1. Chapter 16 Introduction to Managerial Accounting
Demonstration
Problems
© 2016 Pearson Education, Ltd.

2. Demonstration of E16-23
Use the following information for a manufacturer to compute cost of goods manufactured and cost of goods sold:
Inventories:
Beginning
Ending
Raw Materials
$ 16,000
$ 12,000
Work-in-Process
98,000
87,000
Finished Goods
20,000
25,000
Other information:
Purchases of materials
$ 37,000
Direct labor
76,000
Manufacturing overhead
34,000

3. Calculation of cost of goods manufactured
Demonstration of E16-23
Calculation of cost of goods manufactured
Beginning Work-in-Process Inventory
$ 98,000

4. Calculation of cost of goods manufactured
Demonstration of E16-23
Calculation of cost of goods manufactured
Beginning Work-in-Process Inventory
$ 98,000
Direct Materials Used:
Beginning Raw Materials Inventory
$ 16,000

5. Calculation of cost of goods manufactured
Demonstration of E16-23
Calculation of cost of goods manufactured
Beginning Work-in-Process Inventory
$ 98,000
Direct Materials Used:
Beginning Raw Materials Inventory
$ 16,000
Purchases of Raw Materials
37,000

6. Calculation of cost of goods manufactured
Demonstration of E16-23
Calculation of cost of goods manufactured
Beginning Work-in-Process Inventory
$ 98,000
Direct Materials Used:
Beginning Raw Materials Inventory
$ 16,000
Purchases of Raw Materials
37,000
Raw Materials Available for Use
53,000

7. Calculation of cost of goods manufactured
Demonstration of E16-23
Calculation of cost of goods manufactured
Beginning Work-in-Process Inventory
$ 98,000
Direct Materials Used:
Beginning Raw Materials Inventory
$ 16,000
Purchases of Raw Materials
37,000
Raw Materials Available for Use
53,000
Ending Raw Materials Inventory
(12,000)

8. Calculation of cost of goods manufactured
Demonstration of E16-23
Calculation of cost of goods manufactured
Beginning Work-in-Process Inventory
$ 98,000
Direct Materials Used:
Beginning Raw Materials Inventory
$ 16,000
Purchases of Raw Materials
37,000
Raw Materials Available for Use
53,000
Ending Raw Materials Inventory
(12,000)
Direct Materials Used
41,000

9. Calculation of cost of goods manufactured
Demonstration of E16-23
Calculation of cost of goods manufactured
Beginning Work-in-Process Inventory
$ 98,000
Direct Materials Used:
Beginning Raw Materials Inventory
$ 16,000
Purchases of Raw Materials
37,000
Raw Materials Available for Use
53,000
Ending Raw Materials Inventory
(12,000)
Direct Materials Used
41,000
Direct Labor
76,000

10. Calculation of cost of goods manufactured
Demonstration of E16-23
Calculation of cost of goods manufactured
Beginning Work-in-Process Inventory
$ 98,000
Direct Materials Used:
Beginning Raw Materials Inventory
$ 16,000
Purchases of Raw Materials
37,000
Raw Materials Available for Use
53,000
Ending Raw Materials Inventory
(12,000)
Direct Materials Used
41,000
Direct Labor
76,000
Manufacturing Overhead
34,000

11. Calculation of cost of goods manufactured
Demonstration of E16-23
Calculation of cost of goods manufactured
Beginning Work-in-Process Inventory
$ 98,000
Direct Materials Used:
Beginning Raw Materials Inventory
$ 16,000
Purchases of Raw Materials
37,000
Raw Materials Available for Use
53,000
Ending Raw Materials Inventory
(12,000)
Direct Materials Used
41,000
Direct Labor
76,000
Manufacturing Overhead
34,000
Total Manufacturing Costs Incurred During the Year
151,000

12. Calculation of cost of goods manufactured
Demonstration of E16-23
Calculation of cost of goods manufactured
Beginning Work-in-Process Inventory
$ 98,000
Direct Materials Used:
Beginning Raw Materials Inventory
$ 16,000
Purchases of Raw Materials
37,000
Raw Materials Available for Use
53,000
Ending Raw Materials Inventory
(12,000)
Direct Materials Used
41,000
Direct Labor
76,000
Manufacturing Overhead
34,000
Total Manufacturing Costs Incurred During the Year
151,000
Total Manufacturing Costs to Account For
249,000

13. Calculation of cost of goods manufactured
Demonstration of E16-23
Calculation of cost of goods manufactured
Beginning Work-in-Process Inventory
$ 98,000
Direct Materials Used:
Beginning Raw Materials Inventory
$ 16,000
Purchases of Raw Materials
37,000
Raw Materials Available for Use
53,000
Ending Raw Materials Inventory
(12,000)
Direct Materials Used
41,000
Direct Labor
76,000
Manufacturing Overhead
34,000
Total Manufacturing Costs Incurred During the Year
151,000
Total Manufacturing Costs to Account For
249,000
Ending Work-in-Process Inventory
(87,000)

14. Calculation of cost of goods manufactured
Demonstration of E16-23
Calculation of cost of goods manufactured
Beginning Work-in-Process Inventory
$ 98,000
Direct Materials Used:
Beginning Raw Materials Inventory
$ 16,000
Purchases of Raw Materials
37,000
Raw Materials Available for Use
53,000
Ending Raw Materials Inventory
(12,000)
Direct Materials Used
41,000
Direct Labor
76,000
Manufacturing Overhead
34,000
Total Manufacturing Costs Incurred During the Year
151,000
Total Manufacturing Costs to Account For
249,000
Ending Work-in-Process Inventory
(87,000)
Cost of Goods Manufactured
$ 162,000

15. Calculation of cost of goods sold
Demonstration of E16-23
Calculation of cost of goods sold
Beginning Finished Goods Inventory
$ 20,000

16. Calculation of cost of goods sold
Demonstration of E16-23
Calculation of cost of goods sold
Beginning Finished Goods Inventory
$ 20,000
Cost of Goods Manufactured
162,000
[previous slide]

17. Calculation of cost of goods sold
Demonstration of E16-23
Calculation of cost of goods sold
Beginning Finished Goods Inventory
$ 20,000
Cost of Goods Manufactured
162,000
[previous slide]
Cost of Goods Available for Sale
182,000

18. Calculation of cost of goods sold
Demonstration of E16-23
Calculation of cost of goods sold
Beginning Finished Goods Inventory
$ 20,000
Cost of Goods Manufactured
162,000
[previous slide]
Cost of Goods Available for Sale
182,000
Ending Finished Goods Inventory
(25,000)

19. Calculation of cost of goods sold
Demonstration of E16-23
Calculation of cost of goods sold
Beginning Finished Goods Inventory
$ 20,000
Cost of Goods Manufactured
162,000
[previous slide]
Cost of Goods Available for Sale
182,000
Ending Finished Goods Inventory
(25,000)
Cost of Goods Sold
$ 157,000

20. Demonstration of E16-25
Rise & Shine Company sells alarm clocks. The following information summarizes Rise & Shine’s operating activities for 2016:
Selling and Administrative Expenses
$ 147,000
Purchases
208,000
Sales Revenue
421,000
Merchandise Inventory, January 1, 2016
16,000
Merchandise Inventory, December 31, 2016
11,000
Requirements 1.
Calculate the operating income for 2016. 2.
Rise & Shine sold 50,000 alarm clocks in Compute the unit cost for one alarm clock.

21. Demonstration of E16-25
Requirement 1: Calculate the operating income for 2016.
Sales Revenue
$ 421,000

22. Demonstration of E16-25
Requirement 1: Calculate the operating income for 2016.
Sales Revenue
$ 421,000
Cost of Goods Sold:
Beginning Merchandise Inventory
$ 16,000

23. Demonstration of E16-25
Requirement 1: Calculate the operating income for 2016.
Sales Revenue
$ 421,000
Cost of Goods Sold:
Beginning Merchandise Inventory
$ 16,000
Purchases
208,000

24. Demonstration of E16-25
Requirement 1: Calculate the operating income for 2016.
Sales Revenue
$ 421,000
Cost of Goods Sold:
Beginning Merchandise Inventory
$ 16,000
Purchases
208,000
Cost of Goods Available for Sale
224,000

25. Demonstration of E16-25
Requirement 1: Calculate the operating income for 2016.
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)

26. Demonstration of E16-25
Requirement 1: Calculate the operating income for 2016.
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

27. Demonstration of E16-25
Requirement 1: Calculate the operating income for 2016.
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

28. Demonstration of E16-25
Requirement 1: Calculate the operating income for 2016.
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
Selling and Administrative Expenses
147,000

29. Demonstration of E16-25
Requirement 1: Calculate the operating income for 2016.
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
Selling and Administrative Expenses
147,000
Operating Income
$ 61,000

30. © 2016 Pearson Education, Ltd.
Demonstration of E16-25
Requirement 2: Rise & Shine sold 50,000 alarm clocks in Compute the unit cost for one alarm clock.
Unit cost of one alarm clock =
© 2016 Pearson Education, Ltd.

31. © 2016 Pearson Education, Ltd.
Demonstration of E16-25
Requirement 2: Rise & Shine sold 50,000 alarm clocks in Compute the unit cost for one alarm clock.
Unit cost of one alarm clock =
Cost of goods sold
Total units sold
© 2016 Pearson Education, Ltd.

32. © 2016 Pearson Education, Ltd.
Demonstration of E16-25
Requirement 2: Rise & Shine sold 50,000 alarm clocks in Compute the unit cost for one alarm clock.
Unit cost of one alarm clock =
Cost of goods sold
Total units sold =
$213,000
50,000 alarm clocks
© 2016 Pearson Education, Ltd.

33. © 2016 Pearson Education, Ltd.
Demonstration of E16-25
Requirement 2: Rise & Shine sold 50,000 alarm clocks in Compute the unit cost for one alarm clock.
Unit cost of one alarm clock =
Cost of goods sold
Total units sold =
$213,000
50,000 alarm clocks
$4.26 per alarm clock
© 2016 Pearson Education, Ltd.