Quick Check Questions

Managerial Accounting 3e Solutions Manual Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall 28 Chapter 2

Building Blocks of Managerial Accounting

Quick Check Questions

Answers:

QC2-1. b QC2-3. a QC2-5. c QC2-7. b QC2-9. b QC2-2. b QC2-4. b QC2-6. b QC2-8. d QC2-10. c

Short Exercises

(5 min.) S 2-1

ABC Co. is a manufacturer, because it has three kinds of inventory: Raw Materials Inventory, Work in Process Inventory, and Finished Goods Inventory.

DEF Co. is a merchandiser, because it has a single inventory account.

GHI Co. is a service company, because it has no inventory.(10 min.) S 2-2

• Direct materials are stored in raw materials inventory.
• Kmart is a merchandising company.
• Manufacturers sell from their stock of finished goods inventory.
• Labor costs usually account for the highest percentage of service companies’ costs.
• Partially completed units are kept in the work in process inventory.
• Service companies generally have no inventory.
• Intel is a manufacturing company.
• Merchandisers’ inventory consists of the cost of merchandise and freight in.
• Manufacturing companies carry three types of inventories: raw materials inventory, work in process

inventory, and finished goods inventory.

• H&R Block is a service company.
• Two types of merchandising companies include retailers and wholesalers.

Managerial Accounting 3rd Edition Braun Solutions Manual Visit TestBankDeal.com to get complete for all chapters

Chapter 2 Building Blocks of Managerial Accounting

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall 29 (5-10 min.) S 2-3

• Production
• Customer service
• Distribution
• Research and Development (R&D)
• Marketing
• Research and Development (R&D)
• Production
• Design
• Distribution
• Production

(10 min.) S 2-4

• direct; trace
• indirect; allocate
• direct; trace
• direct; trace
• direct; trace
• indirect; allocate
• direct; trace
• indirect; allocate

(5-10 min.) S 2-5

• Inventoriable product cost
• Inventoriable product cost
• Period cost
• Period cost
• Inventoriable product cost
• Inventoriable product cost
• Period cost
• Inventoriable product cost
• Period cost

(5-10 min.) S 2-6 COST Period Cost or Inventoriable Product Cost?If an Inventoriable

Product Cost: Is it

DM, DL, or MOH?

• Wages and benefits paid to assembly-line workers in

the manufacturing plant Product DL

• Repairs and maintenance on factory equipment Product MOH
• Lease payment on administrative headquarters Period
• Salaries paid to quality control inspectors in the plant Product MOH
• Property insurance – 40% of building is used for sales

and administration; 60% of building is used for manufacturing 40% Period; 60% Product — MOH

• Standard packaging materials used to package

individual units of product for sale (e.g., cereal boxes in which cereal is packaged) Product DM

• Depreciation on automated production equipment Product MOH
• Telephone bills relating to customer service call center Period

Managerial Accounting 3e Solutions Manual Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall 30 (5-10 min.) S 2-7 COST

Period Cost or Inventoriable Product Cost?If an Inventoriable

Product Cost: Is it

DM, DL, or MOH?

• Company president’s annual bonus Period
• Plastic gallon containers in which milk is packaged Product DM
• Depreciation on marketing department’s computers Period (marketing

element of value chain)

• Wages and salaries paid to machine operators at

dairy processing plant Product DL

• Research and Development on improving milk

pasteurization process Period (R&D element of value chain)

• Cost of milk purchased from dairy farmers Product DM
• Lubricants used in running bottling machines Product MOH
• Depreciation on refrigerated trucks used to collect raw

milk from dairy farms Product MOH (part of the cost of acquiring DM)

• Property tax on dairy processing plant Product MOH
• Television advertisements for DairyPlains’ products Period
• Gasoline used to operate refrigerated trucks used to

deliver finished dairy products to grocery stores Period (distribution element of value chain)

(5 min.) S 2-8

Frame Pro’s Total Manufacturing Overhead Computation

Manufacturing overhead:

Glue for picture frames* $ 450 Plant depreciation expense 8,100 Plant supervisor’s salary 3,300 Plant janitor’s salary 1,500 Oil for manufacturing equipment 110 Total manufacturing overhead $13,460

*Assuming that it is not cost-effective to trace the low-cost glue to individual frames.The following explanation is provided for instructional purposes, but it is not required.Depreciation on company cars used by the sales force is a marketing expense, interest expense is a financing expense, and the company president’s salary is an administrative expense. None of these expenses is incurred in the manufacturing plant, so they are not part of manufacturing overhead.The wood for frames is a direct material, not part of manufacturing overhead.

Chapter 2 Building Blocks of Managerial Accounting

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall 31 (5 min.) S 2-9

Retailer Cost of Goods Sold Computation

Cost of goods sold:

Beginning inventory $ 4,200 Purchases $42,000 Import duties 1,100 Freight-in 3,600 46,700 Cost of goods available for sale 50,900 Ending inventory (5,400) Cost of goods sold $45,500

(5-10 min.) S 2-10

Gossamer Secrets Income Statement

Sales revenue $39,330,000

Cost of goods sold:

Beginning inventory $ 3,350,000 Purchases 23,975,000 Cost of goods available for sale 27,325,000 Ending inventory (4,315,000) Cost of goods sold (23,010,000) Gross profit 16,290,000 Operating expenses (6,150,000) Operating income $ 10,140,000

(5 min.) S 2-11

Allterrain Computation of Direct Materials Used

Direct materials used:

Beginning raw materials inventory $ 3,900 Purchases of direct materials $15,600 Import duties 900 Freight-in 600 17,100 Direct materials available for use 21,000 Ending raw materials inventory (2,000) Direct materials used $19,000

(5 min.) S 2-12