Charles Maxwell is starting a cheesecake bakery, Able Baker Charlie Company, to produce and sell different flavored cheesecakes to restaurants and the general public. He has just begun his study of accounting, and is a bit confused about the many types of reports he has read about and how they will help him run his business. He asks you to help him clarify what the differences between managerial accounting and financial accounting are. Hes also wondering how to set up his inventory, how to classify the costs of his business, and how to fill in some missing information.

	Required:
1.	Choose whether the characteristics on the Managerial vs. Financial panel are most often associated with managerial accounting or financial accounting.
2.	Charles has provided some of the costs he expects to incur on the Cost Classification panel. Decide on the classifications that could be applied to each of these costs using the table provided. The cost object in each case is the cheesecake.
3.	Charles found some sample income statements and balance sheets on the Internet, and asked which of them might be most appropriate for a manufacturing business like his. Review income statements A and B on the Income Statements panel, and balance sheets C and D on the Balance Sheets panel. Determine which income statement and balance sheet would be most appropriate for a manufacturing business like Able Baker Charlie company. Then, on the Financial Statements panel, denote which income statement and balance sheet would be most appropriate for a manufacturing business.
4.	At the end of February, after the second month of operations of Able Baker Charlie Company, Charles shows you the data hes collected, but he was unable to figure out some of the amounts. On the Costs and Balances panel, determine the missing amounts. Note: It may be helpful to use T accounts to map the flow of the amounts through the manufacturing accounts and solve for the missing dollar values.

Income Statement A (scroll down for Income Statement B):

Sample Company A

Income Statement

For the Year Ended December 31, 20Y8

1	Sales		$42,000.00
2	Cost of goods sold:
3	Beginning finished goods inventory	$5,250.00
4	Plus cost of goods manufactured	6,400.00
5	Cost of finished goods available for sale	$11,650.00
6	Less ending finished goods inventory	400.00
7	Cost of goods sold		11,250.00
8	Gross profit		$30,750.00
9	Operating expenses:
10	Selling expenses	$6,400.00
11	Administrative expenses	5,250.00
12	Total operating expenses		11,650.00
13	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	Cost of goods sold:
3	Beginning merchandise inventory	$5,250.00
4	Plus net purchases	6,400.00
5	Merchandise available for sale	$11,650.00
6	Less ending merchandise inventory	400.00
7	Cost of merchandise sold		11,250.00
8	Gross profit		$30,750.00
9	Operating expenses:
10	Selling expenses	$6,400.00
11	Administrative expenses	5,250.00
12	Total operating expenses		11,650.00
13	Net income		$19,100.00

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	Stockholders Equity
11	Common stock	$19,000.00
12	Retained earnings	19,100.00
13	Total stockholders equity		38,100.00
14	Total liabilities and stockholders 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	Stockholders Equity
14	Common stock	$19,000.00
15	Retained earnings	19,100.00
16	Total stockholders equity		38,100.00
17	Total liabilities and stockholders equity		$55,900.00

At the end of February, after the second month of operations of Able Baker Charlie Company, Charles shows you the data hes collected, but he was unable to figure out some of the amounts. Review the following data and fill in the missing amounts on the chart for Able Baker Charlie Company. Note: It may be helpful to use T accounts to map the flow of the amounts through the manufacturing accounts and solve for the missing dollar values. It may also be helpful to review the steps for determining the cost of materials used, total manufacturing cost incurred, and cost of goods manufactured.

Data for February
Decrease in materials inventory	$2,700
Materials inventory on Feb. 28	50% of materials inventory on Jan. 31
Direct materials purchased	$12,000
Direct materials used	3 times the direct labor incurred
Total manufacturing costs incurred in period	$28,000
Total manufacturing costs incurred in period	70% of Cost of Goods Manufactured
Total manufacturing costs incurred in period	$8,000 less than Cost of Goods Sold

Account	Account Balances		Costs Incurred
	Jan. 31	Feb. 28
Materials Inventory	5400	2700	Direct Materials Used	14700
Work in Process Inventory	27,000	15000	Direct Labor Incurred	4900
Finished Goods Inventory	?	16,000	Factory Overhead Incurred	?
			Cost of Goods Sold	?

Use the Dynamic Exhibit to answer the following questions.

1. When the ending balance in materials inventory is $40,000, the cost of goods manufactured is $ 285000 and net income is $48500.

2. When the ending balance in materials inventory is $35,000, the cost of goods manufactured is $--?-- and net income is $--?----.

3. When the ending balance in materials inventory is $30,000, the cost of goods sold is $--?--- and net income is $--?---.

4. When the ending balance in materials inventory is $32,500, the cost of goods sold is $--?-- and net income is $--?--.