CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN)
INTRODUCTION TO MANAGERIAL ACCOUNTING
DISCUSSION QUESTIONS
1. Financial accounting and managerial accounting are different in several ways. Financial
accounting information is reported in statements that are useful to persons or groups outside of
a company. These statements objectively report the results of operations for fixed periods of
time and the financial condition of the business under generally accepted accounting principles.
Managerial accounting information uses both subjective and objective information to meet the
specific needs of management. This non-GAAP information can be reported periodically or as
needed by management and can be reported for the entire entity or for segments of the organization.
This information includes (i) historical data, which provide objective measures of past operations,
and (ii) estimated data, which provide subjective estimates about future decisions.
2. a. Vertical units are structured as separate businesses within a company and normally develop
and sell products directly to customers. Horizontal units are not responsible for developing and
selling products, but provide services to other horizontal and vertical units within the company.
b. The accounting and legal departments are horizontal units within a company.
c. A consumer products division would be considered a vertical unit within a company.
3. Direct materials cost
4. Prime costs are the combination of direct materials and direct labor costs, while conversion
costs are the combination of direct labor costs and factory overhead costs.
5. Product costs are composed of three elements of manufacturing costs: direct materials cost, direct
labor cost, and factory overhead cost. These costs are treated as assets until the product is sold.
Period costs consist of selling and administrative expenses that are used in generating revenue
during the current period. They are recognized as expenses on the current period’s income statement.
6. The three inventory accounts for a manufacturing business are as follows:
a. Finished goods inventory consists of completed (or finished) products that have not been sold.
b. Work in process inventory consists of the direct materials, direct labor, and factory overhead
costs for products that have entered the manufacturing process, but are not yet completed.
c. Materials inventory consists of the costs of the direct and indirect materials that have not
entered the manufacturing process.
7. Materials, work-in-process, and finished goods
8. The cost of finished goods and the cost of work in process includes the following:
a. Direct materials—the costs of materials that enter directly into the finished product.
b. Direct labor—the wages of factory workers who convert materials into a finished product.
c. Factory overhead—the costs, other than direct materials and direct labor, that are incurred in
the manufacturing process.
9. The manufacturing costs incurred during a period include direct materials used in production plus
the direct labor and factory overhead costs incurred during the period. The cost of goods
manufactured for a period is computed by adjusting the manufacturing costs incurred during the
period for the effects of beginning and ending work in process. Beginning work in process
inventory is added and ending work in process is subtracted from the manufacturing costs incurred
during a period to arrive at the cost of goods manufactured for the period.
10. A retail business purchases merchandise (products) in a finished state for resale to customers.
The cost of product sold is called cost of goods sold. A manufacturer makes the product it
sells using direct materials, direct labor, and factory overhead, which make up the cost of goods
manufactured included in the “Cost of goods sold” section of the income statement.
15-1
© 2020 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
BASIC EXERCISES
BE 15–1 (FIN MAN); BE 1–1 (MAN)
Planning (a)
Directing (c)
Controlling (b)
BE 15–2 (FIN MAN); BE 1–2 (MAN)
a. DM (or FO if the cost is immaterially small)
b. DL
c. FO
d. DM
BE 15–3 (FIN MAN); BE 1–3 (MAN)
a. P
b. B
c. C (or P if significant)
d. C
BE 15–4 (FIN MAN); BE 1–4 (MAN)
a. Period cost
b. Product cost
c. Product cost
d. Period cost
BE 15–5 (FIN MAN); BE 1–5 (MAN)
a. Work in process inventory, April 1……………………………… $ 72,300
Cost of direct materials used in production…………………… $280,000
Direct labor…………………………………………………………… 324,000
Factory overhead…………………………………………………… 188,900
Total manufacturing costs incurred in April…………………… 792,900
Total manufacturing costs………………………………………… $865,200
Work in process inventory, April 30……………………………… (76,600)
Cost of goods manufactured……………………………………… $788,600
b. Finished goods inventory, April 1………………………………… $ 39,600
Cost of goods manufactured……………………………………… 788,600
Cost of finished goods available for sale……………………… $828,200
Finished goods inventory, April 30……………………………… (41,200)
Cost of goods sold…………………………………………………… $787,000
15-2
© 2020 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
BE 15–6 (FIN MAN); BE 1–6 (MAN)
a. Number of Guests Nights per Visit Guest Nights
4,400 1 4,400
1,800 2 3,600
750 3 2,250
600 4 2,400
20 5 100
12,750
b. 15,000 available room nights (500 rooms × 30 nights in June)
Guest Nights
c. Occupancy Rate =
Available Room Nights
12,750
Occupancy Rate = = 85%
15,000
d. The utilization (occupancy) rate has improved from 82% in the prior year to 85% in
the current year.
15-3
© 2020 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
EXERCISES
Ex. 15–1 (FIN MAN); Ex. 1–1 (MAN)
a. Direct materials cost f. Factory overhead cost
b. Direct materials cost g. Direct materials cost
c. Factory overhead cost h. Direct materials cost
d. Direct materials cost i. Direct labor cost
e. Factory overhead cost
Ex. 15–2 (FIN MAN); Ex. 1–2 (MAN)
a. Factory overhead cost f. Factory overhead cost
b. Factory overhead cost g. Direct materials cost
c. Factory overhead cost h. Factory overhead cost
d. Direct materials cost i. Direct materials cost
e. Direct materials cost j. Direct labor cost
Ex. 15–3 (FIN MAN); Ex. 1–3 (MAN)
b, e, g, h
Ex. 15–4 (FIN MAN); Ex. 1–4 (MAN)
a. Period cost j. Product cost
b. Period cost k. Period cost
c. Period cost l. Period cost
d. Product cost m. Period cost
e. Product cost n. Product cost
f. Product cost o. Period cost
g. Product cost p. Period cost
h. Product cost q. Product cost
i. Product cost
Ex. 15–5 (FIN MAN); Ex. 1–5 (MAN)
a. cost object e. cost
b. period f. work in process inventory
c. conversion g. decreases
d. improve
Ex. 15–6 (FIN MAN); Ex. 1–6 (MAN)
a. electricity used to run assembly line e. improving
b. prime f. indirect
c. strategic g. period
d. materials inventory
15-4
© 2020 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
INTRODUCTION TO MANAGERIAL ACCOUNTING
DISCUSSION QUESTIONS
1. Financial accounting and managerial accounting are different in several ways. Financial
accounting information is reported in statements that are useful to persons or groups outside of
a company. These statements objectively report the results of operations for fixed periods of
time and the financial condition of the business under generally accepted accounting principles.
Managerial accounting information uses both subjective and objective information to meet the
specific needs of management. This non-GAAP information can be reported periodically or as
needed by management and can be reported for the entire entity or for segments of the organization.
This information includes (i) historical data, which provide objective measures of past operations,
and (ii) estimated data, which provide subjective estimates about future decisions.
2. a. Vertical units are structured as separate businesses within a company and normally develop
and sell products directly to customers. Horizontal units are not responsible for developing and
selling products, but provide services to other horizontal and vertical units within the company.
b. The accounting and legal departments are horizontal units within a company.
c. A consumer products division would be considered a vertical unit within a company.
3. Direct materials cost
4. Prime costs are the combination of direct materials and direct labor costs, while conversion
costs are the combination of direct labor costs and factory overhead costs.
5. Product costs are composed of three elements of manufacturing costs: direct materials cost, direct
labor cost, and factory overhead cost. These costs are treated as assets until the product is sold.
Period costs consist of selling and administrative expenses that are used in generating revenue
during the current period. They are recognized as expenses on the current period’s income statement.
6. The three inventory accounts for a manufacturing business are as follows:
a. Finished goods inventory consists of completed (or finished) products that have not been sold.
b. Work in process inventory consists of the direct materials, direct labor, and factory overhead
costs for products that have entered the manufacturing process, but are not yet completed.
c. Materials inventory consists of the costs of the direct and indirect materials that have not
entered the manufacturing process.
7. Materials, work-in-process, and finished goods
8. The cost of finished goods and the cost of work in process includes the following:
a. Direct materials—the costs of materials that enter directly into the finished product.
b. Direct labor—the wages of factory workers who convert materials into a finished product.
c. Factory overhead—the costs, other than direct materials and direct labor, that are incurred in
the manufacturing process.
9. The manufacturing costs incurred during a period include direct materials used in production plus
the direct labor and factory overhead costs incurred during the period. The cost of goods
manufactured for a period is computed by adjusting the manufacturing costs incurred during the
period for the effects of beginning and ending work in process. Beginning work in process
inventory is added and ending work in process is subtracted from the manufacturing costs incurred
during a period to arrive at the cost of goods manufactured for the period.
10. A retail business purchases merchandise (products) in a finished state for resale to customers.
The cost of product sold is called cost of goods sold. A manufacturer makes the product it
sells using direct materials, direct labor, and factory overhead, which make up the cost of goods
manufactured included in the “Cost of goods sold” section of the income statement.
15-1
© 2020 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
BASIC EXERCISES
BE 15–1 (FIN MAN); BE 1–1 (MAN)
Planning (a)
Directing (c)
Controlling (b)
BE 15–2 (FIN MAN); BE 1–2 (MAN)
a. DM (or FO if the cost is immaterially small)
b. DL
c. FO
d. DM
BE 15–3 (FIN MAN); BE 1–3 (MAN)
a. P
b. B
c. C (or P if significant)
d. C
BE 15–4 (FIN MAN); BE 1–4 (MAN)
a. Period cost
b. Product cost
c. Product cost
d. Period cost
BE 15–5 (FIN MAN); BE 1–5 (MAN)
a. Work in process inventory, April 1……………………………… $ 72,300
Cost of direct materials used in production…………………… $280,000
Direct labor…………………………………………………………… 324,000
Factory overhead…………………………………………………… 188,900
Total manufacturing costs incurred in April…………………… 792,900
Total manufacturing costs………………………………………… $865,200
Work in process inventory, April 30……………………………… (76,600)
Cost of goods manufactured……………………………………… $788,600
b. Finished goods inventory, April 1………………………………… $ 39,600
Cost of goods manufactured……………………………………… 788,600
Cost of finished goods available for sale……………………… $828,200
Finished goods inventory, April 30……………………………… (41,200)
Cost of goods sold…………………………………………………… $787,000
15-2
© 2020 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
BE 15–6 (FIN MAN); BE 1–6 (MAN)
a. Number of Guests Nights per Visit Guest Nights
4,400 1 4,400
1,800 2 3,600
750 3 2,250
600 4 2,400
20 5 100
12,750
b. 15,000 available room nights (500 rooms × 30 nights in June)
Guest Nights
c. Occupancy Rate =
Available Room Nights
12,750
Occupancy Rate = = 85%
15,000
d. The utilization (occupancy) rate has improved from 82% in the prior year to 85% in
the current year.
15-3
© 2020 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
EXERCISES
Ex. 15–1 (FIN MAN); Ex. 1–1 (MAN)
a. Direct materials cost f. Factory overhead cost
b. Direct materials cost g. Direct materials cost
c. Factory overhead cost h. Direct materials cost
d. Direct materials cost i. Direct labor cost
e. Factory overhead cost
Ex. 15–2 (FIN MAN); Ex. 1–2 (MAN)
a. Factory overhead cost f. Factory overhead cost
b. Factory overhead cost g. Direct materials cost
c. Factory overhead cost h. Factory overhead cost
d. Direct materials cost i. Direct materials cost
e. Direct materials cost j. Direct labor cost
Ex. 15–3 (FIN MAN); Ex. 1–3 (MAN)
b, e, g, h
Ex. 15–4 (FIN MAN); Ex. 1–4 (MAN)
a. Period cost j. Product cost
b. Period cost k. Period cost
c. Period cost l. Period cost
d. Product cost m. Period cost
e. Product cost n. Product cost
f. Product cost o. Period cost
g. Product cost p. Period cost
h. Product cost q. Product cost
i. Product cost
Ex. 15–5 (FIN MAN); Ex. 1–5 (MAN)
a. cost object e. cost
b. period f. work in process inventory
c. conversion g. decreases
d. improve
Ex. 15–6 (FIN MAN); Ex. 1–6 (MAN)
a. electricity used to run assembly line e. improving
b. prime f. indirect
c. strategic g. period
d. materials inventory
15-4
© 2020 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
