Comprehensive Problem (1 of 3) Mastery Problem: Introduction to Managerial Accounting Able Baker Charlie Company 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. He's also wondering how to set up his inventory, how to classify the costs of his business, and how to fill in some missing information Managerial vs. Financial Select whether the following characteristics are most often associated with managerial accounting or financial accounting. Primarily used for internal decision making Managerial Accounting Generally Accepted Accounting Principles (GAAP) must be used Financial Accounting Prepared statements usually pertain to the company as a whole rather than individual departments or products Financial Accounting Information provided will often be subjective, such as estimated future results Managerial Accounting Often prepared on an as needed basis rather than at fixed intervals Managerial Accounting Comprehensive Problem (1 of 3) Cost Classification Charles has provided some of the costs he expects to incur as follows. 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. (Select "Yes" or "No from the below dropdowns.) Factory Selling Cost Cost Materials Expense Period Product Cost Direct Direct Labor Adm Overhead E Eggs used to make cheesecakes Yes Yes Yes Yes Yes Baker's Yes > No No wages Delivery driver Wages Depreciation of office computers Power to run the cheesecake ovens President's salary Sales commissions NO Yes No Yes > No Factory Supervisor Factory Overhead Selling Expense Administrative Expense Direct Cost Indirect Cost Prime Cost Conversion Cost Yes No Comprehensive Problem (1 of 3) Sales Financial Statements 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, and balance sheets C and D. Determine which income statement and balance sheet would be most appropriate for a manufacturing business like Able Baker Charlie Company, Income Statement A Sample Company A Income Statement For the Year Ended December 31, 2018 $42,000 Finished goods inventory, January 1, 2018 $5,250 Cost of goods manufactured 6,400 Cost of finished goods available for sale $11,650 Finished goods inventory, December 31, 2018 (400) Cost of goods sold (11,250) Gross profit $30,750 Operating expenses Selling expenses $6,400 Administrative expenses Total operating expenses (11,650) Net Income $19,100 5,250 Income Statements Sample Company Income Statement For the Year Ended December 31, 2018 Comprehensive Problem (1 of 3) Net Income $19,100 Income Statement B Sample Company B Income Statement For the Year Ended December 31, 2048 Sales $42,000 other $5,250 6,400 $11,650 (400) Beginning inventory Net purchases Inventory available for sale Ending Inventory Cost of goods sold Gross profit Operating expenses: Selling expenses Administrative expenses Total operating expenses (11,250) $30,750 $6,400 5,250 Net Income (11,650) $19,100 Balance Sheet C Sample Company Balance Sheet December 31, 2048 Assets Comprehensive Problem (1 of 3) Net income Balance Sheet C *197100 Sample Company C Balance Sheet December 31, 2018 Assets Cash $20,800 10,000 6,000 Accounts receivable (net) Inventory Supplies Land Total assets 2,100 17,000 > $55,900 Liabilities $17,800 $19,000 19,100 Accounts payable Stockholders' Equity Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity Balance Sheet D Sample Company D Balance Sheet December 31, 2048 38,100 $55,900 Assets Cash $20,800 Comprehensive Problem (1 of 3) Print Item Sample company Balance Sheet December 31, 2018 Assets Cash $20,800 10,000 $2,500 Accounts receivable (net) Inventory: Direct materials Work in process Finished goods Total inventory Supplies Land 1,500 2,000 6,000 2,100 17,000 Total assets $55,900 Liabilities Accounts payable $17,800 Stockholders' Equity Common stock $19,000 Retained earnings 19,100 Total stockholders' equity 38,100 To Income statement A holders' equity $55,900 w Income statement B is most appropriate for a manufacturing business? Income statement A Which balance sheet is most appropriate for a manufacturing business? Balance sheet D Costs and Balances At the end of February, after the second month of operations of Able Baker Charlie Company, Charles shows you the data he's 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 $3,300 Materials inventory on Feb. 28 50% of materials inventory on Jan. 31 Direct materials purchased $11,700 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 $10,000 less than Cost of Goods Sold Account Balances Jan. 31 Feb. 20 Account Costs Incurred Direct Materials Used Materials Inventory Work in Process inventory Pinished Goods Inventory 27,000 Direct Labor Incurred III 16,500 Factory Overhead Incurred Cost of Goods Sold