Professional Documents
Culture Documents
Workbook
(Version 1.0)
Tony Bell
Tony Bell, 2016
Table of Contents
A Note to Instructors ............................................................................................................. 3
Module 1: Introduction to Managerial Accounting ................................................................. 4
Module 2: Cost Concepts and the Schedule of Cost of Goods Manufactured ........................... 7
Module 3: Job-Order Costing ............................................................................................... 13
Module 4: Process Costing ................................................................................................... 22
Module 5: Activity-Based Costing ........................................................................................ 31
Module 6: Cost Behaviour ................................................................................................... 36
Module 7: Cost-Volume-Profit Analysis ................................................................................ 42
Module 8: Budgeting ........................................................................................................... 50
Module 9: Standard Costs and Variance Analysis ................................................................. 62
Module 10: Flexible Budgeting............................................................................................. 69
Module 11: Performance Measurement: ROI, Residual Income and the Balanced Scorecard 72
Module 12: Relevant Costs for Decision Making ................................................................... 75
Module 13: Capital Budgeting .............................................................................................. 85
A Note to Instructors
I hope you find this workbook useful, I just want to point out three key features:
1.) This book is totally free to you and your students. Feel free to copy it or post it to your
course website and feel free to share it with colleagues.
2.) Although I am widely distributing a PDF file, I have gone to great effort to make a fully
editable Word version of this document. Please contact me if youd like to have a copy
of the Word version. You can edit any of these problems to better fit in your class or
simply copy and paste an entire problem into an assignment or test, with the attribution
Source: accountingworkbook.com, or Adapted from: accountingworkbook.com.
3.) Every problem in this workbook has a video walkthrough available at
http://accountingworkbook.com. I suspect the true value in this book lies in the video
walkthroughs, as it will be useful for homework and particularly useful for flipping the
classroom.
Please let me know if you would like to see additional question-types or topics included in
the future. I intend to add to this book frequently based on your input. Also, any feedback
you can provide (particularly student feedback) would be greatly appreciated.
Please note, you do not have my permission to use this for a commercial purpose, nor do you
have permission to recreate the videos found at http://accountingworkbook.com. Send me an
email if you have any questions about use or attribution.
Thanks for checking out this workbook, and I hope youll have a look at the companion
website: http://accountingworkbook.com !
Tony Bell
tbella@gmail.com
Module 1: Introduction to
Managerial Accounting
1-2 - Ethics
Explain the importance of ethics in accounting.
$5,000
8,000
23,000
21,000
16,000
10,000
56,000
42,000
85,000
25,000
35,000
7,000
32,000
2,000
23,000
11000
148,000
160,000
Required:
Based on the information above, prepare a schedule of cost of goods manufactured.
$2,400
1,600
200
150
1,000
900
12,000
1,500
42,000
58,000
2,500
600
2,000
10,000
1,200
3,000
16,000
65,000
Required:
Based on the information above, prepare a schedule of cost of goods manufactured.
$14,000
17,000
31,000
20,000
84,000
68,000
275,000
64,000
120,000
425,000
240,000
20,000
100,000
15,000
30,000
2,050,000
215,000
$185,000
140,000
25,000
35,000
375,000
390,000
1,200,000
400,000
240,000
250,000
3,250,000
100,000
1,700,000
200,000
600,000
10,300,000
2,000,000
Labour:
Required:
a.) Compute the cost of the job.
b.) Assuming the company marks up their price to by three times the cost, what will the
company charge its customer for the table?
$8
Labour:
Required:
a.) Determine the cost of the job.
b.) Assuming the company charges a flat rate of $50 to replace brake pads, how much gross
profit will have been earned on Job #842?
e.)
f.)
g.)
h.)
i.)
j.)
k.)
Required:
a.) For items a.)-k.) above, record journal entries. Unless otherwise noted, assume all
transactions were on account.
b.) Was overhead overapplied or underapplied for the period? By how much?
c.) Record a journal entry to close overhead to cost of goods sold.
d.) Based on the information above, prepare an income statement for the company assume
a 25% tax rate.
$110,500
$33,000
$26,000
94,000
92,000
$950,000
$310,000
$170,000
???
90%
60%
Required:
Using the weighted average method, prepare a production cost report for the company.
$170
$160
$300
1,100
1,400
$1,300
$800
$1,700
???
70%
80%
Required:
Using the weighted average method, prepare a production cost report for the company.
$1,000
500
750
Costs added:
Materials
Labour
Manufacturing overhead
Required:
Using the weighted average method, prepare a production cost report for the company.
$4,000
300
2,500
$25,500
3,000
6,000
Costs added:
Materials
Labour
Manufacturing overhead
Required:
Using the weighted average method, prepare a production cost report for the company.
$90,000
12,000
18,900
___?___
___?___
The beginning work in process includes material of $250, labour of $100, and overhead of $400.
Required:
Using the weighted average method, prepare a production cost report for the company.
___?___
___?___
The August 1 work in process includes material of $100, labour of $52, and overhead of $200.
Required:
Using the weighted average method, prepare a production cost report for the company.
$110,500
$33,000
$26,000
94,000
92,000
$950,000
$310,000
$170,000
???
90%
60%
$170
$160
$300
1,100
1,400
$1,300
$800
$1,700
???
70%
80%
Module 5: Activity-Based
Costing
Estimated MOH
$20,000
35,000
90,000
$145,000
Expected Activity
Total
Commuter
10,000
6,000
2,000
600
100
40
Range
4,000
1,400
60
Direct Materials
Direct Labour
Number of units produced
Commuter
$600
250
250 units
Range
$900
400
150 units
The company has not yet determined its planned selling price, but knows that the average price
for competitors of the Commuter model is $1,200. For the Range model, competitors are priced
at $1,700 on average.
Required:
a.) Compute the activity rates for each activity.
b.) Determine the expected unit cost of each product.
c.) If E-Scoot prices its products in line with competitors, what will the margins be on each
product? The largest competitors have gross profit margins of 23%, how does E-Scoot
compare?
Estimated MOH
Expected Activity
Total
Sport
5,000
3,000
550
250
200
70
$40,000
110,000
200,000
$350,000
Direct Materials
Direct Labour
Number of units produced
Sport
$300
50
250 units
Pro
$500
80
150 units
Required:
a.) Compute the activity rates for each activity.
b.) Determine the expected unit cost of each product.
Pro
2,000
300
130
Direct Materials
Direct Labour ($10 per hour)
Number of units produced
Original
$50
20
7,000 units
Deluxe
$75
30
2,000 units
Estimated MOH
$100,000
200,000
300,000
$600,000
Expected Activity
Total
Standard
20,000
14,000
4,000
2,000
1,000
200
Required:
a.) Under the traditional costing method:
i. Compute the predetermined overhead rate.
ii. Determine the unit cost of each product.
b.) Under activity based costing:
i. Compute the activity rates for each activity.
ii. Determine the expected unit cost of each product.
c.) Compare and comment on your answers from parts a.) and b.) above.
d.) If ABC produces more accurate cost data, why is it not more widely used?
Deluxe
6,000
2,000
800
Direct Materials
Direct Labour ($15 per hour)
Number of units produced
Basic
$700
60
600 units
Superjet
$1200
90
100 units
Estimated MOH
$60,000
75,000
25,000
140,000
$300,000
Expected Activity
Total
Basic
3,000
2,400
800
600
40,000
30,000
500
100
Required:
a.) Under the traditional costing method:
i. Compute the predetermined overhead rate.
ii. Determine the unit cost of each product.
b.) Under activity based costing:
i. Compute the activity rates for each activity.
ii. Determine the expected unit cost of each product.
c.) Compare and comment on your answers from parts a.) and b.) above.
d.) If ABC produces more accurate cost data, why is it not more widely used?
Superjet
600
200
10,000
400
CM
Net income
$2,000,000
1,400,000
600,000
500,000
$100,000
Required:
a.)
b.)
c.)
d.)
$10,000
4,000
6,000
1,000
$5,000
Required:
a.) Compute the breakeven point in units.
b.) Compute the breakeven point in dollars.
c.) If the company wishes to earn a monthly target profit of $10,000, how many units must
be sold each month?
d.) Compute the companys margin of safety. State your answer in both dollar and
percentage terms.
e.) The companys manager thinks that adding a salaried sales staff member at a cost of
$2,000 per month will increase sales by $4,000 per month. If he is correct, what will be
the net dollar advantage or disadvantage of making this change?
f.) Refer to the original data, the companys manager believes that a new production process
will improve profitability. He plans to add new machinery that will cut variable expenses
in half. This will increase fixed expenses by $3,000. He expects after this change the
companys unit sales will increase by 25%. If he is correct, what will be the net dollar
advantage or disadvantage of making this change?
g.) Refer to the original data, the company expects to decrease variable expenses by 5% and
wishes to pass the savings along to customers. The manager wishes to maintain the exact
same contribution margin ratio as the original data. What sales price will need to be
charged to maintain the same contribution margin ratio?
Enthusiast
600
$200
$120
Jammer
350
$500
$200
Pro
50
$3,000
$800
The company has annual fixed costs of $200,000 and a tax rate of 25%.
Required:
a.) Compute the companys expected profit (net income) for the upcoming fiscal period.
b.) Compute the companys sales mix.
c.) Assuming a consistent sales mix, how many units of each product type must the company
sell to break even?
d.) Assuming a consistent sales mix, if the company wishes to earn net income of $300,000,
how many units of each product type must be sold?
e.) Compute the margin of safety in both dollar and percentage terms.
Thin Crust
1,000
$15
$6
Deep Dish
400
$20
$8
Pasta
200
$12
$5
The company has monthly fixed costs of $10,000 and a tax rate of 20%.
Required:
a.) Compute the companys expected profit (net income) for the upcoming fiscal period.
b.) Compute the companys sales mix. (Note Solve the normal way
c.) Assuming a consistent sales mix, how many units of each product type must the company
sell to break even?
d.) Assuming a consistent sales mix, if the company wishes to earn monthly net income of
$25,000, how many units of each product type must be sold?
e.) Compute the margin of safety in both dollar and percentage terms.
Module 8: Budgeting
Q1
11,000
Q2
12,000
Q3
14,000
Q4
13,000
Year
50,000
The company expects to sell its goods for $50 per unit.
Required:
a.) Prepare a sales budget for the year.
Additional information
The company expects to collect 70% of sales in the quarter of the sale, and 25% in the quarter
following the sale. 5% of sales are expected to be uncollectible. The companys beginning
accounts receivable was $125,000, all of which was expected to be collected in the first quarter.
Required:
b.) Prepare a schedule of expected cash collections for the year.
Q1
1,000
Q2
1,200
Q3
1,250
Q4
2,100
Year
5,550
The company expects to sell its goods for $12 per unit.
Required:
a.) Prepare a sales budget for the year.
Additional information
The company expects to collect 90% of sales in the quarter of the sale, and 8% in the quarter
following the sale. 2% of sales are expected to be uncollectible. The companys beginning
accounts receivable was $900, all of which was expected to be collected in the first quarter.
Required:
b.) Prepare a schedule of expected cash collections for the year.
January February
3,000
3,500
March
4,500
Quarter
11,000
The company requires finished goods inventory on hand equal to 20% of the next months
expected sales.
The company expects to begin January with 600 units in inventory. The expected unit sales for
April are 5,000.
Required:
Prepare a production budget for the quarter.
July
5,000
August September
4,000
3,500
Quarter
12,500
The company requires finished goods inventory on hand equal to 30% of the next months
expected sales.
The company expects to begin July with 1,500 units in inventory. The expected unit sales for
October are 3,800.
Required:
Prepare a production budget for the quarter.
July
August September
5,000
7,000
10,000
Quarter
22,000
January
5,000
February
6,000
March
7,000
Quarter
18,000
Each unit requires two direct labour hours to produce and workers are paid $15.00 per hour.
Required
a.) Assuming a completely flexible labour force, prepare the companys direct labour budget
for the quarter.
b.) Refer to the original data. Assume the company has permanent employees who are
guaranteed to be paid for at least 11,500 hours of work per month. If production requires
less than 11,500 hours, they will be paid for 11,500 hours anyway. Any amount of work
above 11,500 hours will be paid at 1.5 times their normal hourly rate.
April
12,000
May
20,000
June
18,000
Quarter
50,000
Each unit requires 1.5 direct labour hours to produce and workers are paid $10.00 per hour.
Required
a.) Assuming a completely flexible labour force, prepare the companys direct labour budget
for the quarter.
b.) Refer to the original data. Assume the company has permanent employees who are
guaranteed to be paid for at least 25,000 hours of work per month. If production requires
less than 25,000 hours, they will be paid for 25,000 hours anyway. Any amount of work
above 25,000 hours will be paid at 1.5 times their normal hourly rate.
January
75,000
February
80,000
March
95,000
Quarter
250,000
The companys variable overhead rate is $10 per direct labour hour. The companys fixed
overhead is $100,000 per month this number includes monthly depreciation of $25,000.
Required
Prepare the companys manufacturing overhead budget for the quarter.
Machine hours
October
200
November
160
December
180
Quarter
540
The companys variable overhead rate is $5 per machine hour. The companys fixed overhead is
$2,000 per month this number includes monthly depreciation of $500.
Required
Prepare the companys manufacturing overhead budget for the quarter.
Quarter
$280,000
270,000
The company begins the year with $20,000 in cash and requires a minimum cash balance of
$10,000. The company may borrow any amount from a local bank at an annual interest rate of
6%, The borrowing must occur at the beginning of any month and all repayments must be made
at the end of any month. Interest must be repaid at the time of loan repayment.
Required:
In good form, prepare the companys cash budget for the upcoming year.
Direct materials
Direct labour
Manufacturing overhead
Quantity
5 kilograms
0.25 hours
0.25 hours
Cost
$4.00 per kg
$10 per DL hour
$8 per DL hour
Total
$20.00
2.50
2.00
$24.50
During the month, the company produced 1,000 buckets of chemicals. The following
information is known:
1.) The company purchased 5,500 kilograms of direct material at a cost of $21,450.
2.) The company had no beginning inventory, and had 700 kilograms of material on hand at
the end of the year.
3.) The direct labour workforce worked a total of 220 hours and was paid a total of $2,640.
4.) Variable overhead of $1,050 and fixed overhead of $800 were incurred.
The manufacturing overhead rate of $8 per direct labour hour can be further broken down. The
company estimates variable overhead to be $5 per direct labour hour. The company expected to
produce 1,100 buckets using 275 direct-labour hours during the month, and based on those
estimates, variable overhead was budgeted to be $1,375 for the month. Fixed overhead was
budgeted to be $825 for the month.
Required:
Compute:
a.) Direct Materials price and quantity variances.
i. The company recently entered into a contract with a new supplier who is
eager for their business. Should the company continue to work with this
new supplier, or should they look for a new one.
b.) Direct Labour rate and efficiency variances.
i. The company experimented using more senior staff and fewer junior
employees this month. Was the experiment successful?
c.) Variable Overhead spending and efficiency variances.
d.) Fixed Overhead spending and volume variances.
Direct materials
Direct labour
Manufacturing overhead
Quantity
10 kilograms
2 hours
2 hours
Cost
$6.00 per kg
$15 per DL hour
$5 per DL hour
Total
$60.00
30.00
10.00
$100.00
During the month, the company produced 200 furniture sets. The following information is
known:
1.) The company purchased 2,300 kilograms of direct material at a cost of $13,000.
2.) The company had no beginning inventory and had 50 kilograms of material on hand at
the end of the year.
3.) The direct labour workforce worked a total of 420 hours and was paid a total of $5,800.
4.) Variable overhead of $1,555 and fixed overhead of $600 were incurred.
The manufacturing overhead rate of $5 per direct labour hour can be further broken down. The
company estimates variable overhead to be $3.75 per direct labour hour. The company planned
to make 180 furniture sets during the month and budgeted to use 360 direct labour hours.
Accordingly, the companys variable overhead was budgeted to be $1,350 for the month. Fixed
overhead was budgeted to be $450 for the month.
Required:
Compute:
a.) Direct Materials price and quantity variances.
i. The company recently entered into a contract with a new supplier who is
eager for their business. Should the company continue to work with this
new supplier, or should they look for a new one.
b.) Direct Labour rate and efficiency variances.
i. The company experimented using more junior staff and fewer senior
employees this month. Was the experiment successful?
c.) Variable Overhead spending and efficiency variances.
d.) Fixed Overhead spending and volume variances.
Variance
6U
$700 F
3,500 F
100 F
4,300 F
100 U
__-__
100 U
$4,200 F
Valerie Pringle, the manager of the rescue group comments on the report: Im certainly proud of
this cost report, it shows that Im not only doing a great job caring for the animals in our care,
Im also keeping costs under control.
Required:
a.) Comment on the major flaw in the report above.
b.) Prepare a revised report using a flexible budget.
c.) Comment on Pringles assertion that she is doing a great job keeping costs under
control.
Payment processing
Total variable costs
Fixed costs
Office expenses
Rent expense
Total fixed costs
Total costs
Net income
Variance
30 F
$2,500 F
$3,000
2,400
1,200
6,600
$3,600
1,500
1,450
6,550
$600 U
900 F
250 U
50 F
2,000
900
2,900
9,500
$2,500
1,800
950
2,750
9,300
$5,200
200 F
50 U
150 F
200 F
$2,700 F
Linda Frost, the manager and matchmaker comments on the report: What a great month. We
were busier than we expected to be and we still managed to keep costs down I just wish every
month could be this good.
Required:
a.)
b.)
c.)
d.)
Examining the report, Carol says, Their icing is just as good, and it would save me $1.50 per
liter, thats over $7,500 for the year. I think Im going to take the deal.
Required
a.) Assuming there is no other use for the icing equipment or the space it uses in the kitchen,
what is the net dollar advantage or disadvantage of accepting the suppliers offer?
b.) If the offer is accepted, Carols Cupcakes could use the space that had been previously
used for making icing as a bacon-frying space. Carol believes that a new bacon line of
cupcakes would produce margins of $5,000 per year. Should Carols Cupcakes accept
the suppliers offer?
Gloria Howard, the owner and CEO of Howard Grills notes: To make 30,000 igniters costs us
$195,000, their starters are just as good and buying from them will only cost us $150,000, Im no
accountant, but it seems obvious we should take this deal.
Required
a.) Assuming there is no other use for the space used to make the starters, what is the net
dollar advantage or disadvantage of accepting the suppliers offer?
b.) If the offer is accepted, the company could use the space to develop a new product line
that would generate estimated margins of $25,000. Should the company accept the
suppliers offer?
Sales
Variable expenses
Contribution margin
Fixed expenses
Operating income (loss)
Housewares
$150,000
60,000
90,000
50,000
$40,000
Hardware
$220,000
100,000
120,000
100,000
$20,000
Electronics
$200,000
140,000
60,000
90,000
$(30,000)
Total
$570,000
300,000
270,000
240,000
$30,000
The company notes that if the electronics department were dropped, the other departments could
expect a 10% decrease in foot traffic and sales. Also, $20,000 of the electronics departments
fixed costs are allocated and would continue even if the department was dropped. The company
has no planned use for the space currently used by the electronics department.
Required
Compute the net dollar advantage or disadvantage of dropping the electronics department.
Price
Variable expenses
Orchid nectar
Other direct materials
Direct labour
Variable manufacturing overhead
Total variable cost
Contribution margin
Red
$200
Green
$160
Blue
$80
50
15
20
15
100
$100
30
25
25
10
90
$70
20
15
10
10
55
$25
Required
a.) Which product would you recommend the company focus on producing first? Second?
Third?
b.) A supplier emerges willing to provide the company with more orchid nectar, but for a
major premium. What is the maximum the company should be willing to pay per gram
of orchid nectar as long as there is unfilled demand for all three perfumes?
$10,000
6,000
$4,000
Birthday
Parties
$2,000
1,000
$1,000
Corporate
Events
$5,000
2,000
$3,000
Typically, weddings take 40 planning hours, birthday parties take 15 planning hours and
Corporate Events take 20 planning hours.
7Required
Which event requests should Anthony take first? Second? Third? (Explain your answer.)
13-2A IRR
Using the information from 13-1A, compute the internal rate of return.
13-2B IRR
Using the information from 13-1B, compute the internal rate of return.