CHAPTER 1
Managerial Accounting
ANSWERS TO QUESTIONS
3. Differences in the content of the reports are as follows:
Financial Managerial
Pertains to business as a whole and is highly Pertains to subunits of the business and
aggregated. may be very detailed.
Limited to double-entry accounting and cost Extends beyond double-entry accounting
data. system to any relevant data.
Generally accepted accounting principles. 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 issued by
managerial accountants.
4. Budgets are prepared by companies to provide future direction. Because the budget is also used
as an evaluation tool, some managers try to game the budgeting process by underestimating
their division’s predicted performance so that it will be easier to meet their performance targets.
On the other hand, if the budget is set at unattainable levels, managers sometimes take unethical
actions to meet targets to receive higher compensation or in some cases to keep their jobs.
17. Direct materials used............................................................................................... $240,000
Direct labor used...................................................................................................... 220,000
Total manufacturing overhead................................................................................. 180,000
Total manufacturing costs.............................................................................. $640,000
18. (a) Total cost of work in process ($26,000 + $640,000)...................................... $666,000
(b) Cost of goods manufactured ($666,000 – $32,000)....................................... $634,000
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 1-5
(a) Direct materials.
(b) Direct materials.
(c) Direct labor.
(d) Manufacturing overhead.
(e) Manufacturing overhead.
(f) Direct materials.
(g) Direct materials.
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 6/e, Solutions Manual (For Instructor Use Only) 1-1
(h) Manufacturing overhead.
BRIEF EXERCISE 1-6
(a) Product.
(b) Period.
(c) Period.
(d) Period.
(e) Product.
(f) Product.
BRIEF EXERCISE 1-10
Total
Direct Direct Factory Manufacturing
Materials Used Labor Used Overhead Costs
(1) $151,000
(2) $81,000
(3) $144,000
BRIEF EXERCISE 1-11
Total Work in Work in
Manufacturing Process Process Cost of Goods
Costs (January 1) (December 31) Manufactured
(1) $151,000* $189,000
(2) $123,000
(3) $58,000
*$40,000 + $61,000 + $50,000 (data from BE 1-10)
SOLUTIONS TO EXERCISES
EXERCISE 1-4
(a) Factory utilities......................................................................... $ 15,500
Depreciation on factory equipment........................................ 12,650
Indirect factory labor............................................................... 48,900
Indirect materials..................................................................... 80,800
Factory manager’s salary........................................................ 8,000
Property taxes on factory building......................................... 2,500
Factory repairs......................................................................... 2,000
Manufacturing overhead......................................................... $170,350
(b) Direct materials........................................................................ $137,600
Direct labor............................................................................... 69,100
Manufacturing overhead......................................................... 170,350
Product costs........................................................................... $377,050
(c) Depreciation on delivery trucks............................................. $ 3,800
Sales salaries........................................................................... 46,400
Repairs to office equipment................................................... 1,300
Advertising............................................................................... 15,000
Office supplies used............................................................... 2,640
Period costs............................................................................. $ 69,140
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 6/e, Solutions Manual (For Instructor Use Only) 1-3
EXERCISE 1-10
A + $57,000 + $46,500 = $195,650 $252,500 – $11,000 = F
A = $92,150 F = $241,500
$195,650 + B = $221,500 $130,000 + G + $102,000 = $253,700
B = $25,850 G = $21,700
$221,500 – C = $185,275 $253,700 + H = $337,000
C = $36,225 H = $83,300
$68,400 + $86,000 + $81,600 = D $337,000 – $70,000 = I
D = $236,000 I = $267,000
$236,000 + $16,500 = E
E = $252,500
Additional explanation to EXERCISE 1-10 solution:
Case A
(a) Total manufacturing costs....................................... $195,650
Less: Manufacturing overhead................................ $46,500
Direct labor...................................................... 57,000 103,500
Direct materials used................................................ $ 92,150
EXERCISE 1-10 (Continued)
(b) Total cost of work in process.................................. $221,500
Less: Total manufacturing costs............................. 195,650
Work in process (1/1/14)........................................... $ 25,850
(c) Total cost of work in process.................................. $221,500
Less: Cost of goods manufactured......................... 185,275
Work in process (12/31/14)....................................... $ 36,225
Case B
(d) Direct materials used................................................ $ 68,400
Direct labor................................................................ 86,000
Manufacturing overhead.......................................... 81,600
Total manufacturing costs....................................... $236,000
(e) Total manufacturing costs....................................... $236,000
Work in process (1/1/14)........................................... 16,500
Total cost of work in process.................................. $252,500
(f) Total cost of work in process.................................. $252,500
Less: Work in process (12/31/14)............................ 11,000
Cost of goods manufactured................................... $241,500
Case C
(g) Total manufacturing costs....................................... $253,700
Less: Manufacturing overhead............................... $102,000
Direct materials used.................................... 130,000 232,000
Direct labor................................................................ $ 21,700
(h) Total cost of work in process.................................. $337,000
Less: Total manufacturing costs............................. 253,700
Work in process (1/1/14)........................................... $ 83,300
(i) Total cost of work in process.................................. $337,000
Less: Work in process (12/31/14)............................ 70,000
Cost of goods manufactured................................... $267,000
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 6/e, Solutions Manual (For Instructor Use Only) 1-5
EXERCISE 1-17
(a) Raw Materials account: (5,000 – 4,650) X $10 = $3,500
Work in Process account: (4,600 X 10%) X $10 = $4,600
Finished Goods account: (4,600 X 90% X 30%) X $10 = $12,420
Cost of Goods Sold account: (4,600 X 90% X 70%) X $10 = $28,980
Selling Expenses account: 50 X $10 = $500
Proof of cost of head lamps allocated (5,000 X $10 = $50,000)
Raw materials $ 3,500
Work in process 4,600
Finished goods 12,420
Cost of goods sold 28,980
Selling expenses 500
Total $50,000
(b) To: Chief Accountant
From: Student
Subject: Statement Presentation of Accounts
Two accounts will appear in the income statement. Cost of Goods Sold
will be deducted from net sales in determining gross profit. Selling ex-
penses will be shown under operating expenses and will be deducted
from gross profit in determining net income. Sometimes, the calculation
for Cost of Good Sold is shown on the income statement. In these cases,
the balance in Finished Goods inventory would also be shown on the
income statement.
The other accounts associated with the head lamps are inventory ac-
counts which contain end-of-period balances. Thus, they will be reported
under inventories in the current assets section of the balance sheet in
the following order: finished goods, work in process, and raw materials.
EXERCISE 1-18
(a) 3. Balanced scorecard
(b) 4. Value chain
(c) 2. Just-in-time inventory
(d) 1. Activity-based costing
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1-24
Copyright © 2012 John Wiley & Sons, Inc.
(a) Product Costs
Direct Direct Manufacturing Period
Cost Item Materials Labor Overhead Costs
Rent on factory equipment $ 9,000
Insurance on factory building 1,500
SOLUTIONS TO PROBLEMS
Raw materials $75,000
Utility costs for factory 900
Supplies for general office $ 300
Wages for assembly line workers $53,000
Weygandt, Managerial Accounting, 6/e, Solutions Manual
Depreciation on office equipment 800
PROBLEM 1-1A
Miscellaneous materials 1,100
Factory manager’s salary 5,700
Property taxes on factory building 400
Advertising for helmets 14,000
Sales commissions 10,000
Depreciation on factory building 000,000 000,000 1,500 000,000
$75,000 $53,000 $20,100 $25,100
(b) Total production costs
Direct materials $ 75,000
Direct labor 53,000
Manufacturing overhead 20,100
Total production cost $148,100
(For Instructor Use Only)
Production cost per helmet = $148,100/10,000 = $14.81.
Copyright © 2012 John Wiley & Sons, Inc.
(a) Product Costs
Direct Direct Manufacturing Period
Cost Item Materials Labor Overhead Costs
Raw materials (1) $111,000
Wages for workers (2) $90,000
Rent on equipment $ 4,900
Indirect materials (3) 7,500
Factory supervisor’s salary 3,000
Janitorial costs 1,300
Weygandt, Managerial Accounting, 6/e, Solutions Manual
Advertising $9,500
Depreciation on factory building (4) 650
PROBLEM 1-2A
Property taxes on factory building (5) 00_0,000 000,000 750 00,000
$111,000 $90,000 $18,100 $9,500
(1) $74 X 1,500 = $111,000.
(2) $12 X 5 X 1,500 = $90,000.
(3) $5 X 1,500 = $7,500.
(4) $7,800/12 = $650.
(5) $9,000/12 = $750.
(b) Total production costs
Direct materials $111,000
(For Instructor Use Only)
Direct labor 90,000
Manufacturing overhead 18,100
Total production cost $219,100
Production cost per system = $219,100/1,500 = $146.07. (rounded)
1-25
PROBLEM 1-3A
(a) Case 1
A = $9,600 + $5,000 + $8,000 = $22,600
$22,600 + $1,000 – B = $17,000
B = $22,600 + $1,000 – $17,000 = $6,600
$17,000 + C = $20,000
C = $20,000 – $17,000 = $3,000
D = $20,000 – $3,400 = $16,600
E = ($24,500 – $2,500) – $16,600 = $5,400
F = $5,400 – $2,500 = $2,900
Case 2
G + $8,000 + $4,000 = $16,000
G = $16,000 – $8,000 – $4,000 = $4,000
$16,000 + H – $3,000 = $22,000
H = $22,000 + $3,000 – $16,000 = $9,000
(I – $1,400) – K = $7,000
(I – $1,400) – $22,800 = $7,000
I = $1,400 + $22,800 + $7,000 = $31,200
(Note: Item I can only be solved after item K is solved.)
J = $22,000 + $3,300 = $25,300
K = $25,300 – $2,500 = $22,800
$7,000 – L = $5,000
L = $2,000
PROBLEM 1-3A (Continued)
(b) CASE 1
Cost of Goods Manufactured Schedule
Work in process, beginning.................................. $ 1,000
Direct materials...................................................... $9,600
Direct labor............................................................. 5,000
Manufacturing overhead........................................ 8,000
Total manufacturing costs............................. 22,600
Total cost of work in process................................ 23,600
Less: Work in process, ending............................ 6,600
Cost of goods manufactured................................ $17,000
(c) CASE 1
Income Statement
Sales revenue......................................................... $24,500
Less: Sales discounts........................................... 2,500
Net sales................................................................. $22,000
Cost of goods sold
Finished goods inventory, beginning........... 3,000
Cost of goods manufactured......................... 17,000
Cost of goods available for sale................... 20,000
Less: Finished goods inventory, ending..... 3,400
Cost of goods sold................................. 16,600
Gross profit............................................................. 5,400
Operating expenses............................................... 2,500
Net income.............................................................. $ 2,900
CASE 1
(Partial) Balance Sheet
Current assets
Cash................................................................. $ 4,000
Receivables (net)............................................ 15,000
Inventories
Finished goods....................................... $3,400
Work in process...................................... 6,600
Raw materials.......................................... 600 10,600
Prepaid expenses........................................... 400
Total current assets................................ $30,000