chapter 16 introduction to managerial accounting demonstration problems © 2016 pearson education,...

Chapter 16

Introduction to Managerial Accounting

Demonstration Problems

© 2016 Pearson Education, Ltd. 16-1

Demonstration of E16-23

Inventories: Beginning Ending

Raw Materials $16,000

$12,000

Work-in-Process98,000 87,000

Finished Goods20,000 25,000

Other information:

Purchases of materials $37,000

Direct labor76,000

Manufacturing overhead34,000

Use the following information for a manufacturer to compute cost of goods manufactured and cost of goods sold:

Beginning Work-in-Process Inventory     $ 98,000

Calculation of cost of goods manufactured

Demonstration of E16-23

Beginning Work-in-Process Inventory     $ 98,000

Direct Materials Used:      

Beginning Raw Materials Inventory $ 16,000    

Calculation of cost of goods manufactured

Demonstration of E16-23

Beginning Work-in-Process Inventory     $ 98,000

Direct Materials Used:      

Beginning Raw Materials Inventory $ 16,000    

Purchases of Raw Materials 37,000    

Calculation of cost of goods manufactured

Demonstration of E16-23

Beginning Work-in-Process Inventory     $ 98,000

Direct Materials Used:      

Beginning Raw Materials Inventory $ 16,000    

Purchases of Raw Materials 37,000    

Raw Materials Available for Use 53,000    

Calculation of cost of goods manufactured

Demonstration of E16-23

Beginning Work-in-Process Inventory     $ 98,000

Direct Materials Used:      

Beginning Raw Materials Inventory $ 16,000    

Purchases of Raw Materials 37,000    

Raw Materials Available for Use 53,000    

Ending Raw Materials Inventory (12,000)    

Calculation of cost of goods manufactured

Demonstration of E16-23

Beginning Work-in-Process Inventory     $ 98,000

Direct Materials Used:      

Beginning Raw Materials Inventory $ 16,000    

Purchases of Raw Materials 37,000    

Raw Materials Available for Use 53,000    

Ending Raw Materials Inventory (12,000)    

Direct Materials Used   41,000  

Calculation of cost of goods manufactured

Demonstration of E16-23

Beginning Work-in-Process Inventory     $ 98,000

Direct Materials Used:      

Beginning Raw Materials Inventory $ 16,000    

Purchases of Raw Materials 37,000    

Raw Materials Available for Use 53,000    

Ending Raw Materials Inventory (12,000)    

Direct Materials Used   41,000  

Direct Labor   76,000  

Calculation of cost of goods manufactured

Demonstration of E16-23

Beginning Work-in-Process Inventory     $ 98,000

Direct Materials Used:      

Beginning Raw Materials Inventory $ 16,000    

Purchases of Raw Materials 37,000    

Raw Materials Available for Use 53,000    

Ending Raw Materials Inventory (12,000)    

Direct Materials Used   41,000  

Direct Labor   76,000  

Manufacturing Overhead   34,000  

Calculation of cost of goods manufactured

Demonstration of E16-23

Beginning Work-in-Process Inventory     $ 98,000

Direct Materials Used:      

Beginning Raw Materials Inventory $ 16,000    

Purchases of Raw Materials 37,000    

Raw Materials Available for Use 53,000    

Ending Raw Materials Inventory (12,000)    

Direct Materials Used   41,000  

Direct Labor   76,000  

Manufacturing Overhead   34,000  

Total Manufacturing Costs Incurred During the Year     151,000

Calculation of cost of goods manufactured

Demonstration of E16-23

Beginning Work-in-Process Inventory     $ 98,000

Direct Materials Used:      

Beginning Raw Materials Inventory $ 16,000    

Purchases of Raw Materials 37,000    

Raw Materials Available for Use 53,000    

Ending Raw Materials Inventory (12,000)    

Direct Materials Used   41,000  

Direct Labor   76,000  

Manufacturing Overhead   34,000  

Total Manufacturing Costs Incurred During the Year     151,000

Total Manufacturing Costs to Account For     249,000

Calculation of cost of goods manufactured

Demonstration of E16-23

Beginning Work-in-Process Inventory     $ 98,000

Direct Materials Used:      

Beginning Raw Materials Inventory $ 16,000    

Purchases of Raw Materials 37,000    

Raw Materials Available for Use 53,000    

Ending Raw Materials Inventory (12,000)    

Direct Materials Used   41,000  

Direct Labor   76,000  

Manufacturing Overhead   34,000  

Total Manufacturing Costs Incurred During the Year     151,000

Total Manufacturing Costs to Account For     249,000

Ending Work-in-Process Inventory     (87,000)

Calculation of cost of goods manufactured

Demonstration of E16-23

Beginning Work-in-Process Inventory     $ 98,000

Direct Materials Used:      

Beginning Raw Materials Inventory $ 16,000    

Purchases of Raw Materials 37,000    

Raw Materials Available for Use 53,000    

Ending Raw Materials Inventory (12,000)    

Direct Materials Used   41,000  

Direct Labor   76,000  

Manufacturing Overhead   34,000  

Total Manufacturing Costs Incurred During the Year     151,000

Total Manufacturing Costs to Account For     249,000

Ending Work-in-Process Inventory     (87,000)

Cost of Goods Manufactured     $ 162,000

Calculation of cost of goods manufactured

Demonstration of E16-23

Beginning Finished Goods Inventory $ 20,000  

Calculation of cost of goods sold

Demonstration of E16-23

Beginning Finished Goods Inventory $ 20,000  

Cost of Goods Manufactured 162,000 [previous slide]

Calculation of cost of goods sold

Demonstration of E16-23

Beginning Finished Goods Inventory $ 20,000  

Cost of Goods Manufactured 162,000 [previous slide]

Cost of Goods Available for Sale 182,000  

Calculation of cost of goods sold

Demonstration of E16-23

Beginning Finished Goods Inventory $ 20,000  

Cost of Goods Manufactured 162,000 [previous slide]

Cost of Goods Available for Sale 182,000  

Ending Finished Goods Inventory (25,000)  

Calculation of cost of goods sold

Demonstration of E16-23

Beginning Finished Goods Inventory $ 20,000  

Cost of Goods Manufactured 162,000 [previous slide]

Cost of Goods Available for Sale 182,000  

Ending Finished Goods Inventory (25,000)  

Cost of Goods Sold $157,000  

Calculation of cost of goods sold

Demonstration of E16-23

Demonstration of E16-25

Selling and Administrative Expenses $147,000

Purchases208,000

Sales Revenue421,000

Merchandise Inventory, January 1, 201616,000

Merchandise Inventory, December 31, 201611,000

Rise & Shine Company sells alarm clocks. The following information summarizes Rise & Shine’s operating activities for 2016:

Requirements

1. Calculate the operating income for 2016.

2. Rise & Shine sold 50,000 alarm clocks in 2016. Compute the unit cost for one alarm clock.

Sales Revenue   $ 421,000

Requirement 1: Calculate the operating income for 2016.

Demonstration of E16-25

Sales Revenue   $ 421,000

Cost of Goods Sold:    

Beginning Merchandise Inventory $ 16,000  

Requirement 1: Calculate the operating income for 2016.

Demonstration of E16-25

Sales Revenue   $ 421,000

Cost of Goods Sold:    

Beginning Merchandise Inventory $ 16,000  

Purchases 208,000  

Requirement 1: Calculate the operating income for 2016.

Demonstration of E16-25

Sales Revenue   $ 421,000

Cost of Goods Sold:    

Beginning Merchandise Inventory $ 16,000  

Purchases 208,000  

Cost of Goods Available for Sale 224,000  

Requirement 1: Calculate the operating income for 2016.

Demonstration of E16-25

Sales Revenue   $ 421,000

Cost of Goods Sold:    

Beginning Merchandise Inventory $ 16,000  

Purchases 208,000  

Cost of Goods Available for Sale 224,000  

Ending Merchandise Inventory (11,000)  

Requirement 1: Calculate the operating income for 2016.

Demonstration of E16-25

Sales Revenue   $ 421,000

Cost of Goods Sold:    

Beginning Merchandise Inventory $ 16,000  

Purchases 208,000  

Cost of Goods Available for Sale 224,000  

Ending Merchandise Inventory (11,000)  

Cost of Goods Sold   213,000

Requirement 1: Calculate the operating income for 2016.

Demonstration of E16-25

Sales Revenue   $ 421,000

Cost of Goods Sold:    

Beginning Merchandise Inventory $ 16,000  

Purchases 208,000  

Cost of Goods Available for Sale 224,000  

Ending Merchandise Inventory (11,000)  

Cost of Goods Sold   213,000

Gross Profit   208,000

Requirement 1: Calculate the operating income for 2016.

Demonstration of E16-25

Sales Revenue   $ 421,000

Cost of Goods Sold:    

Beginning Merchandise Inventory $ 16,000  

Purchases 208,000  

Cost of Goods Available for Sale 224,000  

Ending Merchandise Inventory (11,000)  

Cost of Goods Sold   213,000

Gross Profit   208,000

Selling and Administrative Expenses   147,000

Requirement 1: Calculate the operating income for 2016.

Demonstration of E16-25

Sales Revenue   $ 421,000

Cost of Goods Sold:    

Beginning Merchandise Inventory $ 16,000  

Purchases 208,000  

Cost of Goods Available for Sale 224,000  

Ending Merchandise Inventory (11,000)  

Cost of Goods Sold   213,000

Gross Profit   208,000

Selling and Administrative Expenses   147,000

Operating Income   $ 61,000

Requirement 1: Calculate the operating income for 2016.

Demonstration of E16-25

Requirement 2: Rise & Shine sold 50,000 alarm clocks in 2016. Compute the unit cost for one alarm clock.

Unit cost of one alarm clock =

Demonstration of E16-25

© 2016 Pearson Education, Ltd. 16-30

Requirement 2: Rise & Shine sold 50,000 alarm clocks in 2016. Compute the unit cost for one alarm clock.

Unit cost of one alarm clock =Cost of goods sold

Total units sold

Demonstration of E16-25

© 2016 Pearson Education, Ltd. 16-31

Requirement 2: Rise & Shine sold 50,000 alarm clocks in 2016. Compute the unit cost for one alarm clock.

Unit cost of one alarm clock =Cost of goods sold

Total units sold

= $213,00050,000 alarm clocks

Demonstration of E16-25

© 2016 Pearson Education, Ltd. 16-32

Requirement 2: Rise & Shine sold 50,000 alarm clocks in 2016. Compute the unit cost for one alarm clock.

Unit cost of one alarm clock =Cost of goods sold

Total units sold

= $213,00050,000 alarm clocks

= $4.26 per alarm clock

Demonstration of E16-25

© 2016 Pearson Education, Ltd. 16-33