BT: C Difficulty: Easy TOT: 6 min. AACSB: Analytic AICPA PC: Professional Demeanor, Communication
IMA: FSA, Business Applications
SOLUTIONS FOR DO IT! EXERCISES
DO IT! 1-1
1. False
2. False
3. False
4. True
DO IT! 1-2
Period costs:
Advertising
Salaries of sales representatives
Product costs:
Blank CDs (DM)
Depreciation of CD image burner (MO)
Salary of factory manager (MO)
Factory supplies used (MO)
Paper inserts for CD cases (DM)
CD plastic cases (DM)
Salaries of factory maintenance employees (MO)
Salaries of employees who burn music onto CDs (DL)
DO IT! 1-3
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
Raw materials purchases .......................... 98,000
Total raw materials available for use ........ 108,000
Less: Raw materials, April 30................... 14,000
Direct materials used ................................. $ 94,000
Direct labor ..................................................... 80,000
Manufacturing overhead ................................ 160,000
Total manufacturing costs............................. 334,000
Total cost of work in process ........................ 339,000
Less: Work in process, April 30 ................... 3,500
Cost of goods manufactured ......................... $335,500
LO3 BT: AP Difficulty: Easy TOT: 6 min. AACSB: Analytic AICPA FC: Reporting IMA: Cost Management
[$5,000 + (($10,000 + $98,000 - $14,000) + $80,000 + $160,000) - $3,500 = $335,500]
[Beg. WIP + ((Beg. raw mat. + Raw mat. purch. – End. raw mat.) + DL + MOH) – End. WIP = COGM]
DO IT! 1-4
1. f
2. a
3. c
4. h
5. d
6. e
7. b
8. g
LO4 BT: C Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Decision Modeling IMA: Cost Management
SOLUTIONS TO EXERCISES
EXERCISE 1-1
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.
3. False. Preparation of budgets is part of managerial accounting.
4. False. Managerial accounting applies to service, merchandising and
manufacturing companies.
5. True.
6. False. Managerial accounting reports are prepared as frequently as
needed.
7. True.
8. True.
9. False. Financial accounting reports must comply with generally accepted
accounting principles.
10. False. The company treasurer reports directly to the vice president of
finance/chief financial officer.
EXERCISE 1-2
1. (b) Direct labor.*

2. (c) Manufacturing overhead.
5. (a) Direct materials.
6. (b) Direct labor.
10. (a) Direct materials.
*or sometimes (c), depending on the circumstances

EXERCISE 1-3
(a) Bicycle components ............... DM Advertising expense .............. Period

Depreciation on plant .......... MOH Property taxes on plant ............. MOH
Property taxes on store .... Period Delivery expense .................... Period
Labor costs of assembly Sales commissions ................ Period
line workers ............................ DL Salaries paid to sales clerks ....Period
Factory supplies used ......... MOH
(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
costs are not expensed until the goods are sold. Period costs are
recognized as an expense when incurred.
EXERCISE 1-4
(a) Factory utilities ....................................................................... $ 15,500

Depreciation on factory equipment ....................................... 12,650
Indirect factory labor .............................................................. 48,900
Indirect materials .................................................................... 80,800
Factory manager’s salary ...................................................... 8,000
Property taxes on factory building ........................................ 2,500
Factory repairs ....................................................................... 2,000
Manufacturing overhead ........................................................ $170,350
($15,500 + $12,650 + $48,900 + $80,800 + $8,000 + $2,500 + $2,000 = $170,350)
(Fact. util. + Depr. on fact. equip. + Ind. fact. labor + Ind. mat. + Fact. mgr’s. sal. + Prop. tax. on fact. bldg.. + Fact.
repairs = MOH)
(b) Direct materials ...................................................................... $137,600

Direct labor ............................................................................. 69,100
Manufacturing overhead ........................................................ 170,350
Product costs ......................................................................... $377,050
(c) Depreciation on delivery trucks ............................................ $ 3,800

Sales salaries ......................................................................... 46,400
Repairs to office equipment .................................................. 1,300
Advertising ............................................................................. 15,000
Office supplies used .............................................................. 2,640
Period costs ........................................................................... $ 69,140
($3,800 + $46,400 + $1,300 + $15,000 + $2,640 = $69,140)
(Depr. on del. trks. + Sales sal. + Repairs on off. equip. + Advert. + Off. sup. used = Period costs)
EXERCISE 1-5
1. (c) 3. (a) 5. (b)* 7. (a) 9. (c)

2. (c) 4. (c) 6. (d) 8. (b) 10. (c)
*or sometimes (c), depending on the circumstances.

EXERCISE 1-6
1. (b)
2. (c)
3. (a)
4. (c) (Only for the portion that applies to the x-ray department)
5. (c)
6. (c)
7. (c)
8. (c)
9. (c)
10. (c) (Only for the portion that applies to the x-ray department)
LO2, 4 BT: C Difficulty: Easy TOT: 5 min. AACSB: None AICPA FC: Measurement IMA: Cost Management
EXERCISE 1-7
(a) Delivery service (product) costs:

Indirect materials $ 6,400
Depreciation on delivery equipment 11,200
Dispatcher’s salary 5,000
Gas and oil for delivery trucks 2,200
Drivers’ salaries 16,000
Delivery equipment repairs 300
Total $41,100
($6,400 + $11,200 + $5,000 + $2,200 + $16,000 + $300 = $41,100)
(Ind. mat. + Depr. on del. equip. + Dispatch. sal. + Gas & oil for del.
trks. + Drivers’ sal. + Del. equip. repairs = Tot. product costs)
(b) Period costs:
Property taxes on office building $ 870
CEO’s salary 12,000
Advertising 4,600
Office supplies 650
Office utilities 990
Repairs on office equipment 180
Total $19,290
EXERCISE 1-8
(a) Work in process, 1/1................................ $ 12,000

Direct materials used .............................. $120,000
Direct labor .............................................. 110,000
Manufacturing overhead
Depreciation on plant ....................... $60,000
Factory supplies used ...................... 23,000
Property taxes on plant ................... 14,000
Total manufacturing overhead ............... 97,000
Total manufacturing costs ...................... 327,000
Total cost of work in process ................. 339,000
Less: ending work in process ................ 15,500
Cost of goods manufactured .................. $323,500
[$12,000 + (($120,000 + $110,000 + ($60,000 + $23,000 + $14,000)) - $15,500 = $323,500]
[Beg. WIP + ((DM used + DL + (Depr. on plant + Fact. sup. used + Prop. tax on plant)) – End. WIP = COGM]
(b) Finished goods, 1/1 ................................. $ 60,000

Cost of goods manufactured ................. 323,500
Cost of goods available for sale ............. 383,500
Less: Finished goods, 12/31 .................. 45,600
Cost of goods sold .................................. $337,900
LO3 BT: AP Difficulty: Easy TOT: 5 min. AACSB: Analytic AICPA FC: Reporting IMA: Cost management
EXERCISE 1-9
Total raw materials available for use:

Direct materials used ........................................................ $180,000
Add: Raw materials inventory (12/31) ........................... 22,500
Total raw materials available for use ............................... $202,500
($180,000 + $22,500 = $202,500)
(DM used + End. raw mat. = Tot. raw mat. avail. for use)
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 raw materials available for use ............................... 202,500
Less: Raw materials purchases ...................................... 158,000
Raw materials inventory (1/1) .......................................... $ 44,500
($180,000 + $22,500 - $158,000 = $44,500)
(DM used + End. raw mat. – Raw mat. purch. = Beg. raw mat.)
EXERCISE 1-9 (Continued)
Total cost of work in process:

Cost of goods manufactured ........................................... $540,000
Add: Work in process (12/31) .......................................... 81,000
Total cost of work in process .......................................... $621,000
Total manufacturing costs:

Total cost of work in process ................................. $621,000
Less: Work in process (1/1) .................................... 210,000
Total manufacturing costs ...................................... $411,000
Direct labor:
Less: Total overhead ............................................... $122,000
Direct materials used .................................... 180,000 302,000
Direct labor............................................................... $109,000
[$411,000 – ($122,000 + $180,000) = $109,000]
[Tot. mfg. costs – (Tot. OH + DM used) = DL]
LO3 BT: AN Difficulty: Easy TOT: 10 min. AACSB: Analytic AICPA FC: Reporting IMA: Reporting
EXERCISE 1-10
Case A
A + $57,000 + $46,500 = $195,650 $252,500 – $11,000 = F
A = $92,150 F = $241,500
Case C
$195,650 + B = $221,500 $130,000 + G + $102,000 = $253,700
B = $25,850 G = $21,700
$221,500 – C = $185,275 $253,700 + H = $337,000

C = $36,225 H = $83,300
Case B
$68,400 + $86,000 + $81,600 = D $337,000 – $70,000 = I
D = $236,000 I = $267,000
$236,000 + $16,500 = E
E = $252,500
Additional explanation to EXERCISE 1-10 solution:
Case A
(a) Total manufacturing costs ...................................... $195,650

Less: Manufacturing overhead ............................... $46,500
Direct labor .................................................... 57,000 103,500
Direct materials used ............................................... $ 92,150
[$195,650 – ($46,500 + $57,000) = $92,150]
[Tot. mfg. costs – (MOH + DL) = DM used]
(b) Total cost of work in process ................................. $221,500

Less: Total manufacturing costs ............................ 195,650
Work in process (1/1/20) .......................................... $ 25,850
(c) Total cost of work in process ................................. $221,500

Less: Cost of goods manufactured ........................ 185,275
Work in process (12/31/20) ...................................... $ 36,225
Case B
(d) Direct materials used ............................................... $ 68,400

Direct labor ............................................................... 86,000
Manufacturing overhead ......................................... 81,600
($68,400 + $86,000 + $81,600 = $236,000)
(DM used + DL + MOH = Tot. mfg. costs)
(e) Total manufacturing costs ...................................... $236,000

Work in process (1/1/20) .......................................... 16,500
Total cost of work in process ................................. $252,500
(f) Total cost of work in process ................................. $252,500

Less: Work in process (12/31/20)............................ 11,000
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
Direct labor ............................................................... $ 21,700
[$253,700 – ($102,000 + $130,000) = $21,700]
[Tot. mfg. costs – (MOH + DM used) = DL]
(h) Total cost of work in process ................................. $337,000

Less: Total manufacturing costs ............................ 253,700
Work in process (1/1/20).......................................... $ 83,300
(i) Total cost of work in process ................................. $337,000

Less: Work in process (12/31/20) ........................... 70,000
Cost of goods manufactured .................................. $267,000
EXERCISE 1-11
(a) (a) $117,000 + $140,000 + $87,000 = $344,000
(b) $344,000 + $33,000 – $360,000 = $17,000
($344,000 + $33,000 - $360,000 = $17,000)

(Tot. mfg. costs + Beg. WIP – COGM = End. WIP)
(c) $450,000 – ($200,000 + $132,000) = $118,000
(d) $40,000 + $470,000 – $450,000 = $60,000
($40,000 + $470,000 - $450,000 = $60,000)

(End. WIP + COGM – Tot. mfg. costs = Beg. WIP)
(e) $265,000 – ($80,000 + $100,000) = $85,000
(f) $265,000 + $60,000 – $80,000 = $245,000
($265,000 + $60,000 - $80,000 = $245,000)

(Tot. mfg. costs + Beg. WIP – End. WIP = COGM)
(g) $288,000 – ($70,000 + $75,000) = $143,000
(h) $288,000 + $45,000 – $270,000 = $63,000
(b) HORIZON COMPANY
For the Year Ended December 31, 2020
Work in process, January 1 ............................... $ 33,000

Direct materials ................................................... $117,000
Direct labor .......................................................... 140,000
Manufacturing overhead .................................... 87,000
Total manufacturing costs .......................... 344,000
Total cost of work in process ............................ 377,000
Less: Work in process inventory,
December 31 ............................................ 17,000
Cost of goods manufactured ............................. $360,000
[($33,000 + ($117,000 + $140,000 + $87,000)) - $17,000 = $360,000]
[(Beg. WIP + (DM + DL + MOH)) – End. WIP = COGM]
EXERCISE 1-12
(a) CEPEDA CORPORATION

For the Month Ended June 30, 2020
Work in process, June 1 ............................. $ 3,000

Direct materials used .................................. $20,000
Direct labor .................................................. 40,000
Indirect labor ....................................... $4,500
Factory manager’s salary ................... 3,000
Indirect materials................................. 2,200
Maintenance, factory equipment ........ 1,800
Depreciation, factory equipment ........ 1,400
Factory utilities .................................... 400
Total manufacturing overhead ..... 13,300
Total manufacturing costs ......................... 73,300
Total cost of work in process .................... 76,300
Less: Work in process, June 30................ 3,800
Cost of goods manufactured ..................... $72,500
[($3,000 + ($20,000 + $40,000 + ($4,500 + $3,000 + $2,200 + $1,800 + $1,400 + $400))) - $3,800 = $72,500]
[(Beg. WIP + (DM used + DL + (Ind. labor + Fact. mgrs.. sal. + Ind. mat. + Maint., fact. equip. + Depr., fact. equip.
+ Fact. util.))) – End. WIP = COGM]
(b) CEPEDA CORPORATION

Income Statement (Partial)
Sales revenue ......................................................... $92,100

Cost of goods sold
Finished goods inventory, June 1 ................. $ 5,000
Cost of goods manufactured [from (a)] ........... 72,500
Cost of goods available for sale .................... 77,500
Less: Finished goods inventory, June 30 .... 7,500
Cost of goods sold ......................... 70,000
Gross profit ............................................................. $22,100
LO3 BT: AP Difficulty: Easy TOT: 10 min. AACSB: Analytic AICPA FC: Reporting IMA: Reporting
EXERCISE 1-13
(a)
WASHINGTON CONSULTING
Schedule of Cost of Contract Services Performed
For the Month Ended August 31, 2020
Supplies used (direct materials) ................................... $ 1,700
Salaries of professionals (direct labor) ........................ 15,600
Service overhead:
Utilities for contract operations ............................... $1,400
Contract equipment depreciation ............................ 900
Insurance on contract operations ........................... 800
Janitorial services for professional offices ............ 700
Total overhead .................................................... 3,800
Cost of contract services provided ......................... $21,100
[$1,700 + $15,600 + ($1,400 + $900 + $800 + $700) = $21,100]
[Supp. used + Sal. of profs. + (Util. on contract oper. + Contract equip. depr. + Ins. on contract oper. + Jan. srvs.
for prof. off.) = $21,100]
(b) The costs not included in the cost of contract services provided would
all be classified as period costs. As such, they would be reported on
the income statement under administrative expenses.
EXERCISE 1-14
(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
Less: Materials inventory, 12/31..... 30,000
Direct materials used ............................. $141,000
Direct labor ............................................. 220,000
Manufacturing overhead ........................ 180,000
Total manufacturing costs ..................... 541,000
Total cost of work in process ................ 554,500
Less: Work in process, 12/31 ................ 17,200
Cost of goods manufactured ................. $537,300
[$13,500 + (($21,000 + $150,000 - $30,000) + $220,000 + $180,000) - $17,200 = $537,300]
[Beg. WIP + ((Beg. DM + DM purch. – End. DM) + DL + MOH) – End. WIP = COGM]
AIKMAN COMPANY
Income Statement (Partial)
For the Year Ended December 31, 2020
(b) Sales revenue ....................................... $910,000

Cost of goods sold
Finished goods, 1/1 ......................... $ 27,000
Cost of goods manufactured ......... 537,300
Cost of goods available for sale .... 564,300
Less: Finished goods, 12/31.......... 21,000
Cost of goods sold........... 543,300
Gross profit ............................................ $366,700
[$910,000 – ($27,000 + $537,300 - $21,000) = $366,700]
[Sales rev. – (Beg. FG + COGM – End. FG) = GP]
AIKMAN COMPANY
(Partial) Balance Sheet
December 31, 2020
(c) Current assets

Inventories
Finished goods............................................... $21,000
Work in process ............................................ 17,200
Raw materials ................................................. 30,000 $68,200
(d) In a merchandising company’s income statement, the only difference would

be in the computation of cost of goods sold. Beginning and ending finished
goods would be replaced by beginning and ending inventory, and cost
of goods manufactured would be replaced by purchases. In a
merchandising company’s balance sheet, there would be one inventory
account (inventory) instead of three.
EXERCISE 1-15
1. (a) 9. (a)
2. (a) 10. (a), (b)
3. (a), (c) 11. (b)
4. (b) 12. (b)
5. (a) 13. (a)
6. (a) 14. (a)
7. (a) 15. (a)
8. (b), (c) 16. (a)
LO3 BT: C Difficulty: Easy TOT: 8 min. AACSB: None AICPA FC: Reporting IMA: Reporting
EXERCISE 1-16
(a) ROBERTS COMPANY

Work in process inventory, June 1 ................. $ 5,000

Direct materials
Raw materials inventory, June 1 ............ $ 9,000
Raw materials purchases........................ 54,000
Total raw materials available for use ........ 63,000
Less: Raw materials inventory, June 30 .... 13,100
Direct materials used .............................. $49,900
Direct labor ..................................................... 47,000
Indirect labor............................................ 5,500
Factory insurance.................................... 4,000
Machinery depreciation........................... 4,000
Factory utilities ........................................ 3,100
Machinery repairs .................................... 1,800
Miscellaneous factory costs ................... 1,500
Total manufacturing overhead ......... 19,900
Total manufacturing costs ............................ 116,800
Total cost of work in process ....................... 121,800
Less: Work in process inventory, June 30 ...... 7,000
Cost of goods manufactured ........................ $114,800
[$5,000 + (($9,000 + $54,000 - $13,100) + $47,000 + ($5,500 + $4,000 + $4,000 + $3,100 + $1,800 + $1,500)) –
$7,000 = $114,800]
[Beg. WIP + ((Beg. raw mat. + Raw mat. purch. – End. raw mat.) + DL + (Ind. labor + Fact. ins. + Mach. depr. +
Fact. util. + Mach. repairs + Misc. fact. costs)) – End. WIP = COGM]
(b) ROBERTS COMPANY

June 30, 2020
Current assets
Inventories
Finished goods ........................................... $ 8,000
Work in process .......................................... 7,000
Raw materials ............................................. 13,100 $28,100
LO BT: AP Difficulty: Easy TOT: 8 min. AACSB: Analytic AICPA FC: Reporting IMA: Reporting
EXERCISE 1-17
(a) Raw Materials account: (5,000 – 4,650) X $15 = $5,250

Work in Process account: (4,600 X 10%) X $15 = $6,900
Finished Goods account: (4,600 X 90% X 30%) X $15 = $18,630
Cost of Goods Sold account: (4,600 X 90% X 70%) X $15 = $43,470
Selling Expenses account: 50 X $15 = $750
Proof of cost of head lamps allocated (5,000 X $15 = $75,000)
Raw materials $ 5,250

Work in process 6,900
Finished goods 18,630
Cost of goods sold 43,470
Selling expenses 750
Total $75,000
[(Raw mat.: (5,000 – 4,650) x $15 = $5,250); (WIP: 4,600 x 10% x $15 = $6,900); (Fin. gds.: (4,600 x 90% x 30%)
x $15 = $18,630); (CGS: (4,600 x 90% x 70%) x $15 = $43,470); (Sell. exp.: 50 x $15 = $750)]
[(Raw mat.: (Lamps purch. – Lamps withdrawn) x Unit cost = Acct. bal.); (WIP: (Lamps issued to production x %
still in production) x Unit cost = Acct. bal.); (Fin. Gds.: (Lamps in production x % completed x % not sold) x Unit
cost = Acct. bal.); (CGS: Lamps in production x % completed x % sold) x Unit cost = Acct. bal.); (Sell. exp.: Lamps
in sales staff cars x Unit cost = Acct. bal.)]
(b) To: Chief Accountant

From: Student
Subject: Statement Presentation of Accounts
Two accounts will appear in the income statement. Cost of Goods Sold
will be deducted from net sales in determining gross profit. Selling ex-
penses will be shown under operating expenses and will be deducted
from gross profit in determining net income. Sometimes, the calculation
for Cost of Goods Sold is shown on the income statement. In these cases,
the balance in Finished Goods inventory would also be shown on the
income statement.
The other accounts associated with the head lamps are inventory ac-
counts which contain end-of-period balances. Thus, they will be reported
under inventories in the current assets section of the balance sheet in
the following order: finished goods, work in process, and raw materials.
LO3 BT: AP Difficulty: Moderate TOT: 15 min. AACSB: Analytic AICPA FC: Measurement IMA: Cost
Management
EXERCISE 1-18
(a) 3. Balanced scorecard

(b) 4. Value chain
(c) 2. Just-in-time inventory
(d) 1. Activity-based costing
LO4 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Decision Modeling IMA: Strategic
Planning
1-27
(a) Product Costs

Direct Direct Manufacturing Period
Cost Item Materials Labor Overhead Costs
Rent on factory equipment $11,000
Insurance on factory building 1,500
SOLUTIONS TO PROBLEMS
Raw materials $75,000
Utility costs for factory 900
Supplies for general office $ 300
Wages for assembly line workers $58,000
Depreciation on office equipment 800
PROBLEM 1-1A
Miscellaneous materials 1,100
Factory manager’s salary 5,700
Property taxes on factory building 400
Advertising for helmets 14,000
Sales commissions 10,000
Depreciation on factory building 000,000 000,000 1,500 000,000
$75,000 $58,000 $22,100 $25,100
[(MOH: $11,000 + $1,500 + $900 + $1,100 + $5,700 + $400 + $1,500 = $22,100); (Period costs: $300 + $800 + $14,000 +
$10,000 = $25,100)]
[(MOH: Rent, fact. equip. + Ins., fact. bldg. + Fact. util. + Misc. mat. + Fact. mgrs.. sal. + Prop. tax, fact. bldg.. + Depr., fact.
bldg. = Tot.); (Period costs: Supp., gen. off. + Depr., off. equip. + Advert. for helmets + Sales comm. = Tot.)]
(b) Total production costs

Direct materials $ 75,000
Direct labor 58,000
Manufacturing overhead 22,100

Total production cost $155,100
Production cost per helmet = $155,100/10,000 = $15.51.

(a) Product Costs

Direct Direct Manufacturing Period
Cost Item Materials Labor Overhead Costs
Raw materials (1) $111,000
Wages for workers (2) $90,000
Rent on equipment $ 4,900
Indirect materials (3) 7,500
Factory supervisor’s salary 3,000
Janitorial costs 1,300
Advertising $9,500
Depreciation on factory building (4) 650
PROBLEM 1-2A
Property taxes on factory building (5) 00_0,000 000,000 750 00,000
$111,000 $90,000 $18,100 $9,500
(1)$74 X 1,500 = $111,000.

(2)$12 X 5 X 1,500 = $90,000.
(3)$5 X 1,500 = $7,500.
(4)$7,800/12 = $650.
(5)$9,000/12 = $750.
[(MOH: $4,900 + ($5 x 1,500) + $3,000 + $1,300 + ($7,800/12) + ($9,000/12) = $18,100); (Period costs: $9,500)]
[(MOH: Rent, equip. + (Ind. mat. cost/system x No. systems) + Fact. super. sal. + Jan. costs + (Ann. depr./Mos. in a yr.) + (Ann.
prop.tax./Mos. in a yr,) = Tot.); (Period costs: Advert.)]
(b) Total production costs
Direct materials $111,000

Direct labor 90,000
Manufacturing overhead 18,100
Total production cost $219,100
Production cost per system = $219,100/1,500 = $146.07. (rounded)

1-28
PROBLEM 1-3A
(a) Case 1
A = $9,600 + $5,000 + $8,000 = $22,600
$22,600 + $1,000 – B = $17,000

B = $22,600 + $1,000 – $17,000 = $6,600
$17,000 + C = $22,000
C = $22,000 – $17,000 = $5,000
D = $22,000 – $3,400 = $18,600
E = ($24,500 – $2,500) – $18,600 = $3,400
F = $3,400 – $2,500 = $900

[(B: $22,600 + $1,000 - $17,000 = $6,600); (E: ($24,500 - $2,500) - $18,600 = $3,400)]
[(B: Tot. mfg. costs + Beg. WIP – COGM = End. WIP); (E: (Sales rev. – sales disc.) – CGS = GP)]
Case 2
G + $8,000 + $4,000 = $16,000

G = $16,000 – $8,000 – $4,000 = $4,000
$16,000 + H – $3,000 = $24,000

H = $24,000 + $3,000 – $16,000 = $11,000
(I – $1,400) – K = $7,000
(I – $1,400) – $24,800 = $7,000
I = $1,400 + $24,800 + $7,000 = $33,200
(Note: Item I can only be solved after item K is solved.)
J = $24,000 + $3,300 = $27,300
K = $27,300 – $2,500 = $24,800
$7,000 – L = $5,000
L = $2,000
PROBLEM 1-3A (Continued)
[(H: $24,000 + $3,000 - $16,000 = $11,000); (I: $1,400 + $24,800 + $7,000 = $33,200); (K: $27,300 - $2,500 =
$24,800)]
[(H: COGM + End. WIP – Tot. mfg. costs = Beg. WIP); (I: Sales disc. + CGS + GP = Sales rev.); (K: Gds. avail. for
sale – End. fin. gds. = CGS)]
(b) CASE 1
Work in process, beginning ................................. $ 1,000

Direct materials ..................................................... $9,600
Direct labor ............................................................ 5,000
Manufacturing overhead ...................................... 8,000
Total manufacturing costs ............................ 22,600
Total cost of work in process .............................. 23,600
Less: Work in process, ending ........................... 6,600
Cost of goods manufactured ............................... $17,000
(c) CASE 1
Income Statement
Sales revenue........................................................ $24,500

Less: Sales discounts ......................................... 2,500
Net sales ................................................................
$22,000
Cost of goods sold
Finished goods inventory, beginning .......... 5,000
Cost of goods manufactured ........................ 17,000
Cost of goods available for sale................... 22,000
Less: Finished goods inventory, ending .... 3,400
Cost of goods sold ................................ 18,600
Gross profit ........................................................... 3,400
Operating expenses.............................................. 2,500
Net income ............................................................ $ 900
[($24,500 - $2,500) – ($5,000 + $17,000 - $3,400) - $2,500 = $900]
[(Sales rev. – Sales disc.) – (Beg. fin. gds. + COGM – End. fin. gds.) – Oper. exp. = Net inc.]
CASE 1
Current assets
Cash ............................................................... $ 3,000
Receivables (net)........................................... 15,000
Inventories
Finished goods ...................................... $3,400
Work in process..................................... 6,600
Raw materials ........................................ 600 10,600
Prepaid expenses.......................................... 400
Total current assets .............................. $29,000
LO3 BT: AN Difficulty: Moderate TOT: 40 min. AACSB: Analytic AICPA FC: Reporting IMA: Reporting
PROBLEM 1-4A
(a) CLARKSON COMPANY

For the Year Ended June 30, 2020
Work in process, July 1, 2019 ............ $ 19,800

Direct materials
Raw materials inventory,
July 1, 2019 .............................. $ 48,000
Raw materials purchases ........... 96,400
Total raw materials available
for use ...................................... 144,400
Less: Raw materials inventory,
June 30, 2020 ................... 39,600
Direct materials used .................. $104,800
Direct labor .......................................... 139,250
Plant manager’s salary ............... 58,000
Factory utilities ............................ 27,600
Indirect labor ............................... 24,460
Factory machinery depreciation ... 16,000
Factory property taxes ................ 9,600
Factory insurance ....................... 4,600
Factory repairs ............................ 1,400
Total manufacturing
overhead........................... 141,660
Total manufacturing costs ................. 385,710
Total cost of work in process ............ 405,510
Less: Work in process, June 30, 2020
18,600
Cost of goods manufactured ............. $386,910
[$19,800 + (($48,000 + $96,400 - $39,600) + $139,250 + ($58,000 + $27,600 + $24,460 + $16,000 + $9,600 +
$4,600 + $1,400)) - $18,600 = $386,910]
[Beg. WIP + ((Beg. raw mat. + Raw mat. purch. – End. raw mat.) + DL + (Plant mgrs.. sal. + Fact. util. + Ind. labor
+ Fact. mach. depr. + Fact. prop. tax. + Fact. ins. + Fact. repairs)) – End. WIP = COGM]
(b) CLARKSON COMPANY

(Partial) Income Statement
For the Year Ended June 30, 2020
Sales revenues
Sales revenue ............................................. $534,000
Less: Sales discounts............................... 4,200
Net sales ..................................................... $529,800
Cost of goods sold
Finished goods inventory,
July 1, 2019 ............................................. 96,000
Cost of goods manufactured..................... 386,910
Cost of goods available for sale ............... 482,910
Less: Finished goods inventory,
June 30, 2020 ................................. 75,900
Cost of goods sold ............................. 407,010
Gross profit ................................................ $122,790
[($534,000 - $4,200) – ($96,000 + $386,910 - $75,900) = $122,790]
[(Sales rev. – Sales disc.) – (Beg. fin. gds. + COGM – End. fin. gds.) = GP]
(c) CLARKSON COMPANY

June 30, 2020
Assets
Current assets
Cash ............................................................ $ 32,000
Accounts receivable .................................. 27,000
Inventories
Finished goods ................................... $75,900
Work in process.................................. 18,600
Raw materials ..................................... 39,600 134,100
Total current assets .................... $193,100
LO3 BT: AP Difficulty: Moderate TOT: 35 AACSB: Analytic AICPA FC: Reporting IMA: Reporting
PROBLEM 1-5A
(a) EMPIRE COMPANY

For the Month Ended October 31, 2020
Work in process, October 1 .............. $ 20,000

Direct materials
Raw materials inventory,
October 1 ................................ $ 18,000
Raw materials
purchases ............................... 264,000
Total raw materials available
for use ..................................... 282,000
Less: Raw materials inventory,
October 31 ....................... 29,000
Direct materials used ................. $253,000
Direct labor ......................................... 190,000
Factory facility rent .................... 60,000
Depreciation on factory
equipment ............................... 31,000
Indirect labor .............................. 28,000
Factory utilities* ......................... 9,000
Factory insurance**.................... 4,800
Total manufacturing
overhead.......................... 132,800
Total manufacturing costs ................ 575,800
Total cost of work in process ........... 595,800
Less: Work in process, October 31..... 14,000
Cost of goods manufactured ............ $581,800
**$12,000 X 75% = $9,000

**$ 8,000 X 60% = $4,800
[$20,000 + (($18,000 + $264,000 - $29,000) + $190,000 + ($60,000 + $31,000 + $28,000 + ($12,000 x 75%) +
($8,000 x 60%))) - $14,000 = $581,800]
[Beg. WIP + ((Beg. raw mat. + Raw mat. purch. – End. raw mat.) + DL + (Fact. facil. rent + Depr. on fact. equip. +
Ind. labor + Fact. util. + Fact. ins.)) – End. WIP = COGM]
(b) EMPIRE COMPANY

Income Statement
For the Month Ended October 31, 2020
Sales revenue ................................................... $780,000

Cost of goods sold
Finished goods inventory, October 1 ...... $ 30,000
Cost of goods manufactured.................... 581,800
Cost of goods available for sale .............. 611,800
Less: Finished goods inventory,
October 31 ..................................... 50,000
Cost of goods sold ............................ 561,800
Gross profit ....................................................... 218,200
Operating expenses
Advertising expense ................................. 90,000
Selling and administrative salaries .......... 75,000
Depreciation expense—sales
equipment .............................................. 45,000
Insurance expense** ................................. 3,200
Utilities expense* ...................................... 3,000
Total operating expenses ................. 216,200
Net income ........................................................ $ 2,000
**$12,000 X 25%
**$ 8,000 X 40%
LO3 BT: AN Difficulty: Moderate TOT: 35 AACSB: Analytic AICPA FC: Reporting IMA: Reporting
CURRENT DESIGNS
CD1
The answers to parts (a) and (b) may vary from student to student.
(a) What are the primary information needs of each manager?
Mike Cichanowski, CEO, needs to know the overall financial picture of
the company. He also needs to have a general picture of sales by
territory and product line, and of cost per unit by product line.
Diane Buswell, Controller, needs all accounting-related information.
Deb Welch, Purchasing Manager, needs to know the costs of the
components for each product.
Bill Johnson, Sales Manager, needs to know sales by territory and
product line.
Dave Thill, Kayak Plant Manager, needs to know all the costs of
producing each type of kayak.
Rick Thrune, Production Manager for Composite Kayaks, needs to
know the costs related to the composite kayak production.
CD1 (Continued)
(b) Name one special-purpose management accounting report that could

be designed for each manager. Include the name of the report, the
information it would contain, and how frequently it should be issued.
Manager Name of Information report How frequently

report would contain should it be
issued?
Mike Cichanowski Analysis of Projected revenues As needed and
proposed and expenses for a requested
new product possible new
line product line
Diane Buswell Company- Revenues, expenses, Monthly
wide budget and net income
analysis compared to the
budgeted amounts
for each
Deb Welch Purchasing List of items Monthly or
History purchased and most available on-
recent cost for each line
item
Bill Johnson Sales Sales by product Monthly or
Summary line and by weekly
customer
Dave Thill Cost of Direct materials, Monthly or
Production direct labor, and weekly
Report manufacturing
overhead costs
assigned to each
product line
Rick Thrune Cost of Detailed direct Weekly
Production material and direct
Report for labor costs for the
Composite composite kayaks
Kayaks
CD1 (Continued)
(c) When Diane Buswell, controller for Current Designs, reviewed the
accounting records for a recent period, she noted the following items.
Classify each item as a product cost or a period cost. If a cost is a
product cost, note if it is a direct materials, direct labor, or manufactur-
ing overhead item.
Product Costs Period

Payee Purpose Direct Direct Manufacturing Costs
Materials Labor Overhead
Winona Agency Property insurance for
the manufacturing plant $3,200
Bill Johnson Payroll–payment to
(sales manager) sales manager $1,700
Xcel Energy Electricity for
manufacturing plant 450
Winona Printing Price lists for salespeople 85
Jim Kaiser (sales Sales commissions
representative) 1,250
Dave Thill (plantPayroll–payment to
manager) plant manager 1,450
Dana Schultz (kayak
Payroll–payment to
assembler) kayak assembler $760
Composite One Bagging film used when
kayaks are assembled. It
is discarded after use. 260
Fastenal Shop supplies–brooms,
paper towels, etc. 890
Ravago Polyethylene powder
which is the main
ingredient for the
rotational molded kayaks $3,170
Winona County Property taxes on
manufacturing plant 5,480
North American Kevlar fabric for
Composites composite kayaks 4,930
Waste Management Trash disposal for the
company office building 660
None Journal entry to record
depreciation of
manufacturing equipment 4,540
Totals $8,100 $760 $16,270 $3,695
LO1, 2 BT: AN Difficulty: Moderate TOT: 60 min. AACSB: Analytic AICPA FC: Measurement IMA: Cost
Management, Performance Measurement
CT 1-1 DECISION-MAKING ACROSS THE ORGANIZATION
Ending Raw Materials Inventory

Beginning raw materials + Raw materials purchased
= Raw materials available for use
= $19,000 + $365,000 = $384,000
Raw materials available for use – Ending raw materials inventory

= Direct materials used
$384,000 – Ending raw materials inventory = $350,000
Ending raw materials inventory = $384,000 – $350,000 = $34,000
($19,000 + $365,000 - $350,000 = $34,000)
(Beg. raw mat. + Raw mat. purch. – DM used = End. raw mat.)
Ending Work in Process Inventory

Direct materials + Direct labor + Manufacturing overhead
= Total manufacturing costs
= $350,000 + $250,000 + ($250,000 X 60%) = $750,000
Beginning work in process inventory + Total manufacturing costs

= Total cost of work in process
= $25,000 + $750,000 = $775,000
Cost of goods manufactured + Beginning finished goods inventory

= Cost of goods available for sale
Cost of goods manufactured + $38,000 = $770,000
Cost of goods manufactured = $770,000 – $38,000 = $732,000
Total cost of work in process – Ending work in process inventory

= Cost of goods manufactured
$775,000 – Ending work in process inventory = $732,000
Ending work in process inventory = $775,000 – $732,000 = $43,000
[($25,000 + ($350,000 + $250,000 + ($250,000 x 60%)) = $775,000); ($770,000 - $38,000 = $732,000);
($775,000 - $732,000 = $43,000)]
[(Beg. WIP + (DM + DL + (DL x MOH rate)) = Tot. cost in WIP); (Cost of gds. avail. for sale – Beg. fin. gds. =
COGM); (Tot. cost in WIP – COGM = End. WIP)]
Ending Finished Goods Inventory

Sales – Cost of goods sold = Gross profit
$1,240,000 – Cost of goods sold = $1,240,000 X 40%
Cost of goods sold = $1,240,000 – $496,000 = $744,000
CT1-1 ( Continued)
Cost of goods available for sale – Ending finished goods inventory

= Cost of goods sold
$770,000 – Ending finished goods inventory = $744,000
Ending finished goods inventory = $770,000 – $744,000 = $26,000
CT 1-2 MANAGERIAL ANALYSIS
Since the questions were fairly open-ended, the following are only sug-
gested results. The class may be able to think of others, or of more items
for each one.
(a) Jason Dennis Needs information on sales, perhaps by salesper-

son and by territory.
Peggy Groneman Needs cost information for her department.
Dave Marley Needs all manufacturing accounting information.
Kevin Carson Needs product cost information.
Sally Renner Needs information on component costs and costs
for her department.
(b) Jason Dennis Income statement.
Peggy Groneman None.
Dave Marley All.
Kevin Carson Income statement and cost of goods manufactured
schedule.
Sally Renner None.
(c) Jason Dennis Sales by Territory—Detailed information, possibly
by product line, issued daily or weekly.
Peggy Groneman Cost of Computer Programs—Accumulated cost
incurred for each major program used including
maintenance and updates of program, issued
monthly.
Dave Marley Cost of Preparing Reports—Detailed analysis of all
reports provided, their frequency, time, and estimated
cost to prepare, issued monthly.
Kevin Carson Cost of Product—Detailed cost by product line,
including a comparison with estimated costs for
that product. Issued as each batch of production
is completed.
Sally Renner Cost of Product Design—Accumulated total costs
of each new product, issued at end of each project.
LO3 BT: AN Difficulty: Moderate TOT: 40 min. AACSB: Analytic AICPA FC: Reporting IMA: Cost
Management, Performance Meaurement
CT 1-3 REAL-WORLD FOCUS
(a) The IMA has more than 85,000 members. These members include
business leaders, managers, and decision makers in accounting and
finance.
(b) Student and Associate members receive most of the benefits of Regular
membership at a significant savings.
 Unique access to the professional designation, the Certified Manage-

ment Accountant (CMA)
 Specialized learning opportunities
 Educational assistance, grants, educational competitions
 Around-the-Clock Networking
 Career management resources
(c) The answer to this question will vary by school.

LO N/A BT: K Difficulty: Easy TOT: 20 min. AACSB: Technology AICPA PC: Communication IMA: None
CT 1-4 COMMUNICATION ACTIVITY
Ms. Shelly Phillips

President
Phillips Company
Dear Shelly:
As you requested, I corrected the income statement for October from the
information you gave me. The corrected statement is enclosed and it shows
that you actually earned net income of $2,000 for October. I also noticed
that you did not have a cost of goods manufactured schedule, so I prepared
one for you.
The income statement your assistant accountant prepared was not correct for
two primary reasons. First, product costs were not separated from selling and
administrative expenses. Second, and more importantly, the reported net loss
did not reflect changes in inventories. This had the effect of treating these
costs as expenses rather than assets. A reconciliation of the reported net loss
of $23,000 to net income of $2,000 is as follows:
Net loss as reported .................................................... $(23,000)
Increase (decrease) in inventories
Raw materials ($29,000 – $18,000) ...................... $11,000
Work in process ($14,000 – $20,000) .................. (6,000)
Finished goods ($50,000 – $30,000) ................... 20,000
Total increase ............................................... (25,000
Net income as corrected ............................................. $ (2,000
The changes in raw materials and work in process inventories are reported
in the cost of goods manufactured schedule. You will see, for example, that
the cost of direct materials used was $253,000, not $264,000 as reported by
your accountant in the income statement. The difference is the change in raw
materials inventories. Similarly, you will see that the $6,000 decrease in work
in process inventories increases total manufacturing costs of $575,800 to
produce cost of goods manufactured of $581,800.
The change in finished goods inventories is reported in the income
statement. Notice that the change of $20,000 is subtracted from cost of
goods manufactured of $581,800 to produce cost of goods sold of $561,800.
CT 1-4 (Continued)
I have also modified the form of the income statement to recognize the dis-
tinction between product costs (cost of goods sold) and period costs (operating
expenses) as required by generally accepted accounting principles.
Thanks for letting me help. If I can be of further assistance, don’t hesitate

to call. I hope you find a replacement for your controller soon.
Sincerely,
CT 1-5 ETHICS CASE
(a) The stakeholders in this situation are:
 The users of Newton Industries’ financial statements.

 Steve Morgan, controller.
 The vice-president of finance.
 The president of Newton Industries.
(b) The ethical issues in this situation pertain to the adherence to sound
and acceptable accounting principles. Intentional violation of generally
accepted accounting principles in order to satisfy a practical short-term
personal or company need and thus create misleading financial statements
would be unethical. Selecting one acceptable method of accounting
and reporting among other acceptable methods is not necessarily unethical.
(c) Ethically, the management of Newton Industries should be trying to report

the financial condition and results of operations as fairly as possible;
that is, in accordance with GAAP. Steve should inform management
what is acceptable accounting and what is not. The basic concept to
be supported in this advertising cost transaction is matching costs
and revenues. Normally, advertising costs are expensed in the period
in which they are incurred because it is very difficult to associate them
with specific revenues.
LO2, 3 BT: E Difficulty: Moderate TOT: 20 min. AACSB: Ethics AICPA FC: Reporting AICPA PC: professional
Demeanor, Communication IMA: Business Applications, Reporting
CT 1-6 ALL ABOUT YOU
Student responses will vary. We have provided some basic examples that
may represent common responses.
(a) Individuals must often make purchase decisions which involve choosing
between an item that has a more expensive initial purchase price, but
is expected to either last longer, or provides some form of cost savings.
The question that the individual faces is whether the cost savings or
additional benefit justifies the additional initial cost. For example, more
expensive dishwashers and refrigerators also tend to be more energy
efficient. The labels on these appliances provide information regarding
the energy savings which can be used to make a break-even evaluation.
(b) In order to increase control over their financial situation and reduce
the probability of financial hardship, all people should prepare personal
budgets. Preparation of a personal budget requires the individual to plan
for the future and to prioritize expenditures.
(c) Companies employ the balanced scorecard as a mechanism to ensure

that their financial goals are consistent with their efforts. Use of the
balanced scorecard requires clear articulation of goals, priorities, and
strategies. By employing these same techniques in their everyday life,
individuals can be better assured that they will expend effort on those
things that really matter to them, rather than wasting efforts on less
important distractions.
(d) Capital budgeting involves financial evaluation of long-term assets. Compa-

nies routinely make capital budgeting decisions, but so do individuals.
The purchase of a home or car is a decision that has implications for your
finances for many subsequent years. Buying a house or car is a very
personal decision, influenced by many personal, nonfinancial, preferences.
However, these decisions should also be subjected to a financial
evaluation using capital budgeting techniques to ensure that the choice
makes good economic sense.
LO N/A BT: C Difficulty: Moderate TOT: 25 min. AACSB: None AICPA FC: Measurement IMA: Cost
Management, Budget Preparation Performance Measurement
Managerial Accounting Tools for Business Decision Making 8th Edition Weygandt Solutions Manu
CT 1-7 CONSIDERING YOUR COSTS AND BENEFITS
Discussion guide: This is a difficult decision. While the direct costs of

outsourced tax return preparation may in fact be lower, you must also
consider other issues: Will the accuracy of the returns be as high? Will your
relationships with your customers suffer due to the loss of direct contact?
Will customers resent having their personal information shipped overseas?
While you may not want to lay off six employees, you also don’t want to put
your firm at risk by not remaining competitive. Perhaps one solution would
be to outsource the most basic tasks, and then provide training to the six
employees so they can perform higher-skilled services such as tax planning.
Many of the techniques that you learn in the remaining chapters of this text
will help you evaluate the merits of your various options.
LO2 BT: E Difficulty: Moderate TOT: 25 min. AACSB: Analytic AICPA FC: Measurement AICPA PC:
Communication IMA: Cost management
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Managerial Accounting Tools for

Business Decision Making 8th Edition

*1. Identify the features of 1, 2, 3, 4, 5, 1, 2 1 1

*2. Describe the classes of 8, 9, 10 3, 4, 5, 6 2 2, 3, 4, 5, 6, 1A, 2A

*4. Discuss trends in managerial 17, 18, 19, 20, 11 4 18

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Problem Difficulty Time

1A Classify manufacturing costs into different categories and Simple 20–30

2A Classify manufacturing costs into different categories and Simple 20–30

4A Prepare a cost of goods manufactured schedule, a partial Moderate 30–40

5A Prepare a cost of goods manufactured schedule and a Moderate 30–40

3. Differences in the content of the reports are as follows:

12. (a) X = total cost of work in process.

13. Raw materials inventory, beginning ....................................................................... $12,000

14. Direct materials used ............................................................................................. $240,000

15. (a) Total cost of work in process ($26,000 + $640,000)...................................... $666,000

BRIEF EXERCISE 1-1

Financial Accounting Managerial Accounting

BRIEF EXERCISE 1-2

BRIEF EXERCISE 1-3

(a) DM Frames and tires used in manufacturing bicycles.

(a) Direct materials.

BRIEF EXERCISE 1-5

BRIEF EXERCISE 1-6

BRIEF EXERCISE 1-7

(a) Direct materials used ............................................................ $180,000

(b) Beginning work in process .................................................. $ 25,000

BRIEF EXERCISE 1-8

BRIEF EXERCISE 1-9

BRIEF EXERCISE 1-10

Total Work in Work in

One implication of SOX was to clarify top management’s responsibility for

Work in process, April 1 ................................ $ 5,000

1. False. Financial accounting focuses on providing information to external

1. (b) Direct labor.*

*or sometimes (c), depending on the circumstances

(a) Bicycle components ............... DM Advertising expense .............. Period

(a) Factory utilities ....................................................................... $ 15,500

(b) Direct materials ...................................................................... $137,600

(c) Depreciation on delivery trucks ............................................ $ 3,800

1. (c) 3. (a) 5. (b)* 7. (a) 9. (c)

*or sometimes (c), depending on the circumstances.

(a) Delivery service (product) costs:

(a) Work in process, 1/1................................ $ 12,000

(b) Finished goods, 1/1 ................................. $ 60,000

Total raw materials available for use:

Raw materials inventory (1/1):

Total cost of work in process:

Total manufacturing costs:

$221,500 – C = $185,275 $253,700 + H = $337,000

(a) Total manufacturing costs ...................................... $195,650

(b) Total cost of work in process ................................. $221,500

(c) Total cost of work in process ................................. $221,500

(d) Direct materials used ............................................... $ 68,400

(e) Total manufacturing costs ...................................... $236,000

(f) Total cost of work in process ................................. $252,500

(g) Total manufacturing costs ...................................... $253,700

(h) Total cost of work in process ................................. $337,000

(i) Total cost of work in process ................................. $337,000