ACCESSrTestrBankrforrFundamental rManagerial rAccounting rConcepts r10thrEditi

ACCESSrTestrBankrforrFundamental rManagerial rAccounting rConcepts r10thrEditi onrEdmonds Chapterr01r-rManagementrAccountingrandrCorporaterGovernance 1-1 ynursytest.store ©rMcGrawrHillrLLC.rAllrrightsrreserved.rNorr m e herpriorrwrittenrconsentrofrMcGrawrHillrLLC.

TeachingrNotesrforrChapterr1 Managerialraccountingrrequiresrteachingrmethodsrdifferentrfromrthoserusedrinrfinancialracc ounting.rInrtherintroductoryrfinancialraccountingrcourse,rinstructorsrteachrstudentsraboutrac countingrstandards.rArprimaryrgoalrinrteachingrmanagerialraccountingrisrtordeveloprstudent s’rconditionalrassessmentrskillsr(critical- thinkingrskills).rForrexample,rinrarlaterrchapter,rstudentsrarerfrequentlyrconfusedrbyrtherfactrt hat,rinrdifferentrsituations,rargivenrcostrcanrberclassifiedrasrfixedrorrvariable,rdirectrorrindirect,r relevantrorrnotrrelevant.rThersalaryrcostrofrstorermanagersrmayrberfixedrwithrrespectrtorthernu mberrofrcustomersrthatrenterrtheirrstores.rHowever,rmanagers’rsalaryrcostrisrvariablerrelative rtorthernumberrofrstoresrarcompanyroperates.rArmanager’srsalaryrcostrisrdirectlyrtraceablertorar particularrstorerbutrnotrtraceablertorarsaleroccurringrinrtherstore.rStudentsrmustrlearnrtorassess rtherconditionsrthatrdeterminercostrclassification.rChapterr1roffersrtherfirstropportunityrtorde veloprtherstudents’rconditionalrassessmentrskills.rHere,rstudentsrlearnrthatrdepreciationrcanrb erclassifiedrasranrassetrorranrexpense,rdependingronrcertainrconditions.rIfrardepreciablerassetri srusedrtorproducerinventory,rtherdepreciationrcostrwillrfirstrberclassifiedrasranrassetr(inventory) randrlaterrasranrexpenser(costrofrgoodsrsold).rIfrtherdepreciablerassetrisrusedrtorsupportrsellingra ndradministrativeractivities,rdepreciationrwillrberreportedrdirectlyronrtherincomerstatementra srdepreciationrexpense.

Studentsrtypicallyrenterrmanagerialraccountingrwithrrigidrideasraboutrexpenserrecogniti on.rInrfinancialraccountingrtheyrlearnedrthatrdepreciationrandremployeercompensationrcostsr arerexpensedrdirectlyronrtherincomerstatement.rTheridearthatrdepreciationrrelatedrtormanufac turingrequipmentrandrwagesrofrproductionrworkersrwillrpassrthroughranrinventoryraccountrb eforerbeingrexpensedrasrcostrofrgoodsrsoldrisrcontraryrtortheirrexistingrknowledgerbase.rExpa ndingrthatrknowledgerbaserrequiresrarsignificantrcommitmentrofrteachingrtime.rYourrstuden tsrarerdevelopingrtheirranalyticalrskills.rTheyrarerlearningrhowrtorassessrtherconditionsrthatri nfluencercostrclassification.rThisrtyperofrlearningrrequiresrmorertimerthanrmerelyrmemorizi ngrdefinitions.rIfryoursometimesrfeelrthatrprogressrisrtoorslow,rrememberrthatryourarerbuildin grarfoundationruponrwhichrsubsequentrlearningrwillrrest.rThererisrnormorerimportantrteachin grtaskrthanrhelpingrstudentsrformrarsoundrconceptualrframework.rWerrecommendrusingrappr oximatelyrthreerhoursrofrclassrtimerforrChapterr1. 1 / 4

ACCESSrTestrBankrforrFundamental rManagerial rAccounting rConcepts r10thrEditi onrEdmonds Chapterr01r-rManagementrAccountingrandrCorporaterGovernance 1-2 ynursytest.store ©rMcGrawrHillrLLC.rAllrrightsrreserved.rNorr m e herpriorrwrittenrconsentrofrMcGrawrHillrLLC.

DetailedrOutlinerofrarLessonrPlanrforrChapterr1 ArcomprehensiverlessonrplanrforrtherfirstrdayrofrclassrbeginsrinrtherIntroductionrtorthisrmanual.rPleaserrea dritrbeforerimplementingrstepsrII–VIIIrofrtherfollowingrlessonrplan.

• Distinguishrbetweenrmanagerialrandrfinancialraccounting.rTherbestrwayrtordiffe

rentiaterbetweenrmanagerialrandrfinancialraccountingrisrtorhighlightrdifferencesrwh erertheyroccurrinrthersubjectrmatterrthroughoutrthercourse.rForrexample,rwhenrusingr estimatedrdatarinrardecision- makingrcontext,rpointroutrthatrmanagerialraccountingrisrfuture- orientedrratherrthanrhistoricallyrbased.rArlongrmonologueraboutrtherdifferencesrbet weenrfinancialrandrmanagerialraccountingrwillronlyrboreryourrstudents.rInrarbriefrintr oductionrtorthisrtopic,ryourmightrdiscussrtherinformationrneedsrforrinternalrusersr(ma nagers)rtorplan,rdirect,randrcontrol.rTherinformationrneededrbyrarmanagerrdependsro nrhis/herrpositionrinrtherorganizationrandrtherparticularrdecisionrfacingrthermanager.r Ifryourwantrtorspendrmorertimeronrthertopic,rExerciser1-1Arfromrtherend-of- chapterrmaterialsrinrthertextrmightrberanrappropriaterin-classractivityratrthisrpoint.

II. UserDemonstrationrProblemr1-1rasrarproblem- basedrlearningrexercise.r(Seertherintroductionrtorthisrmanualrforrdetailsraboutrproble m-basedrlearning.)

III. Afterrgivingrtherstudentsrarfewrminutesrtordigestrtherproblemrandrformulaterso lutions,rengagerthemrinrsomerformrofrcollaborativerlearningrexperience.

IV. Introducertherconceptrofrproductrcostingrbyrprovidingrthersolutionrto requirementrarofrDemonstrationrProblemr1-1.

• ContinuingrDemonstrationrProblemr1-

1,rdeterminerthercostrperrunitrandrthersalesrpricerusingrarcost- plusrpricingrstrategy.

VI. Showrhowrproductrcostsrarerexpensedrthroughrcostrofrgoodsrsold.

VII. Introducerthercostrcategoryrofrselling,rgeneral,randradministrativercostsr(SG& Arcosts).

VIII. UserProblemr1-19Arasranrin-classrreinforcementrexercise.

IX. CopyrandrdistributerDemonstrationrProblemr1-2.rDemonstrationrProblemr1- 2rexpandsrtherclassificationrconceptsrintroducedrinrDemonstrationrProblemr1- 1rtorincluderaccountingrforrtherdepreciationrofrmanufacturingrequipment.rExplainrth atrdepreciationronrmanufacturingrfacilitiesrandrequipmentrisrarproductrcost.rPointroutrt hatrtherentryrtorrecordrdepreciationronrmanufacturingrequipmentrrepresentsranrassetr exchangertransaction.rTherbookrvaluerofrmanufacturingrequipmentrdecreases,randrt herbalancerinrtherInventoryraccountrincreases.rStudentsrarersoraccustomedrtortheridea rthatrdepreciationrisranrexpense,rtheyrarernotrlikelyrtorgrasprtherproductrcostrconceptru ntilrtheyrworkrarproblem.rAfterryourrexplanation,rassign 2 / 4

ACCESSrTestrBankrforrFundamental rManagerial rAccounting rConcepts r10thrEditi onrEdmonds Chapterr01r-rManagementrAccountingrandrCorporaterGovernance 1-3 ynursytest.store ©rMcGrawrHillrLLC.rAllrrightsrreserved.rNorr m e herpriorrwrittenrconsentrofrMcGrawrHillrLLC.

DemonstrationrProblemr1- 2rtorstudentsrandrhaverthemrattemptrtorworkrtherproblem.rStudentsrshouldrberablertor workrtherproblemrwithrminimalrhelp.rWalkraroundrtherroom;rifryourfindrthatrstudent srarerhavingrtrouble,rhelprasrneeded.

IfryourdesirerfurtherrreinforcementrofrproductrversusrSG&Arcostrclassifications,rseer Problemr1-20Arorr1- 20B.rStudentsrmayrneedrhelprgettingrstartedrwithrtheserproblems.

• Discussrtherimportancerofrproductrandrperiodrcostingrinrfinancialrstatements.rS

tudentsrarerinterestedrinrhowrproductrcostingraffectsrreal- worldrdecisionrmaking.rAfterrshowingrthemrhowrtherclassificationrofrcostsrasrproduc trversusrselling,rgeneral,randradministrativercanraffectrtheramountsrreportedrinrarcom pany’srbalancersheetrandrincomerstatement,rwerdiscussrhowrtheramountsrreportedrinr therfinancialrstatementsrcanraffectrbusinessrdecisions.rSpecifically,rwerdiscussrtheri mplicationsrforracquiringrcapitalrorrdebt,rtherpotentialreffectronrexecutivercompensa tion,randrtherimpactronrincomertaxes.rToraddressrtheserissues,rwersuggestryouruserPr oblemr1-21Arasrardemonstrationrproblem.rThen,ryourmayrwishrtoruserProblemr1- 21Brasrarhomeworkrproblem.

XI. Discussrmanagerialrversusrfinancialrtreatmentrofrupstream,rmidstream,randrd ownstreamrcostsrinrmanufacturingrcompanies.rThisrcanreliminatertherneedrforrsep araterreportsrforrinternalrandrexternalrfinancialrreporting.rManagersrmayrfailrtoruserup streamrorrdownstreamrcostsrwhenrcalculatingrsalesrpricerorrproductrprofitability.rUs erDemonstrationrProblemr1-3rtorintroducerthisrconcept.

XII. Therchapterrprovidesrarbriefrintroductionrtortotalrqualityrmanagementr(TQM ),ractivity- basedrmanagementr(ABM),randrvaluerchainranalysis.rEachrofrthesertopicsrisrcover edrinrmorerdepthrinrlaterrchaptersrofrthertext.rIfryourarerrunningrshortrofrtime,ryourmayr minimizerthertimeryourallocatertorthesersubjects.rIfryourwishrtorcoverrthesertopics,rw ersuggestrthatryouruserarproblemrfromrtherArSetrofrtherend-of- chapterrmaterials,rlikerProblemr1- 29Aronrvaluerchainranalysis,rinrthertextrasrardemonstrationrproblem.rThenryourmayr wishrtoruserProblemr1-29Brasrarhomeworkrproblem. 3 / 4

ACCESSrTestrBankrforrFundamental rManagerial rAccounting rConcepts r10thrEditi onrEdmonds Chapterr01r-rManagementrAccountingrandrCorporaterGovernance 1-4 ynursytest.store ©rMcGrawrHillrLLC.rAllrrightsrreserved.rNorr m e herpriorrwrittenrconsentrofrMcGrawrHillrLLC.

DemonstrationrProblemsrforrChapterr1 DemonstrationrProblemr1-1rrIdentifyingrProductrCosts

EiffelrManufacturingrCompanyrmakesrsmallrreplicasrofrmajorrlandmarksrthatritrsellsrtorsouv enirrshops.rThercompanyrwasrstartedronrJanuaryr1,rYearr1,rwhenritracquiredr$60,000rcashrfro mrtherissuerofrcommonrstock.rDuringrYearr1,rthercompanyrpurchasedrandrusedrrawrmaterial srthatrcostr$16,000rcash.rItrpaidrwagesrofr$22,000rcashrtortherworkersrwhormadertherreplicas.rFinally,rmanufacturingroverheadrcosts,rincludingrrentalrfeesrpaidrforrfacilitiesrandrequipme nt,ramountedrtor$12,000rcash.rThercompanyrstartedrandrcompletedrtherproductionrofr1,000rr eplicasrduringrYearr1.

Required

• DeterminertheramountrofrexpenserEiffelrincurredrinrYearr1,rassumingrnonerofrtherreplica

srwerersoldrinrYearr1.

• Recordrtheraccountingreventsrassociatedrwithrmakingrther1,000rreplicasrinrarfinancialrstat

ementsrmodelrlikertheronershownrbelow.rThereventrpertainingrtortherissuerofrcommonrst ockrisrrecordedrinrthermodelrasranrexample.

Events Assets =

= Stk.rEquity

Rev.r–rExp.r=rNetrInc.

Cash

+ Inv.C.Stk.Ret.+rEarn.

• 60,000r+ = 60,000r+ – =
• Determinerthercostrperrunitrofrther1,000rreplicas.rDeterminerthersalesrpricerperrunit,rassu

mingrtherproductsrarersoldrforrcostrplusr40%rofrcost.

• Recordrthersalerofr800rreplicas.
• Recordrtherpaymentrofrar$4,000rsalesrcommissionrtorthersalespersonrwhorsoldrtherreplic

as.

• / 4