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Chapter 16: Q1RQ (page 884)
1. What is the primary purpose of managerial accounting?
Managerial accounting is a field of accounting that has the purpose of providing information to managers and employees.
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Comparing managerial accounting and financial accounting
Match the following terms to the appropriate statement. Some terms may be used more than once, and some terms may not be used at all.
Directing Managerial
Creditors Managers
Controlling Planning
Financial Stockholders
a. Accounting systems that must follow GAAP.
b. External parties for whom financial accounting reports are prepared.
c. The role managers play when they are monitoring day-to-day operations and keeping the company on track.
d. Internal decision makers.
e. Accounting system that provides information on a company鈥檚 past performance.
f. Accounting system not restricted by GAAP.
g. The management function that involves choosing goals and deciding how to achieve them
Classifying costs Wheels, Inc. manufactures wheels for bicycles, tricycles, and scooters. For each cost given below, determine if the cost is a product cost or a period cost. If the cost is a product cost, further determine if the cost is direct materials (DM), direct labor (DL), or manufacturing overhead (MOH) and then determine if the product cost is a prime cost, conversion cost, or both. If the cost is a period cost, further determine if the cost is a selling expense or administrative expense (Admin). Cost (a) is answered as a guide
Cost Product Period
DM DL MOH Prime Conversion Selling Admin.
a. Metal used for rims
b. Sales salaries
c. Rent on factory
d. Wages of assembly workers
e. Salary of production supervisor
f. Depreciation on office equipment
g. Salary of CEO
h. Delivery expense
Question:Applying ethical standards
Natalia Wallace is the new controller for Smart Software, Inc. which develops and sells education software. Shortly before the December 31 fiscal year-end, James Cauvet, the company president, asks Wallace how things look for the year-end numbers. He is not happy to learn that earnings growth may be below 13% for the first time in the company鈥檚 five-year history. Cauvet explains that financial analysts have again predicted a 13% earnings growth for the company and that he does not intend to disappoint them. He suggests that Wallace talk to the assistant controller, who can explain how the previous controller dealt with such situations. The assistant controller suggests the following strategies:
a. Persuade suppliers to postpone billing \(13,000 in invoices until January 1.
b. Record as sales \)115,000 in certain software awaiting sale that is held in a public warehouse.
c. Delay the year-end closing a few days into January of the next year so that some of the next year鈥檚 sales are included in this year鈥檚 sales.
d. Reduce the estimated Bad Debts Expense from 5% of Sales Revenue to 3%, given the company鈥檚 continued strong performance.
e. Postpone routine monthly maintenance expenditures from December to January.
Requirements
1. Which of these suggested strategies are inconsistent with IMA standards?
2. How might these inconsistencies affect the company鈥檚 creditors and stockholders?
3. What should Wallace do if Cauvet insists that she follow all of these suggestions?
Explain the difference between line positions and staff positions.
Question:Preparing a schedule of cost of goods manufactured and an income statement for a manufacturing company
Gourmet Bones manufactures its own brand of pet chew bones. At the end of December 2018, the accounting records showed the following:
Balances: Beginning Ending
Direct Materials \( 13,500 \) 7,500
Work-in-Process Inventory 0 3,500
Finished Goods Inventory 0 5,200
Other information:
Direct materials purchases$ 36,000
Plant janitorial services 700
Sales salaries 6,000
Delivery costs1,300
Net sales revenue 107,000
Utilities for plant 1,300
Rent on plant 17,000
Customer service hotline costs 1,200
Direct labor23,000
Requirements
1. Prepare a schedule of cost of goods manufactured for Gourmet Bones for the year ended December 31, 2018.
2. Prepare an income statement for Gourmet Bones for the year ended December 31, 2018.
3. How does the format of the income statement for Gourmet Bones differ from the income statement of a merchandiser?
4. Gourmet Bones manufactured 17,900 units of its product in 2018. Compute the company鈥檚 unit product cost for the year, rounded to the nearest cent.
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