Chapter 16

Introduction to
Managerial
Accounting
Demonstration Problems

© 2018 Pearson Education, Inc. 16-1

 Demonstration of E16-21

Use the following information for a manufacturer to compute cost of

goods manufactured and cost of goods sold:

Inventories: Beginning Ending

Direct Materials $ 16,000 $ 12,000
Work-in-Process 98,000 87,000
Finished Goods 20,000 25,000
Other information:
Purchases of direct materials $ 37,000
Direct labor 76,000
Manufacturing overhead 34,000
 Demonstration of E16-21

Calculation of cost of goods manufactured

Beginning Work-in-Process Inventory $

98,000
 Demonstration of E16-21

Calculation of cost of goods manufactured

Beginning Work-in-Process Inventory $

98,000
Direct Materials Used:
Beginning Direct Materials Inventory $
16,000
 Demonstration of E16-21

Calculation of cost of goods manufactured

Beginning Work-in-Process Inventory $

98,000
Direct Materials Used:
Beginning Direct Materials Inventory $
16,000
Purchases of Direct Materials 37,00
0
 Demonstration of E16-21

Calculation of cost of goods manufactured

Beginning Work-in-Process Inventory $

98,000
Direct Materials Used:
Beginning Direct Materials Inventory $
16,000
Purchases of Direct Materials 37,00
0
Direct Materials Available for Use 53,00
0
 Demonstration of E16-21

Calculation of cost of goods manufactured

Beginning Work-in-Process Inventory $

98,000
Direct Materials Used:
Beginning Direct Materials Inventory $
16,000
Purchases of Direct Materials 37,00
0
Direct Materials Available for Use 53,00
0
Ending Direct Materials Inventory (12,00
0)
 Demonstration of E16-21

Calculation of cost of goods manufactured

Beginning Work-in-Process Inventory $

98,000
Direct Materials Used:
Beginning Direct Materials Inventory $
16,000
Purchases of Direct Materials 37,00
0
Direct Materials Available for Use 53,00
0
Ending Direct Materials Inventory (12,00
0)
Direct Materials Used 41,00
0
 Demonstration of E16-21

Calculation of cost of goods manufactured

Beginning Work-in-Process Inventory $

98,000
Direct Materials Used:
Beginning Direct Materials Inventory $
16,000
Purchases of Direct Materials 37,00
0
Direct Materials Available for Use 53,00
0
Ending Direct Materials Inventory (12,00
0)
Direct Materials Used 41,00
0
Direct Labor 76,00
0
 Demonstration of E16-21

Calculation of cost of goods manufactured

Beginning Work-in-Process Inventory $

98,000
Direct Materials Used:
Beginning Direct Materials Inventory $
16,000
Purchases of Direct Materials 37,00
0
Direct Materials Available for Use 53,00
0
Ending Direct Materials Inventory (12,00
0)
Direct Materials Used 41,00
0
Direct Labor 76,00
0
 Demonstration of E16-21

Calculation of cost of goods manufactured

Beginning Work-in-Process Inventory $

98,000
Direct Materials Used:
Beginning Direct Materials Inventory $
16,000
Purchases of Direct Materials 37,00
0
Direct Materials Available for Use 53,00
0
Ending Direct Materials Inventory (12,00
0)
Direct Materials Used 41,00
0
Direct Labor 76,00
0
 Demonstration of E16-21

Calculation of cost of goods manufactured

Beginning Work-in-Process Inventory $

98,000
Direct Materials Used:
Beginning Direct Materials Inventory $
16,000
Purchases of Direct Materials 37,00
0
Direct Materials Available for Use 53,00
0
Ending Direct Materials Inventory (12,00
0)
Direct Materials Used 41,00
0
Direct Labor 76,00
0
 Demonstration of E16-21

Calculation of cost of goods manufactured

Beginning Work-in-Process Inventory $

98,000
Direct Materials Used:
Beginning Direct Materials Inventory $
16,000
Purchases of Direct Materials 37,00
0
Direct Materials Available for Use 53,00
0
Ending Direct Materials Inventory (12,00
0)
Direct Materials Used 41,00
0
Direct Labor 76,00
0
 Demonstration of E16-21

Calculation of cost of goods manufactured

Beginning Work-in-Process Inventory $

98,000
Direct Materials Used:
Beginning Direct Materials Inventory $
16,000
Purchases of Direct Materials 37,00
0
Direct Materials Available for Use 53,00
0
Ending Direct Materials Inventory (12,00
0)
Direct Materials Used 41,00
0
Direct Labor 76,00
0
 Demonstration of E16-21

Calculation of cost of goods sold

Beginning Finished Goods Inventory $

20,000
 Demonstration of E16-21

Calculation of cost of goods sold

Beginning Finished Goods Inventory $

20,000
Cost of Goods Manufactured 162,0 [previous slide]
00
 Demonstration of E16-21

Calculation of cost of goods sold

Beginning Finished Goods Inventory $

20,000
Cost of Goods Manufactured 162,0 [previous slide]
00
Cost of Goods Available for Sale 182,0
00
 Demonstration of E16-21

Calculation of cost of goods sold

Beginning Finished Goods Inventory $

20,000
Cost of Goods Manufactured 162,0 [previous slide]
00
Cost of Goods Available for Sale 182,0
00
Ending Finished Goods Inventory (25,0
00)
 Demonstration of E16-21

Calculation of cost of goods sold

Beginning Finished Goods Inventory $

20,000
Cost of Goods Manufactured 162,0 [previous slide]
00
Cost of Goods Available for Sale 182,0
00
Ending Finished Goods Inventory (25,0
00)
Cost of Goods Sold $
157,000
 Demonstration of E16-24

Rise & Shine Company sells alarm clocks. The following information
summarizes Rise & Shine’s operating activities for 2018:

Selling and Administrative Expenses $ 147,000

Purchases 208,000
Net Sales Revenue 421,000
Merchandise Inventory, January 1, 2018 16,000
Merchandise Inventory, December 31, 2018 11,000

Requirements
1. Calculate the operating income for 2018.
2. Rise & Shine sold 50,000 alarm clocks in 2018. Compute the unit cost for one alarm
clock.
 Demonstration of E16-24

Requirement 1: Calculate the operating income for 2018.

Net Sales Revenue $ 421,000

 Demonstration of E16-24

Requirement 1: Calculate the operating income for 2018.

Net Sales Revenue $ 421,000

Cost of Goods Sold:
Beginning Merchandise Inventory $ 16,000
 Demonstration of E16-24

Requirement 1: Calculate the operating income for 2018.

Net Sales Revenue $ 421,000

Cost of Goods Sold:
Beginning Merchandise Inventory $ 16,000
Purchases 208,000
 Demonstration of E16-24

Requirement 1: Calculate the operating income for 2018.

Net Sales Revenue $ 421,000

Cost of Goods Sold:
Beginning Merchandise Inventory $ 16,000
Purchases 208,000
Cost of Goods Available for Sale 224,000
 Demonstration of E16-24

Requirement 1: Calculate the operating income for 2018.

Net 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
)
 Demonstration of E16-24

Requirement 1: Calculate the operating income for 2018.

Net 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
 Demonstration of E16-24

Requirement 1: Calculate the operating income for 2018.

Net 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
 Demonstration of E16-24

Requirement 1: Calculate the operating income for 2018.

Net 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
 Demonstration of E16-24

Requirement 1: Calculate the operating income for 2018.

Net 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
 Demonstration of E16-24

Requirement 2: Rise & Shine sold 50,000 alarm clocks in 2018.

Compute the unit cost for one alarm clock.

Unit cost of one alarm clock =

© 2018 Pearson Education, Inc. 16-30

 Demonstration of E16-24

Requirement 2: Rise & Shine sold 50,000 alarm clocks in 2018.

Compute the unit cost for one alarm clock.

Cost of goods sold

Unit cost of one alarm clock =
Total units sold

© 2018 Pearson Education, Inc. 16-31

 Demonstration of E16-24

Requirement 2: Rise & Shine sold 50,000 alarm clocks in 2018.

Compute the unit cost for one alarm clock.

Cost of goods sold

Unit cost of one alarm clock =
Total units sold

= $213,000
50,000 alarm clocks

© 2018 Pearson Education, Inc. 16-32

 Demonstration of E16-24

Requirement 2: Rise & Shine sold 50,000 alarm clocks in 2018.

Compute the unit cost for one alarm clock.

Cost of goods sold

Unit cost of one alarm clock =
Total units sold

= $213,000
50,000 alarm clocks

= $4.26 per alarm clock

© 2018 Pearson Education, Inc. 16-33

End of Chapter 16