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$10.00 Identifying Management Concepts and Preparing Manufacturing and Income Statements Problem 18-8A,Exercise 18-5

• From Economics: Accounting
• Due on Oct. 19, 2008
• Asked on Oct. 16, 2008 at 08:35:36AM

Q:

Exercise 18-5

Following are three separate events affecting the managerial accounting systems for different companies.
Match the management concept(s) that the company is likely to adopt for the event identified.
There is some overlap in the meaning of customer orientation and total quality management and,
therefore, some responses can include more than one concept.
Event

_______ 1. The company starts measuring inventory turnover and discontinues elaborate
inventory records. Its new focus is to pull inventory through the system.
_______ 2. The company starts reporting measures on customer complaints and product
returns from customers.
_______ 3. The company starts reporting measures such as the percent of defective products and the number of units scrapped.

Management Concept

a.Total quality management (TQM)
b. Just-in-time (JIT) system
c. Continuous improvement (CI)
d. Customer orientation (CO)

Problem 18-8A
The following calendar year-end information is taken from the December 31, 2005, adjusted trial balance
and other records of Plaza Company.

Advertising expense . . . . . . . . . . . . . . . . . . . . . . . . $ 30,750
Depreciation expense—Office equipment . . . . . . . . . 9,250
Depreciation expense—Selling equipment . . . . . . . . . 10,600
Depreciation expense—Factory equipment . . . . . . . . 35,550
Factory supervision . . . . . . . . . . . . . . . . . . . . . . . . . 104,600
Factory supplies used . . . . . . . . . . . . . . . . . . . . . . . 9,350
Factory utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000
Inventories
Raw materials, December 31, 2004 . . . . . . . . . . . . 168,850
Raw materials, December 31, 2005 . . . . . . . . . . . . 184,000
Goods in process, December 31, 2004 . . . . . . . . . 17,700
Goods in process, December 31, 2005 . . . . . . . . . 21,380
Finished goods, December 31, 2004 . . . . . . . . . . . 169,350
Finished goods, December 31, 2005 . . . . . . . . . . . 138,490
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677,480
Income taxes expense . . . . . . . . . . . . . . . . . . . . . . . 235,725
Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,875
Miscellaneous production costs . . . . . . . . . . . . . . . . 10,425
Office salaries expense . . . . . . . . . . . . . . . . . . . . . . 65,000
Raw materials purchases . . . . . . . . . . . . . . . . . . . . . 927,000
Rent expense—Office space . . . . . . . . . . . . . . . . . . 24,000
Rent expense—Selling space . . . . . . . . . . . . . . . . . . 28,100
Rent expense—Factory building . . . . . . . . . . . . . . . 78,800
Maintenance expense—Factory equipment . . . . . . . . 37,400
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,527,000
Sales discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,500
Sales salaries expense . . . . . . . . . . . . . . . . . . . . . . . 394,560
1. Prepare the company’s 2005 manufacturing statement.
2. Prepare the company’s 2005 income statement that reports separate categories for (a) selling
expenses and (b) general and administrative expenses.