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 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 "Vec" or "No" from the below drondowns 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 u the table provided. The cost object in each case is the cheesecake. (Select "Yes" or "No" from the below dropdowns.) Product Period Direct Direct Factory Selling Cost Cost Cost Materials Labor Overhead Expense Eggs used to make cheesecakes Yes No Yes No No No Baker's wages Yes No Yes No No Delivery driver wages No No Yes Depreciation of office computers No Yes No No No No Power to run the cheesecake ovens Yes No No No Yes No President's salary No Yes No No No No Sales commissions No Yes No No No Yes Factory supervisor salary Yes No No Yes No No Yes No No No Direct Materials Yes Direct Labor Selling Expense Direct Cost Indirect Cost Prime Cost Conversion Cost No Factory Overhead No No No No Yes No Yes No No Yes Administrative Expense No No No Yes No Yes No Yes No Yes No No No No No Yes No No No No No No No Yes No No No No No No Yes Yes No No No No No Yes No Yes No No No No No Yes No Yes No No No No No Yes No No No Yes No No 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, 2048 Sales $42,000 $5,250 6,400 Finished goods inventory, January 1, 2048 Cost of goods manufactured Cost of finished goods available for sale Finished goods inventory, December 31, 2048 Cost of goods sold Gross profit Operating expenses: $11,650 (400) (11,250) $30,750 (400) (11,250) $30,750 Finished goods inventory, December 31, 2048 Cost of goods sold Gross profit Operating expenses: Selling expenses Administrative expenses Total operating expenses Net income $6,400 5,250 (11,650) $19,100 Income Statement B $42,000 Sample Company B Income Statement For the Year Ended December 31, 2018 Sales Beginning inventory $5,250 Net purchases 6,400 Inventory available for sale $11,650 Ending inventory (400) Cost of goods sold Gross profit (11,250) $30,750 Gross prorit $30,750 $6,400 5,250 Operating expenses: Selling expenses Administrative expenses Total operating expenses Net income Balance Sheet C (11,650) $19,100 Sample Company C Balance Sheet December 31, 2048 Assets $20,800 10,000 Cash Accounts receivable (net) Inventory Supplies Land 6,000 2,100 17,000 Total assets $55,900 Liabilities Accounts payable $17,800 Stockholders' Equity Common stock $19,000 19,100 Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 38,100 $55,900 Balance Sheet D Sample Company D Balance Sheet December 31, 2048 Assets $20,800 10,000 Cash Accounts receivable (net) Inventory: Direct materials Work in process Finished goods $2,500 1,500 2,000 6,000 Total inventory Supplies 2,100 Land 17,000 2,000 Finished goods Total inventory Supplies 6,000 2,100 Land 17,000 Total assets $55,900 Liabilities Accounts payable $17,800 Stockholders' Equity Common stock $19,000 19,100 Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 38,100 $55,900 Which income statement is most appropriate for a manufacturing business? Income statement A Which balance sheet is most appropriate for a manufacturing business? Balance sheet D Account Balances Jan. 31 Feb. 28 $ Account Materials Inventory Work in Process Inventory Finished Goods Inventory Costs Incurred Direct Materials Used Direct Labor Incurred 27,000 16,000 Factory Overhead Incurred Cost of Goods Sold Ill