Solutions Manual for

Solutions Manual for Managerial Accounting Tools for Business Decision Making, 9e Jerry Weygandt, Paul Kimmel, Jill Mitchell (All Chapters) 1 / 4

CHAPTER 1

Managerial Accounting

Learning Objectives

• Identify the features of managerial accounting and the functions of management.

• Describe the classes of manufacturing costs and the differences between product and period

costs.

• Demonstrate how to compute cost of goods manufactured and prepare financial statements for a

manufacturer.

• Discuss trends in managerial accounting.
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ANSWERS TO QUESTIONS

• (a) Not true. 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, Analysis and Interpretation IMA: Cost Management

• (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. These 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 external users. The purpose of managerial accounting is to provide special-purpose information for specific internal decisions.LO1 BT: C Difficulty: Easy TOT: 5 min. AACSB: None AICPA FC: Measurement, Analysis and Interpretation IMA: Cost Management

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 accrual accounting and cost data.• Generally accepted accounting principles.• Pertains to subunits of the business and may be very detailed.• Extends beyond accrual accounting system to any relevant data.• 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 prepared by managerial accountants.LO1 BT: C Difficulty: Easy TOT: 5 min. AACSB: None AICPA FC: Measurement, Analysis and Interpretation IMA: Cost Management

• 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.LO1 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Measurement, Analysis and Interpretation IMA: Cost Management

• Not true. 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.LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Measurement, Analysis and Interpretation IMA: Cost Management

• Employees with line positions are directly involved in the company’s primary revenue generating

operating activities. Examples would include factory 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.LO1 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Measurement, Analysis and Interpretation IMA: Cost Management 3 / 4

Questions Chapter 1 (Continued)

• 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, Analysis and Interpretation IMA: Cost management

• Manufacturing costs are classified as either direct materials, direct labor, or manufacturing

overhead.LO2 BT: C Difficulty: Easy TOT: 1 min. AACSB: None AICPA FC: Measurement, Analysis and Interpretation IMA: Cost management

• 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.LO2 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Measurement, Analysis and Interpretation IMA: Cost management

• Product costs, or inventoriable costs, are costs that are a necessary and integral part of

producing the finished product, they are classified as manufacturing costs. Period costs are costs that are identified with a specific time period rather than with a salable product. These costs relate to nonmanufacturing activities and therefore are not inventoriable costs, they are expensed as incurred.LO2 BT: K Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Measurement, Analysis and Interpretation IMA: Cost management

• A merchandising company that uses the periodic inventory system reports beginning inventory,

cost of goods purchased, and ending inventory in the cost of goods section of the income statement. A manufacturing company reports beginning finished goods inventory, cost of goods manufactured, and ending finished goods inventory in its determination of cost of goods sold.LO3 BT: C Difficulty: Easy TOT: 5 min. AACSB: None AICPA FC: Measurement, Analysis and Interpretation IMA: Cost management

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

(b) X = cost of goods manufactured.LO3 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Measurement, Analysis and Interpretation IMA: Cost management

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

Raw materials purchases ...................................................................................... 170,000 Less: 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, Analysis and Interpretation IMA: Cost management

($12,000 + $170,000 - $15,000 = $167,000)

(Beg. RM + RM purch. – End. RM = DM used)

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

Direct labor ........................................................................................................... 220,000 Total manufacturing overhead ............................................................................... 180,000 Total manufacturing costs ............................................................................. $640,000 LO3 BT: AP Difficulty: Easy TOT: 2 min. AACSB: Analytic AICPA FC: Measurement, Analysis and Interpretation IMA: Cost management

($240,000 + $220,000 + $180,000 = $640,000)

(DM used + DL used + Tot. MOH = Tot. mfg. costs)

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

(b) Cost of goods manufactured ($666,000 – $32,000) ...................................... $634,000 LO3 BT: AP Difficulty: Easy TOT: 2 min. AACSB: Analytic AICPA FC: Measurement, Analysis and Interpretation IMA: Cost management [(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)]

• The order of reporting is finished goods inventory, work in process inventory, and raw materials

inventory.LO3 BT: K Difficulty: Easy TOT: 1 min. AACSB: None AICPA FC: Measurement, Analysis and Interpretation IMA: Cost management Questions Chapter 1 (Continued)

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