ACC 406 Lecture Notes - Lecture 1: Finished Good, Income Statement, Sig Sauer P226
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I'll rate posting for sec times just do last parts likecost and balance sheet ( account balance and cost incurred ) that'sit ready question carefully then answer all last partthanks
Charles Maxwell is starting a cheesecake bakery, Able BakerCharlie Company, to produce and sell different flavored cheesecakesto restaurants and the general public. He has just begun his studyof accounting, and is a bit confused about the many types ofreports he has read about and how they will help him run hisbusiness. He asks you to help him clarify what the differencesbetween managerial accounting and financial accounting are. Heâsalso wondering how to set up his inventory, how to classify thecosts of his business, and how to fill in some missinginformation.
| Required: | |
| 1. | Choose whether thecharacteristics on the Managerial vs. Financial panel are mostoften associated with managerial accounting or financialaccounting. |
| 2. | Charles has provided some ofthe costs he expects to incur on the Cost Classification panel.Decide on the classifications that could be applied to each ofthese costs using the table provided. The cost object in each caseis the cheesecake. |
| 3. | Charles found some sampleincome statements and balance sheets on the Internet, and askedwhich of them might be most appropriate for a manufacturingbusiness like his. Review income statements A and B on the IncomeStatements panel, and balance sheets C and D on the Balance Sheetspanel. Determine which income statement and balance sheet would bemost appropriate for a manufacturing business like Able BakerCharlie. Then, on the Financial Statements panel, denote whichincome statement and balance sheet would be most appropriate for amanufacturing business. |
| 4. | At the end of February, afterthe second month of operations of Able Baker Charlie Company,Charles shows you the data heâs collected, but he was unable tofigure out some of the amounts. On the Costs and Balances panel,determine the missing amounts. Note: It may behelpful to use T accounts to map the flow of the amounts throughthe manufacturing accounts and solve for the missing dollarvalues. |
Managerial vs. Financial
Choose whether the following characteristics are most oftenassociated with managerial accounting or financial accounting.
Managerial Accounting | Financial Accounting | ||
|---|---|---|---|
| Primarily used for internal decision making | |||
| Generally Accepted Accounting Principles (GAAP) must beused | |||
| Prepared statements usually pertain to the company as a wholerather than individual departments or products | |||
| Information provided will often be subjective, such asestimated future results | |||
| Often prepared on an as-needed basis rather than at fixedintervals | |||
| Use principles of the Sustainability Accounting Standards Board(SASB) to provide sustainability information to external financialstatement users | |||
| Consideration of sustainability practices to contribute to thecompanyâs long-term success | |||
| Using eco-efficiency measures to reduce expenses |
Cost Classification
Charles has provided some of the costs he expects to incur asfollows. Decide on the classifications that could be applied toeach of these costs using the table provided. The cost object ineach case is the cheesecake.
Cost | Product | Period | Direct | Direct | Factory | Selling | Administrative | Direct | Indirect | Prime | Conversion | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cost | Cost | Materials | Labor | Overhead | Expense | Expense | Cost | Cost | Cost | Cost | ||
| Eggs used to make cheesecakes | ||||||||||||
| Bakerâs wages | ||||||||||||
| Delivery driver wages | ||||||||||||
| Depreciation of office computers | ||||||||||||
| Power to run the cheesecake ovens | ||||||||||||
| Presidentâs salary | ||||||||||||
| Sales commissions | ||||||||||||
| Factory supervisor salary |
Financial Statements
Charles found some sample income statements and balance sheetson the Internet, and asked which of them might be most appropriatefor a manufacturing business like his. Review income statements Aand B on the Income Statements panel, and balance sheets C and D onthe Balance Sheets panel. Determine which income statement andbalance sheet would be most appropriate for a manufacturingbusiness like Able Baker Charlie Company.
Which income statement is most appropriate for a manufacturingbusiness?
Income statement A
Income statement B
Which balance sheet is most appropriate for a manufacturingbusiness?
Balance sheet C
Balance sheet D
Income Statements
Income Statement A (scroll down for Income StatementB):
Sample Company A |
Income Statement |
For the Year Ended December 31, 20Y8 |
1 | Sales | $42,000.00 | |
2 | Beginning finished goods inventory | $5,250.00 | |
3 | Plus cost of goods manufactured | 6,400.00 | |
4 | Cost of finished goods available for sale | $11,650.00 | |
5 | Less ending finished goods inventory | 400.00 | |
6 | Cost of goods sold | 11,250.00 | |
7 | Gross profit | $30,750.00 | |
8 | Operating expenses: | ||
9 | Selling expenses | $6,400.00 | |
10 | Administrative expenses | 5,250.00 | |
11 | Total operating expenses | 11,650.00 | |
12 | Net income | $19,100.00 |
Income Statement B:
Sample Company B |
Income Statement |
For the Year Ended December 31, 20Y8 |
1 | Sales | $42,000.00 | |
2 | Beginning merchandise inventory | $5,250.00 | |
3 | Plus net purchases | 6,400.00 | |
4 | Merchandise available for sale | $11,650.00 | |
5 | Less ending merchandise inventory | 400.00 | |
6 | Cost of merchandise sold | 11,250.00 | |
7 | Gross profit | $30,750.00 | |
8 | Operating expenses: | ||
9 | Selling expenses | $6,400.00 | |
10 | Administrative expenses | 5,250.00 | |
11 | Total operating expenses | 11,650.00 | |
12 | Net income | $19,100.00 |
Balance Sheets
Balance Sheet C (scroll down for Balance SheetD):
Sample Company C |
Balance Sheet |
December 31, 20Y8 |
1 | Assets | ||
2 | Cash | $20,800.00 | |
3 | Accounts receivable (net) | 10,000.00 | |
4 | Merchandise inventory | 6,000.00 | |
5 | Supplies | 2,100.00 | |
6 | Land | 17,000.00 | |
7 | Total assets | $55,900.00 | |
8 | Liabilities | ||
9 | Accounts payable | $17,800.00 | |
10 | Stockholdersâ Equity | ||
11 | Common stock | $19,000.00 | |
12 | Retained earnings | 19,100.00 | |
13 | Total stockholdersâ equity | 38,100.00 | |
14 | Total liabilities and stockholdersâ equity | $55,900.00 |
Balance Sheet D:
Sample Company D |
Balance Sheet |
December 31, 20Y8 |
1 | Assets | ||
2 | Cash | $20,800.00 | |
3 | Accounts receivable (net) | 10,000.00 | |
4 | Inventories: | ||
5 | Finished goods | $2,000.00 | |
6 | Work in process | 1,500.00 | |
7 | Materials | 2,500.00 | 6,000.00 |
8 | Supplies | 2,100.00 | |
9 | Land | 17,000.00 | |
10 | Total assets | $55,900.00 | |
11 | Liabilities | ||
12 | Accounts payable | $17,800.00 | |
13 | Stockholdersâ Equity | ||
14 | Common stock | $19,000.00 | |
15 | Retained earnings | 19,100.00 | |
16 | Total stockholdersâ equity | 38,100.00 | |
17 | Total liabilities and stockholdersâ equity | $55,900.00 |
Costs and Balances
At the end of February, after the second month of operationsof Able Baker Charlie Company, Charles shows you the data heâscollected, but he was unable to figure out some of the amounts.Review the following data and fill in the missing amounts on thechart for Able Baker Charlie Company. Note: It maybe helpful to use T accounts to map the flow of the amounts throughthe manufacturing accounts and solve for the missing dollar values.It may also be helpful to review the steps for determining the costof materials used, total manufacturing cost incurred, and cost ofgoods manufactured.
| Data forFebruary | |
|---|---|
| Decrease in materialsinventory | $3,300 |
| Materials inventory on Feb. 28 | 50% of materials inventory on Jan.31 |
| Direct materials purchased | $12,600 |
| Direct materials used | 3 times the direct laborincurred |
| Total manufacturing costs incurredin period | $29,400 |
| Total manufacturing costs incurredin period | 70% of Cost of GoodsManufactured |
| Total manufacturing costs incurredin period | $7,000 less than Cost of GoodsSold |
| Account | Account Balances | Costs Incurred | ||
|---|---|---|---|---|
| Jan.31 | Feb.28 | |||
| Materials Inventory | DirectMaterials Used | |||
| Work inProcess Inventory | $27,000 | DirectLabor Incurred | ||
| FinishedGoods Inventory | $16,000 | FactoryOverhead Incurred | ||
| Cost ofGoods Sold | ||||
Mannarelli Corporation uses the FIFO method in its processcosting system. Operating data for the Casting Department for themonth of September appear below:
| Units | PercentComplete with Respect to Conversion | |
| Beginning workin process inventory | 19,000 | 25% |
| Transferred infrom the prior department during September | 99,000 | |
| Ending work inprocess inventory | 29,000 | 90% |
According to the company's records, the conversion cost inbeginning work in process inventory was $16,160 at the beginning ofSeptember. Additional conversion costs of $531,556 were incurred inthe department during the month. |
The cost per equivalent unit for conversion costs for Septemberis closest to (Round off to three decimal places.): |
$4.642
$4.817
$5.369
$4.669
During February, Degan Inc. transferred $55,000 from Work inProcess to Finished Goods and recorded a Cost of Goods Sold of$60,000 (assume there was enough beginning balance in the Finishedgoods inventory account). The journal entries to record thesetransactions would include a:
credit to Finished Goods of $55,000
debit to Finished Goods of $60,000
credit to Cost of Goods Sold of $60,000
credit to Work in Process of $55,000
Carr Company produces a single product. During the past year,Carr manufactured 42,000 units and sold 28,500 units. Productioncosts for the year were as follows:
| Fixed manufacturing overhead | $ 420,000 |
| Variable manufacturing overhead | $ 525,000 |
| Direct labor | $ 344,400 |
| Direct materials | $ 445,200 |
Sales totaled $2,137,500, variable selling expenses totaled$424,200, and fixed selling and administrative expenses totaled$187,000. There were no units in beginning inventory. Assume thatdirect labor is a variable cost.
Under absorption costing, the ending inventory for the year wouldbe valued at (Do not round your intermediate calculations.):
$557,550
$646,129
$752,657
$711,284
| The followingdata were taken from the accounting records of Abacus Company whichuses the FIFO method in its process costing system: |
| Beginning work in process inventory: | 30,000 units(materials 100% complete, labor and overhead 70% complete) |
| Started in process during the period: | 100,000units |
| Endingwork in process inventory: | 40,000 units(materials 100% complete, labor and overhead 80% complete) |
The equivalent units are:
Material, 134,000 units; labor and overhead, 132,000 units
Material, 130,000 units; labor and overhead, 122,000 units
Material, 100,000 units; labor and overhead, 101,000 units
Material, 91,000 units; labor and overhead, 83,000 units
Budget data for the Bidwell Company are as follows:
| Sales (170,000 units) | $1,700,000 | ||
| Expenses: | Fixed | Variable | |
| Raw materials | $ 510,000 | ||
| Direct labor | 340,000 | ||
| Overhead | $ 170,000 | 255,000 | |
| Selling and administrative | 187,000 | 85,000 | |
| Total expenses | $ 357,000 | $ 1,190,000 | 1,547,000 |
| Netoperating income | $ 153,000 |
| The number ofunits Bidwell would have to sell to earn a net operating income of$255,000 is: |
170,000 units
119,000 units
204,000 units
255,000 units
DeAnne Company produces a single product. The company's variablecosting income statement for August appears below:
| DeAnne Company Income statement For the month ended August 31 | |
| Sales ($21 per unit) | $1,134,000 |
| Variable expenses: | |
| Variable cost of goods sold | 486,000 |
| Variable selling expense | 108,000 |
| Total variable expenses | 594,000 |
| Contribution margin | 540,000 |
| Fixed expenses: | |
| Fixed manufacturing | 147,000 |
| Fixed selling and administrative | 49,000 |
| Total fixed expenses | 196,000 |
| Netoperating income | $344,000 |
The company produced 49,000 units in August and the beginninginventory consisted of 22,000 units. Variable production costs perunit and total fixed costs have remained constant over the pastseveral months.
The value of the company's inventory on August 31 under theabsorption costing method is (Do not round your intermediatecalculations.):
$204,000
$238,000
$153,000
$253,426
Candice Corporation has decided to introduce a new product. Theproduct can be manufactured using either a capital-intensive orlabor-intensive method. The manufacturing method will not affectthe quality or sales of the product. The estimated manufacturingcosts of the two methods are as follows:
| Capital-Intensive | Labor-Intensive | |||||||
| Variable manufacturing cost per unit | $ | 14.00 | $ | 17.60 | ||||
| Fixed manufacturing cost per year | $ | 2,606,000 | $ | 1,417,600 | ||||
The company's market research department has recommended anintroductory selling price of $30 per unit for the new product. Theannual fixed selling and administrative expenses of the new productare $600,000. The variable selling and administrative expenses are$2 per unit regardless of how the new product is manufactured. |
Required: | |
| a. | Calculate the break-even point in units if Candice Corporationuses the (Do not round intermediatecalculations.): |
| Break-evenpoint in units | |
| Capital-intensive manufacturing method | |
| Labor-intensive manufacturing method | |
| b. | Determine the unit sales volume at which the net operatingincome is the same for the two manufacturing methods. (Donot round intermediate calculations. Round your answer to thenearest whole number.) |
| Sales volume |
| c. | Assuming sales of 440,000 units, what is the degree of operatingleverage if the company uses the: (Do not roundintermediate calculations. Round your answers to 2 decimalplaces.) |
| Degree ofoperating leverage | |
| Capital-intensive manufacturing method | |
| Labor-intensive manufacturing method | |
| d. | What is your recommendation to management concerning whichmanufacturing method should be used, if the sales volume is inexcess of the one calculated under Requirement (b)? | ||||
|
| Hickory Company manufactures two productsâ13,000 units ofProduct Y and 5,000 units of Product Z. The company uses aplantwide overhead rate based on direct labor-hours. It isconsidering implementing an activity-based costing (ABC) systemthat allocates all of its manufacturing overhead to four costpools. The following additional information is available for thecompany as a whole and for Products Y and Z: (The totalestimated overhead cost may not agree with the sum of allocatedoverhead costs to each product.)
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ermoin Inc. uses the FIFO method in its process costing system.The following data concern the operations of the company's firstprocessing department for a recent month.
| Workin process, beginning: | |||||
| Units in process | 2,400 | ||||
| Percent complete with respect tomaterials | 70 | % | |||
| Percent complete with respect toconversion | 30 | % | |||
| Costs in the beginning inventory: | |||||
| Materials cost | $ | 4,140 | |||
| Conversion cost | $ | 6,265 | |||
| Units started into production during the month | 17,900 | ||||
| Units completed and transferred out | 17,900 | ||||
| Costs added to production during the month: | |||||
| Materials cost | $ | 165,490 | |||
| Conversion cost | $ | 560,270 | |||
| Workin process, ending: | |||||
| Units in process | 2,400 | ||||
| Percent complete with respect tomaterials | 50 | % | |||
| Percent complete with respect toconversion | 30 | % | |||
| Required: |
Using the FIFO method: |
| a. | Determine theequivalent units of production for materials and conversioncosts. |
| Materials | Conversion | |
| Equivalent units of production | ||
| b. | Determine the cost per equivalent unit for materials andconversion costs. (Round your answers to 2 decimalplaces.) |
| Materials | Conversion | |
| Costper equivalent unit | $ | $ |
| c. | Determine the cost of ending work in process inventory.(Round your intermediate calculations to 2 decimal placesand final answer to the nearest dollar amount.) |
| Costof ending work in process inventory | $ |
| d. | Determine the cost of units transferred out of the departmentduring the month. (Round your intermediate calculations to2 decimal places and final answer to the nearest dollaramount.) |
| Costof units transferred out | $ |
All questions have to do with cost accounting systems,more in particular, job order costing.
Complete each of the following statements/Answer the followingquestions
1. A custom-furniture designer would probably use which methodof cost accounting? 1. ____
2. The cost of finished products on hand that have not been soldis called 2. ____
3-5. Work in process consists of these costs that have enteredthe manufacturing process on unfinished products:
3. ____
4. ____
5. ____
6. The accounting system that accumulates the product costsoriginating with inventory and ending with the cost of goods soldis the 6. ____
7. The system best suited to industries that manufacture customgoods to fill special orders is referred to as a 7. ____
8. The system that accumulates costs for each of the departmentswithin the factory is a 8. ____
9. The Receiving Department document that shows the quantityreceived and its condition is the 9. ____
10. Materials are released from the storeroom to the factory inresponse to a 10. ____
11. The amount of time spent by an employee in the factory isusually recorded on 11. ____
12. Indirect materials and indirect labor are examples of thismanufacturing cost 12. ____
13. The costing method that accumulates and allocates factoryoverhead costs to products using many overhead rates is 13.____
14. If estimated total factory overhead costs are $75,000 anddirect labor hours are 15,000, the predetermined factory overheadrate is 14. ____
15. The process of assigning factory overhead costs to a costobject is termed 15. ____
16. In highly-automated factory settings, a widely used activitybase for predetermining a factory overhead rate is 16. ____
17. The subsidiary ledger that contains cost data for the unitsmanufactured, units sold, and units on hand is 17. ____
18. The direct labor and overhead costs of a service businessare accumulated in a 18. ____
19. If the actual factory overhead costs exceed the amount offactory overhead applied, the factory overhead account balance willbe a (debit or credit) 19. ____
20. The factory overhead in Question 19 is said to be 20.____
21. The source of the data for debiting Work in Process fordirect materials is a 21. ____
22. The accounting document that is used to accumulate the costsfor each clientâs job in a service business is a 22. ____
23. The controlling account for the cost ledger is 23. ____
24. The measure used to allocate overhead that reflects itsconsumption is called 24. ____
Indicate the titles of the accounts to be debited andcredited in recording the summarized operations presented below byinserting the letter or letters of the account titles listed in theappropriate columns.
ACCOUNTS
A. Accounts Payable E. FactoryOverhead I. Selling and AdministrativeExpenses
B. Accounts Receivable F.Finished Goods J. Wages Payable
C. Cash G. MaterialsK. Work in Process
D. Cost of Goods Sold H.Sales
TRANSACTIONS | Debit | Credit | ||
0. Cash paid on account...................................................................................... | A | 0. ____ | C | 0. ____ |
1-2. Materials requisitioned for use on specific jobsand for general factory use....................................................................................................................... |
|
| ||
3-4. Factory labor incurred on specific jobs and forgeneral factory use ....... | 3. ____ | 4. ____ | ||
5-6. Applied factory overhead to jobs................................................................... | 5. ____ | 6. ____ | ||
7-8. Paid salary of vice-president of finance....................................................... | 7. ____ | 8. ____ | ||
9-10. Cashpaid for overhead costs incurred......................................................... | 9. ____ | 10. ____ | ||
11-12. Transferred smallbalance of under-applied overhead ............................ | 11. ____ | 12. ____ | ||
13-14. Jobs completed................................................................................................. | 13. ____ | 14. ____ |
