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Solution Manual for Managerial Accounting 14th Edition by WarrenComplete downloadable file at:

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DISCUSSION QUESTIONS1. Financialaccountingandmanagerialaccountingaredifferentinseveralways.Financial

accountinginformationisreportedinstatementsthatareusefultopersonsorgroupsoutsideofacompany.Thesestatementsobjectivelyreporttheresultsofoperationsforfixedperiodsoftimeandthefinancialconditionofthebusinessundergenerallyacceptedaccountingprinciples.Managerialaccountinginformationusesbothsubjectiveandobjectiveinformationtomeetthespecificneedsofmanagement.Thisnon-GAAPinformationcanbereportedperiodicallyoras neededbymanagementandcanbereportedfortheentireentityorforsegmentsoftheorganization. Thisinformationincludes(i)historicaldata,whichprovideobjectivemeasuresofpastoperations,and(ii)estimateddata,whichprovidesubjectiveestimatesaboutfuturedecisions.

2. A.

Alinedepartmentisdirectlyinvolvedinprovidinggoodsandservicestocustomers,whileastaffdepartmentprovidesservice,assistance,oradvicetolinedepartmentsorotherstaffdepartments.

B. (1) SalesDepartment(2) PersonnelDepartment

3. Directmaterialscost4. Primecostsarethecombinationofdirectmaterialsanddirectlaborcosts,whileconversion

costsarethecombinationofdirectlaborcostsandfactoryoverheadcosts.5. Productcostsarecomposedofthreeelementsofmanufacturin

gcosts:directmaterialscost,directlaborcost,andfactoryoverheadcost.Thesecostsaretreatedasassetsuntiltheproductissold. Periodcostsconsistofsellingandadministrativeexpensesthatareusedingeneratingrevenue duringthecurrentperiod.Theyarerecognizedasexpensesonthecurrentperiod’sincomestatement.

6. Thethreeinventoryaccountsforamanufacturingbusinessareasfollows:A. Finishedgoodsinventoryconsistsofcompleted(orfinished)productsthathavenotbeensold.B. Workinprocessinventoryconsistsofthedirectmaterials

,directlabor,andfactoryoverheadcostsforproductsthathaveenteredthemanufacturingprocess,butarenotyetcompleted.

C. Materialsinventoryconsistsofthecostsofthedirectandindirectmaterialsthathavenotenteredthemanufacturingprocess.

7. Finishedgoods,workinprocess,andmaterials8. Thecostoffinishedgoodsandthecostofworkinprocessincludesthefollowing:

A. Directmaterials—thecostsofmaterialsthatenterdirectlyintothefinishedproduct.B. Directlabor—thewagesoffactoryworkerswhoconvertmaterialsintoafinishedproduct.C. Factoryoverhead—

thecosts,otherthandirectmaterialsanddirectlabor,thatareincurredinthemanufacturingprocess.9. Sustainabilityisthepracticeofoperatingabusinesst

omaximizeprofitswhileattemptingtopreservetheenvironment,economy,andneedsoffuturegenerations.Sustainablebusinesspracticesconsidertherolethatenvironmentalandsocialresourcesplayindecisionmaking,andactinamannertopreserveandprotecttheseresources.

10. Amerchandisingbusinesspurchasesmerchandise(products)inafinishedstateforresaleto customers.Thecostofproductsoldiscalledcostofgoodssold. Amanufacturermakesthe productitsellsusingdirectmaterials,directlabor,an

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dfactoryoverhead,whichmakeupthecostofgoodsmanufacturedincludedintheCostofGoodsSoldsectionoftheincomestatement.



BASIC EXERCISESBE15–1(FINMAN);BE1–1(MAN)Planning(A)Directing(C)Controlling(B)

BE15–2(FINMAN);BE1–2(MAN)A. DM(orFOifthecostisimmateriallysmall)B. DLC. FOD. DM

BE15–3(FINMAN);BE1–3(MAN)A. PB. BC. C(orPifsignificant)D. C

BE15–4(FINMAN);BE1–4(MAN)A. PeriodcostB. ProductcostC. ProductcostD. Periodcost

BE15–5(FINMAN);BE1–5(MAN)A. Workinprocessinventory,April1.......................................... $ 72,300

Costofdirectmaterialsusedinproduction............................ $280,000Direct labor........................................................................... 324,000Factory overhead.................................................................TotalmanufacturingcostsincurredinApril..........................

188,900792,900

Total manufacturing costs.................................................. $865,200Workinprocessinventory,April30........................................ (76,600)Costofgoodsmanufactured................................................. $788,600

B. Finishedgoodsinventory,April1.......................................... $ 39,600Costofgoodsmanufactured................................................. 788,600Costoffinishedgoodsavailableforsale................................ $828,200Finishedgoodsinventory,April30........................................ (41,200)Costofgoodssold................................................................. $787,000



EXERCISESEx.15–1(FINMAN);Ex.1–1(MAN)A. Factoryoverheadcost E. FactoryoverheadcostB. Directmaterialscost F. FactoryoverheadcostC. Directmaterialscost G. DirectmaterialscostD. Directmaterialscost H. Directlaborcost

Ex.15–2(FINMAN);Ex.1–2(MAN)A. Factoryoverheadcost F. DirectlaborcostB. Factoryoverheadcost G. FactoryoverheadcostC. Factoryoverheadcost H. DirectmaterialscostD. Directlaborcost I. DirectmaterialscostE. Directmaterialscost J. Factoryoverheadcost

Ex.15–3(FINMAN);Ex.1–3(MAN) A,B,D,F,G

Ex.15–4(FINMAN);Ex.1–4(MAN)A.B.C.

Periodcost ProductcostProductcost

J.K.L.

Periodcost Productcost Productcost

D.E.

PeriodcostPeriodcost

M.N.

Periodcost Periodcost

F. Productcost O. ProductcostG. Productcost P. ProductcostH. Periodcost Q. ProductcostI. Periodcost

Ex.15–5(FINMAN);Ex.1–5(MAN)A. period E. workinprocessinventoryB. improve F. conversionC. costs G. decreasesD. costobject

Ex.15–6(FINMAN);Ex.1–6(MAN)A. improving E. strategicB. conversion F. materialsinventoryC. period G. electricityusedtorunassemblylineD. indirect



Ex.15–7(FINMAN);Ex.1–7(MAN)A. direct G. indirectB. indirect H. indirectC. direct I. indirectD. direct J. directE. indirect K. indirectF. indirect L. indirect

Ex.15–8(FINMAN);Ex.1–8(MAN)

1. C2. D3. B4. A

Ex.15–9(FINMAN);Ex.1–9(MAN)Theerrorsinthemanufacturingcostreportareasfollows:1. Themaintenancesalariesof$84,400andindirectmaterialsof$56,200shouldbe

includedasfactoryoverhead.

2. Thefactoryoverheadincorrectlyincludesthefollowingitems:salessalariesof$348,750,promotionalexpensesof$315,000,corporateofficeinsuranceandproperty taxesof$219,400,andcorporateofficedepreciationof$90,000.Theseitemsshould notbeincludedasfactoryoverhead.

Thecorrectedreportisasfollows:

MarchingAntsInc.ManufacturingCosts

FortheQuarterEndedJune30Costofdirectmaterialsusedinproduction $ 551,300Directlabor 478,100Factoryoverhead:

Maintenancesalaries $ 84,400Indirectmaterials 56,200Supervisorsalaries 517,500Heat,light,andpower 140,650Insuranceandpropertytaxes—plant 151,900Depreciation—plantandequipment 123,750

Totalfactoryoverhead 1,074,400Total $2,103,800




A. DigitalVibeManufacturingCompanyIncomeStatement

FortheMonthEndedMarch31Revenues $875,000Costofgoodssold 525,000Grossprofit $350,000Operatingexpenses:

Sellingexpenses $125,000Administrativeexpenses 80,000

Totaloperatingexpenses 205,000Netincome $145,000

B. InventorybalancesonMarch31:Materials($168,500–$149,250).........................................................................$19,250WorkinProcess($149,250+$360,000+$120,000–$600,000).............................$29,250FinishedGoods($600,000–$525,000)...............................................................$75,000

Ex.15–11(FINMAN);Ex.1–11(MAN)DieselAdditivesCompany

BalanceSheetAugust31

Currentassets:Cash $167,500Accountsreceivable 348,200Inventories:

Finishedgoods $89,400Workinprocess 61,100Materials 26,800

Totalinventories 177,300Supplies 13,800Prepaidinsurance 9,000

Totalcurrentassets $715,800



Ex.15–12(FINMAN);Ex.1–12(MAN)Materialsinventory,November1................................................................................... $ 64,900

MaterialspurchasedduringNovember......................................................................... 490,900Costofmaterialsavailableforuse.................................................................................. $555,800Materialsinventory,November30................................................................................. (81,300)

Costofdirectmaterialsusedinproduction............................................................... $474,500


A. $352,410 ($19,660+$332,750)B. $328,910 ($352,410–$23,500)C. $474,120 ($515,770–$41,650)D. $461,770 ($515,770–$54,000)E. $165,000 ($1,240,000–$1,075,000)F. $172,000 ($1,240,000–$1,068,000)


Workinprocessinventory,July1....................................................... $ 316,400 ManufacturingcostsincurredduringJuly:........................................

Costofdirectmaterialsusedinproduction.................................. $1,150,000Direct labor................................................................................. 966,000Factory overhead....................................................................... 490,500 Totalmanufacturingcostsincurred............................................ 2,606,500

Total manufacturing costs............................................................... $2,922,900Workinprocessinventory,July31..................................................... (355,500)Costofgoodsmanufactured.............................................................. $2,567,400


A. $942,500 ($116,600+$825,900)B. $812,500 ($942,500–$130,000)C. $501,120 ($540,000–$38,880)D. $470,000 ($540,000–$70,000)E. $920,000 ($1,100,000–$180,000)F. $155,000 ($1,100,000–$945,000)




A. SanduskyManufacturingCompanyStatementofCostofGoodsManufactured

FortheMonthEndedJanuary31Workinprocessinventory,January1 $ 334,600Directmaterials:

Materialsinventory,January1 $ 180,000Purchases 1,375,000Costofmaterialsavailableforuse $1,555,000Materialsinventory,January31 (145,500)Costofdirectmaterialsusedin

production $1,409,500Directlabor 2,260,000Factoryoverhead:

Indirectlabor $ 115,000Machinerydepreciation 90,000Heat,light,andpower 55,000Supplies 18,500Propertytaxes 10,000Miscellaneouscosts 33,100

Totalfactoryoverhead 321,600TotalmanufacturingcostsincurredinJanuary 3,991,100Totalmanufacturingcosts $4,325,700Workinprocessinventory,January31 (290,700)Costofgoodsmanufactured $4,035,000

B. Finishedgoodsinventory,January1………………………………………… $ 675,000Costofgoodsmanufactured…………………………………………………… 4,035,000Costoffinishedgoodsavailableforsale…………………………………… $4,710,000Finishedgoodsinventory,January31……………………………………… (715,000)Costofgoodssold……………………………………………………………… $3,995,000



Ex.15–17(FINMAN);Ex.1–17(MAN)A. Finishedgoodsinventory,January1................................................ $ 880,000

Costofgoodsmanufactured............................................................ 4,490,000Costoffinishedgoodsavailableforsale........................................... $5,370,000Finishedgoodsinventory,January31.............................................. (775,000)Costofgoodssold............................................................................ $4,595,000

B. Sales................................................................................................ $6,600,000Costofgoodssold............................................................................ 4,595,000Gross profit..................................................................................... $2,005,000

C. Gross profit..................................................................................... $2,005,000Operatingexpenses:

Selling expenses....................................................................... $530,000Administrative expenses..........................................................

Totaloperatingexpenses.....................................................340,000

870,000 Net income...................................................................................... $1,135,000

Ex.15–18(FINMAN);Ex.1–18(MAN)A. Sales................................................................................................ $792,000

Less gross profit............................................................................. 462,000Costofgoodssold............................................................................ $330,000

B. Costofgoodsmanufactured............................................................ $396,000Lesscostofgoodssold..................................................................... 330,000Finishedgoodsinventory................................................................ $ 66,000

C. Purchased materials....................................................................... $244,200Lessmaterialsinventory.................................................................. 33,000Directmaterials cost........................................................................ $211,200

D. Totalmanufacturingcosts............................................................... $455,400Less:Direct materials...................................................................... $211,200

Factoryoverheadcosts(indirectlaborandfactorydepreciation)*........................................ 198,000 409,200

Direct labor cost....................................................................... $ 46,200*$171,600+ $26,400

E. Totalmanufacturingcosts......................................................................... $455,400Lesscostofgoodsmanufactured.............................................................. 396,000Workinprocessinventory.......................................................................... $ 59,400



PROBLEMSProb.15–1A(FINMAN);Prob.1–1A(MAN)

Cost

ProductCosts PeriodCostsDirect

MaterialsCost

DirectLaborCost

FactoryOverhead

CostSelling

ExpenseAdministrative

ExpenseA. XB. XC. XD. XE. XF. XG. XH. XI. XJ. XK. XL. XM. XN. XO. XP. XQ. XR. XS. XT. XU. XV. XW. XX. XY. XZ. X



Prob.15–2A(FINMAN);Prob.1–2A(MAN)

Cost


MaterialsCost

DirectLaborCost

FactoryOverhead

CostSelling

ExpenseAdministrative

ExpenseA. XB. XC. XD. XE. XF. XG. XH. XI. XJ. XK. XL. XM. XN. XO. XP. XQ. XR. XS. XT. XU. XV. XW. XX. X



Prob.15–3A(FINMAN);Prob.1–3A(MAN)1. Themostlogicaldefinitionforthefinalcostobjectwoul

dbethepatient.Thereasonisthatthecostcanbeaccumulatedatthepatientlevelforbillingand insurancereimbursementpurposes.

2. Cost Direct IndirectA. XB. XC. XD. XE. XF. XG. XH. XI. XJ. XK. XL. XM. XN. XO. XP. XQ. XR. XS. XT. XU. X



Prob.15–4A(FINMAN);Prob.1–4A(MAN)1. RainierCompany

A. $111,500 ($950,000+$100,000–$938,500)B. $5,598,500 ($938,500+$2,860,000+$1,800,000)C. $5,616,500 ($5,598,500+$400,000–$382,000)D. $5,635,000 ($615,000+$5,616,500–$596,500)E. $3,585,000 ($9,220,000–$5,635,000)F. $2,585,000 ($3,585,000–$1,000,000)YakimaCompanyA. $708,200 ($48,200+$710,000–$50,000)B. $1,330,000 ($2,484,200–$708,200–$446,000)C. $169,100 ($2,660,600–$2,491,500)D. $211,500 ($2,491,500+$190,000–$2,470,000)E. $2,080,000 ($4,550,000–$2,470,000)F. $580,000 ($2,080,000–$1,500,000)

2. YakimaCompanyStatementofCostofGoodsManufactured

FortheMonthEndedMay31Workinprocessinventory,May1 $ 176,400Directmaterials:

Materialsinventory,May1 $48,200Purchases 710,000Costofmaterialsavailableforuse $758,200Materialsinventory,May31 (50,000)

Costofdirectmaterialsused $ 708,200Directlabor 1,330,000Factoryoverhead 446,000TotalmanufacturingcostsincurredinMay 2,484,200Totalmanufacturingcosts $2,660,600Workinprocessinventory,May31 (169,100)Costofgoodsmanufactured $2,491,500



Prob.15–4A(FINMAN);Prob.1–4A(MAN)(Concluded)

3. YakimaCompanyIncomeStatement

FortheMonthEndedMay31Sales $4,550,000Costofgoodssold:

Finishedgoodsinventory,May1 $ 190,000Costofgoodsmanufactured 2,491,500Costoffinishedgoodsavailableforsale $2,681,500Finishedgoodsinventory,May31 (211,500)

Costofgoodssold 2,470,000Grossprofit $2,080,000Operatingexpenses 580,000Netincome $1,500,000



Prob.15–5A(FINMAN);Prob.1–5A(MAN)

1. Robstown CorporationStatementofCostofGoodsManufactured

FortheYearEndedDecember31,20Y8Workinprocessinventory,January1,20Y8 $ 63,900Directmaterials:

Materialsinventory,January1,20Y8 $44,250Purchases 556,600Costofmaterialsavailableforuse $600,850Materialsinventory,December31,20Y8 (31,700)

Costofdirectmaterialsusedinproduction $ 569,150

Directlabor 1,100,000Factoryoverhead:

Indirectlabor $115,000Depreciationexpense—factoryequipment 80,000Heat,light,andpower—factory 53,300Propertytaxes—factory 40,000Rentexpense—factory 27,000Supplies—factory 9,500Miscellaneouscosts—factory 11,400

Totalfactoryoverhead 336,200Totalmanufacturingcostsincurredin20Y8 2,005,350Totalmanufacturingcosts $2,069,250Workinprocessinventory,December31,20Y8 (80,000)Costofgoodsmanufactured $1,989,250



Prob.15–5A(FINMAN);Prob.1–5A(MAN)(Concluded)

2. RobstownCorporationIncomeStatement

FortheYearEndedDecember31,20Y8Sales $3,850,000Costofgoodssold:

Finishedgoodsinventory,January1,20Y8 $ 101,200Costofgoodsmanufactured 1,989,250Costoffinishedgoodsavailableforsale $2,090,450Finishedgoodsinventory,

December31,20Y8 (99,800)Costofgoodssold 1,990,650

Grossprofit $1,859,350Operatingexpenses:

Administrativeexpenses:Officesalariesexpense $318,000Depreciationexpense—office

equipment 30,000Propertytaxes—officebuilding 25,000 $ 373,000

Sellingexpenses:Advertisingexpense $400,000Salessalariesexpense 200,000 600,000

Totaloperatingexpenses 973,000Netincome $ 886,350



Prob.15–1B(FINMAN);Prob.1–1B(MAN)

Cost


MaterialsCost

DirectLabor Cost

FactoryOverhead Cost

Selling Expense

AdministrativeExpense

A. XB. XC. XD. XE. XF. XG. XH. X*I. XJ. XK. XL. XM. XN. XO. XP. XQ. XR. XS. XT. XU. XV. XW. XX. XY. XZ. X

*Item H might also be classified as direct material cost if thecost is significant because it can be directly traced to the end product.




Cost


MaterialsCost

DirectLaborCost

FactoryOverhead

CostSelling

ExpenseAdministrativ

eExpenseA. XB. XC. XD. XE. XF. XG. XH. XI. XJ. XK. XL. XM. XN. XO. XP. XQ. XR. XS. XT. XU. X*V. XW. XX. X

*Health insurance premiums are employment benefits for direct labor and are included as part of the direct labor cost.



Prob.15–3B(FINMAN);Prob.1–3B(MAN)1. Themostlogicaldefinitionforthefinalcostobjectwoul

dbeahotelguest.Guestsconsumeservicessuchasameal,anight’sstayinahotelroom,roomservice,atelephonecall,etc.

2. Cost Direct IndirectA. XB. XC. XD. XE. XF. XG. XH. XI. XJ. XK. XL. XM. XN. XO. XP. XQ. XR. XS. XT. XU. XV. XW. X



Prob.15–4B(FINMAN);Prob.1–4B(MAN)1. On

A.Company$30,800 ($282,800+$65,800–$317,800)

B. $854,000 ($317,800+$387,800+$148,400)C. $800,800 ($854,000+$119,000–$172,200)D. $827,400 ($224,000+$800,800–$197,400)E. $299,600 ($1,127,000–$827,400)F. $182,000 ($299,600–$117,600)

OffCompany

A. $581,560 ($685,720*+$91,140–$195,300)B. $685,720 ($1,519,000–$256,060–$577,220)C. $195,300 ($1,727,320–$1,532,020)D. $256,060 ($1,532,020+$269,080–$1,545,040)E. $399,280 ($1,944,320–$1,545,040)F. $234,360 ($399,280–$164,920)

*Note: Thestudentmustcalculatepart(B)priortocalculatingpart(A)because thesolutiontopart(B)isneededasaninputtopart(A).

2. OnCompanyStatementofCostofGoodsManufactured

FortheMonthEndedDecember31Workinprocessinventory,December1 $119,000Directmaterials:

Materialsinventory,December1 $ 65,800Purchases 282,800Costofmaterialsavailableforuse $348,600Materialsinventory,December31 (30,800)

Costofdirectmaterialsusedinproduction $317,800Directlabor 387,800Factoryoverhead 148,400TotalmanufacturingcostsincurredinDecember 854,000Totalmanufacturingcosts $973,000Workinprocessinventory,December31 (172,200)Costofgoodsmanufactured $800,800



Prob.15–4B(FINMAN);Prob.1–4B(MAN)(Concluded)

3. OnCompanyIncomeStatement

FortheMonthEndedDecember31Sales $1,127,000Costofgoodssold:

Finishedgoodsinventory,December1 $ 224,000Costofgoodsmanufactured 800,800Costoffinishedgoodsavailableforsale $1,024,800Finishedgoodsinventory,December31 (197,400)

Costofgoodssold 827,400Grossprofit $ 299,600Operatingexpenses 117,600Netincome $ 182,000




1. ShanikaCompanyStatementofCostofGoodsManufactured

FortheYearEndedDecember31,20Y6Workinprocessinventory,January1,20Y6 $109,200Directmaterials:

Materialsinventory,January1,20Y6 $77,350Purchases 123,500Costofmaterialsavailableforuse $200,850Materialsinventory,December31,20Y6 (95,550)

Costofdirectmaterialsusedinproduction $105,300Directlabor 186,550Factoryoverhead:

Indirectlabor $23,660Depreciationexpense—factoryequipment 14,560Heat,light,andpower—factory 5,850Propertytaxes—factory 4,095Rentexpense—factory 6,825Supplies—factory 3,250Miscellaneouscosts—factory 4,420

Totalfactoryoverhead 62,660Totalmanufacturingcostsincurredin20Y6 354,510Totalmanufacturingcosts $463,710Workinprocessinventory,December31,20Y6 (96,200)Costofgoodsmanufactured $367,510



Prob.15–5B(FINMAN);Prob.1–5B(MAN)(Concluded)

2. ShanikaCompanyIncomeStatement

FortheYearEndedDecember31,20Y6Sales $864,500Costofgoodssold:

Finishedgoodsinventory,January1,20Y6 $113,750Costofgoodsmanufactured 367,510Costoffinishedgoodsavailableforsale $481,260Finishedgoodsinventory,

December31,20Y6 (100,100)Costofgoodssold 381,160

Grossprofit $483,340Operatingexpenses:

Administrativeexpenses:Officesalariesexpense $77,350Depreciationexpense—officeequipment 22,750Propertytaxes—headquartersbuilding 13,650 $113,750

Sellingexpenses:Advertisingexpense $68,250Salessalariesexpense 136,500 204,750

Totaloperatingexpenses 318,500Netincome $164,840



ANALYSIS FOR DECISION MAKING

ADM–1

A. TheoccupancytrendisfavorableforHiltonHotels.Thecompanyimprovedoccupancyfrom72.2%to74.6%,ora2.4percentagepointincreaseovertheyear.

B. TheoccupancytrendisfavorableforMarriottInternational.Thecompanyimproved occupancyfrom71.3%to73.3%,ora2.0percentagepointincreaseovertheyear.

C. HiltonHotelshasaslightlybetteroccupancyratethanMarriottInternationalforthetwoyearsprovided.Thiscanbeseenbothbytheoccupancypercentagecomparisonsforeachyear(74.6%vs.73.3%inYear2and72.2%vs.71.3%inYear1)andbythe slightlylargerincreaseinoccupancyfortheyear(2.4percentagepointsforHiltonvs.2.0percentagepointsforMarriott).

D. Animportantquestionbeyondoccupancyisthepriceatwhichtheroomsaresold. Pricewillinfluenceoccupancy.Forexample,itispossibletoincreaseoccupancy byreducingprice.However,areducedpricemayreducerevenuebymorethanthe revenueincreaseachievedbyincreasedoccupancy.Thus,hotelsalsoneedto monitortheaveragedailypriceforwhichroomnightsaresold.Note:Inthiscase,HiltonHotelshadanaverageroompriceof$141.52inYear2,whileMarriotthadanaverageroompriceof$150.23inYear2.Thus,whileMarriott hadaloweroccupancyrate,Marriottmademorerevenueperroomnightthandid Hilton.Thus,Marriott’soverallperformanceappearsmorefavorablethanwhatcouldbedeterminedbyjusttheoccupancydata.

ADM–2A.

NumberofGuests

Average Lengthof Visit(in Nights)

GuestNights(Number ofGuests×Average

LengthofVisit)SunriseSuitesNationwideInns

183,600228,000

××

1.51.2

==

275,400273,600

B.

NumberofHotels

Average NumberofRoo

msperHotelDaysinJ

une

RoomNightsforJun

eSunriseSuites 120 × 90 × 30 = 324,000NationwideInns 150 × 76 × 30 = 342,000

C.



ADM–2(Concluded)D.

SunriseSuiteshadthebetteroccupancyrateduringJune,with85%comparedtoNationwideInns’occupancyrateof80%.Additionalanalysesshouldevaluatetheaveragepriceperroom,sincepricecaninfluencetheoccupancyrateandthere canbeatrade-offbetweenaverageroompriceandoccupancy.

ADM–3

A. April May JuneAdmittedpatientsAveragelengthofstayperpatient

1,440× 4.0

1,860× 3.5

2,250× 3.0

In-patientdays 5,760 6,510 6,750B.

Availablebeds:Private

Semi-Private Total

NumberofroomsBedsperroomTotalbedcapacityAvailablebeddays:

100× 1100

100× 2200 300

April May JuneBedcapacityDayspermonthAvailablebeddays

300× 309,000

300× 319,300

300× 309,000

C.Occupancyrate:

April May JuneIn-patientdays[from(A)]Availablebeddays[from(B)]Occupancyrate

5,760÷9,000 64%

6,510÷9,300 70%

6,750÷9,000 75%

D. TheoccupancyrateincreasedfromApriltoMayandagainfromMaytoJune.This suggeststhehospitalbedcapacityisbeingutilizedmoreefficientlyovertime.Acloserexaminationofthedatarevealsthattheaveragelengthofstayisdeclining, whilethenumberofadmissionsisincreasing.Theaveragelengthofstaymaybedecliningbecauseofgreaterefficiencyindeliveringhealthcare,assumingnochangeintreatmentmixbeingprovidedoverthethreemonths.Thispotentialimprovementprovidesgreatercapacitytoacceptnewpatients,ascanbeseenfromthethree- monthdata.Thus,thereducedlengthofstayandgreateroccupancyarebothcontributingtothehospital’sabilitytoservemorepatientspermonth.



ADM–4A.

AvailableseatcapacityforeachflightnumberforJune:Numberofseatsperflight 180NumberofflightsinJune(oneperday) × 30Totalseatcapacityperflightnumber(June) 5,400

B.Flight

NumberNumberof SeatsSold

AvailableSeat Capacity[from(A)]

Passenger Load*

57 5,130 5,400 95%85 2,592 5,400 48%94 2,376 5,400 44%

*Numberofseatssold÷Availableseatcapacity

C. ThepassengerloadinformationindicatesthatFlight57fliesveryneartocapacity, butFlights85and94flyatlessthanhalfofcapacity.ThissuggeststhemanagementofEasternSkiesisofferingtoomuchcapacityforthemorningflightstoChicago.One solutionwouldbetousesmalleraircraftforFlights85and94soastobettermatch capacitywithdemand.Alternatively,Easterncouldconsolidatethetwoflightsintooneflightthatcoulddepartatsometimebetweenthetwooriginaltimes,suchas10:45AM.Passengerscouldthenmigratetothenewflight,resultinginabetterutilizationoftheremainingflight.



TAKE IT FURTHER

TIF15–1(FINMAN);TIF1–1(MAN)BrianhasbehavedunethicallyandviolatedseveraloftheIMA’sprinciplesofethical conduct.Bydeterminingthepriceofthelumberthatheisbuying,Brianhascreatedaconflict-of-interestsituationthatviolatestheprincipleofobjectivity.Forprofessionals tobeobjective,theymustmakedecisionsthatarenotinfluencedbytheirpersonalfeelingsorresultinpersonalgains.SinceBrianisinapositiontodirectlyinfluencethepricethathewillpayforthelumber,hecannotbeobjective.Thus,althoughitisappropriateforBriantotakeadvantageofAvett’spolicyofallowingemployeestopurchasematerialsatcost,heshouldhavehadsomeoneelse(suchashissupervisor)determinetheamountthatheowedforthelumber.Clearly,selectingthelowestpricehasopenedthedoorforcriticism.

TIF15–2(FINMAN);TIF1–2(MAN)Answersmayvaryslightlybyrestaurantchosen.Asuggestedanswerforapizza restaurantfollows:

CostDirect

MaterialsDirect Labor Overhead

Selling Expenses

Ingredients..................................................... XCookwages.................................................... XManagersalary............................................... XDepreciationonequipmentandfixtures.........

XCouponcosts................................................. XAdvertising..................................................... XTo-goboxes.................................................... XDisposableplates,utensils,cups................... XNondisposableplates,utensils,cups............. XRepaircosts.................................................... XPropertytaxes................................................ XStoredepreciation.......................................... XCashiersalary................................................. XBeverages...................................................... XBuildingheatandA/C...................................... XSaladingredients............................................ XDeliverypersonwages.................................... XPowercostsforovens..................................... X

Inservicebusinesses,thedistinctionbetweendirectlaborandoverheadwillnot alwaysbeclear.



TIF15–3(FINMAN);TIF1–3(MAN)MemoTo: ToddJohnson From: A+StudentRe: Financialvs.ManagerialAccountingInformationTheobjectivesoffinancialandmanagerialaccountingarequitedifferent,andyour statementdoesnotfullyconsiderthesedifferences.Inonesense,yourstatementmaybeappropriateathighlevelsintheorganization.Forexample,itisappropriatetoevaluatea divisionmanagerwhoisresponsiblefortheoverallperformanceofadivisionusingthe samefinancialperformancemeasuresthatshareholdersusetoevaluatethecompany.However,thesemeasuresarenotappropriateforevaluatingmanagerialdecisionmaking belowthedivisionlevel.Attheselevels,summaryfinancialperformancemeasuresdonotprovidetherelevantinformationneededtodirectandcontrolthecompany’soperations.Operationalperformancemeasuresneedtofocusonmeasuringcost,quality,deliverytime,equipmentavailability,inventorylevels,scrap,waste,andefficiency.Thislistismuchbroaderandmoredetailedthanthefinancialstatementnumbersprovidedtothestockholders.

Thestockholders’interestinprofitisrelatedtoincreasingshareholdervalue.Managersmustincreaselong-termshareholdervaluebyengaginginstrategiesthatenhancepeople,product,andprocessesinthedeliveryofvaluetocustomers.Thesestrategiescanbemeasuredbybothfinancialandnonfinancialmeans.Therefore,managerialaccountinginformationneedsamuchbroadersetofobjectiveandsubjectivemeasuresusedinternallyintheorganizationtoguidestrategyandoperations.


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