Maangerial 9e – Chapter 1 - ATC
ATC 1-1
a. The information described in the table is primarily managerial
accounting information, as much of it refers to nonfinancial
measures. The disclosures are not restricted by GAAP or other
regulation. The information about revenues, total assets, and
earnings are financial in nature, although they are also useful for
managerial accounting purposes.
b. Other examples of managerial information include operating data
such as sales generated per country, number of different products
sold, and the revenue generated from each of these. Financial
information would include financial statements, footnotes to
financial statements, and the auditor’s opinion.
c. Starbucks’ 2017 fiscal year appears better than 2016 because in 2017
it had higher revenues and net earnings.
d. Starbucks had more employees and had more sales in 2017 than in
2016, which suggest it was larger, and therefore, appears better.
e. Starbucks had more revenue and earnings in 2017 than in 2016, but
it also had more employees, 277,000 versus 254,000. It also had
more property, 6,322 thousand square feet in 2017 versus 6,277
thousand in 2016. If we calculate “revenue per employee” and
“earnings per employee” for each year, we get:
2017 2016
Revenue per employee $80,819 $83,921
Earnings per employee 10,415 11,094
If we calculate “revenue per thousand square feet of property” and
“earnings per thousand square feet of property” for each year, we
get:
2017 2016
Revenue per thousand feet $3,541 $3,396
Earnings per thousand feet 456 449
1-1
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consent of McGraw-Hill Education
,Maangerial 9e – Chapter 1 - ATC
ATC 1-1 (continued)
These numbers suggest the company used its employees less
efficiently in 2017 than in 2016, but it is using its property more
efficiently.
1-2
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consent of McGraw-Hill Education
,Maangerial 9e – Chapter 1 - ATC
ATC 1-2
a.
1. Cost of goods sold
Raw materials $ 720,000
Utilities1 96,000
Labor 880,000
Depreciation on manufacturing equipment2 1,000,000
Setup cost 80,000
Total product cost $2,776,000
Cost of goods sold = $2,776,000 69,400 units = $40 per unit
Cost of goods sold = $40 per unit x 60,000 units = $2,400,000
2. Upstream Costs
Note: The $10,000 of accrued engineer’s salaries is an upstream cost.
However, it would not be used in the computation of net income
because it applies to the previous accounting period.
Utilities1 $ 16,000
Salaries 390,000
Redesign cost 186,000
Insurance expense3 16,000
Total $608,000
3. Downstream Costs
Advertising $ 70,000
Utilities1 48,000
Salaries ($658,000 + $16,000) 674,000
Insurance expense3 32,000
Total $824,000
1-3
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consent of McGraw-Hill Education
, Maangerial 9e – Chapter 1 - ATC
ATC 1-2 (continued)
1
Allocation Rate for Utilities = $160,000 100,000 = $1.60 per square foot.
Research and development 10,000 x $1.60 = $ 16,000
Manufacturing 60,000 x $1.60 = 96,000
Selling and administrative 30,000 x $1.60 = 48,000
Total 100,000 x $1.60 = $160,000
2
Depreciation on manufacturing equipment = ($10,000,000 $2,000,000)
8 = $1,000,000
3
Amount of prepaid insurance to recognize as expense
= ($72,000 12 months) x 8 months = $48,000
Rate for insurance expense = $48,000 12 = $4,000 per employee.
Research and development 4 x $4,000 = $16,000
Selling and administrative 8 x $4,000 = 32,000
Total 12 x $4,000 = $48,000
b. Income Statement
Revenue (60,000 x $70) $4,200,000
Cost of goods sold (2,400,000)
Gross margin 1,800,000
Upstream expense (608,000)
Downstream expenses (824,000)
Net income $ 368,000
1-4
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consent of McGraw-Hill Education
ATC 1-1
a. The information described in the table is primarily managerial
accounting information, as much of it refers to nonfinancial
measures. The disclosures are not restricted by GAAP or other
regulation. The information about revenues, total assets, and
earnings are financial in nature, although they are also useful for
managerial accounting purposes.
b. Other examples of managerial information include operating data
such as sales generated per country, number of different products
sold, and the revenue generated from each of these. Financial
information would include financial statements, footnotes to
financial statements, and the auditor’s opinion.
c. Starbucks’ 2017 fiscal year appears better than 2016 because in 2017
it had higher revenues and net earnings.
d. Starbucks had more employees and had more sales in 2017 than in
2016, which suggest it was larger, and therefore, appears better.
e. Starbucks had more revenue and earnings in 2017 than in 2016, but
it also had more employees, 277,000 versus 254,000. It also had
more property, 6,322 thousand square feet in 2017 versus 6,277
thousand in 2016. If we calculate “revenue per employee” and
“earnings per employee” for each year, we get:
2017 2016
Revenue per employee $80,819 $83,921
Earnings per employee 10,415 11,094
If we calculate “revenue per thousand square feet of property” and
“earnings per thousand square feet of property” for each year, we
get:
2017 2016
Revenue per thousand feet $3,541 $3,396
Earnings per thousand feet 456 449
1-1
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written
consent of McGraw-Hill Education
,Maangerial 9e – Chapter 1 - ATC
ATC 1-1 (continued)
These numbers suggest the company used its employees less
efficiently in 2017 than in 2016, but it is using its property more
efficiently.
1-2
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written
consent of McGraw-Hill Education
,Maangerial 9e – Chapter 1 - ATC
ATC 1-2
a.
1. Cost of goods sold
Raw materials $ 720,000
Utilities1 96,000
Labor 880,000
Depreciation on manufacturing equipment2 1,000,000
Setup cost 80,000
Total product cost $2,776,000
Cost of goods sold = $2,776,000 69,400 units = $40 per unit
Cost of goods sold = $40 per unit x 60,000 units = $2,400,000
2. Upstream Costs
Note: The $10,000 of accrued engineer’s salaries is an upstream cost.
However, it would not be used in the computation of net income
because it applies to the previous accounting period.
Utilities1 $ 16,000
Salaries 390,000
Redesign cost 186,000
Insurance expense3 16,000
Total $608,000
3. Downstream Costs
Advertising $ 70,000
Utilities1 48,000
Salaries ($658,000 + $16,000) 674,000
Insurance expense3 32,000
Total $824,000
1-3
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written
consent of McGraw-Hill Education
, Maangerial 9e – Chapter 1 - ATC
ATC 1-2 (continued)
1
Allocation Rate for Utilities = $160,000 100,000 = $1.60 per square foot.
Research and development 10,000 x $1.60 = $ 16,000
Manufacturing 60,000 x $1.60 = 96,000
Selling and administrative 30,000 x $1.60 = 48,000
Total 100,000 x $1.60 = $160,000
2
Depreciation on manufacturing equipment = ($10,000,000 $2,000,000)
8 = $1,000,000
3
Amount of prepaid insurance to recognize as expense
= ($72,000 12 months) x 8 months = $48,000
Rate for insurance expense = $48,000 12 = $4,000 per employee.
Research and development 4 x $4,000 = $16,000
Selling and administrative 8 x $4,000 = 32,000
Total 12 x $4,000 = $48,000
b. Income Statement
Revenue (60,000 x $70) $4,200,000
Cost of goods sold (2,400,000)
Gross margin 1,800,000
Upstream expense (608,000)
Downstream expenses (824,000)
Net income $ 368,000
1-4
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consent of McGraw-Hill Education
