Introduction to Management

Accounting

Chapter 18

1
Copyright © 2007 Prentice-Hall. All rights reserved
Which is a characteristic of management
accounting information?

1. Emphasizes the external financial statements

2. Focuses on the future
3. Audited by CPA’s
4. Applies GAAP

2
Copyright © 2007 Prentice-Hall. All rights reserved
Answer: 2

3
Copyright © 2007 Prentice-Hall. All rights reserved
Creighton Lawn Service reports the following
information:
Revenue $5,000
Supplies expense 1,000
Rent Expense 1,000
Utilities Expense 600
What is the net income?

4
Copyright © 2007 Prentice-Hall. All rights reserved
Answer:
Revenue $5,000
Less expenses
Supplies $1,000
Rent 1,000
Utilities 600
Total Expense (2,600)
$2,400

5
Copyright © 2007 Prentice-Hall. All rights reserved
Suppose SolarCel provides the following data:
Sales $2,000
Cost of goods sold 500
Selling and Administrative Expenses 200
What is the operating income?

6
Copyright © 2007 Prentice-Hall. All rights reserved
Answer: Operating income =
Sales – Cost of good sold – S & A expenses
$2,000 – 500 – 200 = $1300

7
Copyright © 2007 Prentice-Hall. All rights reserved
Which is a direct cost of manufacturing?
1. Depreciation on plant and equipment
2. Cost of a component part
3. Want ad to hire assembly personnel
4. Support Service Facility

8
Copyright © 2007 Prentice-Hall. All rights reserved
Answer: 2

9
Copyright © 2007 Prentice-Hall. All rights reserved
Which of the following is not part of manufacturing
overhead?
1. Insurance on plant and equipment
2. Manufacturing plant property taxes
3. Depreciation on delivery trucks
4. Manufacturing plant utilities

10
Copyright © 2007 Prentice-Hall. All rights reserved
Answer: 3 The delivery truck is not a cost of the
manufacturing process, but of the selling process.

11
Copyright © 2007 Prentice-Hall. All rights reserved
You have the following information:
Purchases of direct materials $700
Freight in 100
Property tax 200
Beginning inventory of direct materials 300
Ending inventory of direct materials 200

Compute direct materials used

12
Copyright © 2007 Prentice-Hall. All rights reserved
Answer:
Beginning inventory of direct materials $300
Purchases of direct materials 700
Freight in 100
Cost of materials available for use $1,100
Ending inventory of direct materials (200)
Direct materials used $900

13
Copyright © 2007 Prentice-Hall. All rights reserved
Suppose a bakery reports this information
Beginning materials inventory $60
Ending materials inventory 50
Direct labor 30
Manufacturing overhead 20
Cost of direct materials used 100
Beginning work-in process inventory 80
Ending work-in process inventory 50
What is the cost of goods manufactured?

14
Copyright © 2007 Prentice-Hall. All rights reserved
Answer:
Beginning work-in process inventory $80
Cost of direct materials 100
Direct labor 30
Manufacturing overhead 20
Cost of goods in process during period $230
Ending work-in-process inventory (50)
Cost of goods manufactured $180

15
Copyright © 2007 Prentice-Hall. All rights reserved
Suppose the bakery reported this information
Cost of goods manufactured $152
Beginning work in process inventory 2
Ending work in process inventory 1
Beginning finished goods inventory 3
Ending finished goods inventory 5
What is the cost of goods sold?

16
Copyright © 2007 Prentice-Hall. All rights reserved
Answer:
Beginning finished goods inventory $3
Cost of goods manufactured 152
Cost of goods available for sale 155
Less ending finished goods inventory (5)
Cost of goods Sold $150

17
Copyright © 2007 Prentice-Hall. All rights reserved
The following costs are reported by a bakery
Depreciation of ovens $200
Depreciation of delivery trucks 400
Cost of thermal bags for delivery 100
Cost of spices 300
Cost of flour, sugar, and eggs 1,000
Baker’s wages 800
Truck driver’s wages 400
What is the total inventoriable product cost?

18
Copyright © 2007 Prentice-Hall. All rights reserved
Answer:
Depreciation of ovens $200
Cost of spices 300
Cost of flour, sugar, and eggs 1,000
Pay of baker 800
$2,300

19
Copyright © 2007 Prentice-Hall. All rights reserved
Which represents the flow of costs through
manufacturing inventory accounts?
1. Beginning work in process → Cost of goods manufactured
→Finished goods inventory
2. Direct labor → Direct materials → Finished goods
inventory
3. Direct materials inventory → Work in process inventory→
Finished goods inventory
4. Beginning Finished goods inventory → Work in process
inventory → Ending finished goods inventory

20
Copyright © 2007 Prentice-Hall. All rights reserved
Answer: 3

21
Copyright © 2007 Prentice-Hall. All rights reserved
 22
Copyright © 2007 Prentice-Hall. All rights reserved