Solution manual accounting 25th editon warren chapter 18

CHAPTER 18
MANAGERIAL ACCOUNTING CONCEPTS AND PRINCIPLES
DISCUSSION QUESTIONS
1.

Financial accounting and managerial accounting are different in several ways. Financial
accounting information is reported in statements that are useful to persons or groups outside of
a company. These statements objectively report the results of past operations for fixed periods of
time and the financial condition of the business under generally accepted accounting principles.
Managerial accounting information uses both subjective and objective information to meet the
specific needs of management. This non-GAAP information can be reported periodically or as
needed by management and can be reported for the entire entity or for segments of the organization.
This information includes (i) historical data, which provide objective measures of past operations,
and (ii) estimated data, which provide subjective estimates about future decisions.

2.

a.

A line department is directly involved in the basic objectives of the organization, while a
staff department provides service, assistance, or advice to line departments or other staff
departments.

b.

(1) Sales Department
(2) Personnel Department

3.

Direct materials cost

4.

Prime costs are the combination of direct materials and direct labor costs, while conversion
costs are the combination of direct labor costs and factory overhead costs.

5.

Product costs are composed of three elements of manufacturing costs: direct materials cost,
direct labor cost, and factory overhead cost. These costs are treated as assets until the product is
sold. Product costs are sometimes referred to as inventoriable costs. Period costs are costs that
are used in generating revenue during the current period. They are recognized as expenses on
the current period’s income statement.

6.

The three inventory accounts for a manufacturing business are as follows:
a.

Finished goods, representing goods in the state in which they are to be sold.

b.

Work in process, representing goods in the process of manufacture.

c.

Materials, representing goods in the state in which they were acquired.

7.

Finished goods, work in process, and materials

8.

The cost of finished goods and the cost of work in process included the following:

9.
10.

a.

Direct materials—the costs of materials that enter directly into the finished product.

b.

Direct labor—the wages of factory workers who convert materials into a finished product.

c.

Factory overhead—the remaining costs, other than direct materials and direct labor, of
operating a factory.

Cost of goods sold
A merchandising business purchases merchandise (products) in a finished state for resale to
customers. The cost of product sold is called cost of merchandise sold. A manufacturer makes
the product it sells using direct materials, direct labor, and factory overhead. The cost of the
product sold is generally called cost of goods sold.
18-1

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CHAPTER 18

Managerial Accounting Concepts and Principles

PRACTICE EXERCISES
PE 18–1A
Controlling (a)
Planning (c)
Decision making (b)

PE 18–1B
Planning (a)
Directing (c)
Controlling (b)

PE 18–2A
a.
b.
c.
d.

DL
FO
DM
FO

PE 18–2B

a.
b.
c.
d.

DM (or FO if the cost is immaterially small)
DL
FO
DM

PE 18–3A
a.
b.
c.
d.

B
C
P
C

PE 18–3B
a.
b.
c.
d.

P
B
C (or P if significant)

C


PE 18–4A
a.
b.
c.
d.

Product cost
Product cost
Period cost
Period cost

PE 18–4B
a.
b.
c.
d.

Period cost
Product cost
Product cost
Period cost

PE 18–5A
a.

b.

Work in process inventory, January 1………………………………
Cost of direct materials used in production……………………… $16,800
Direct labor……………………………………………………………… 43,400
28,000
Factory overhead………………………………………………………
Total manufacturing costs incurred during January……………
Total manufacturing costs…………………………………………
Less work in process inventory, January 31………………………
Cost of goods manufactured…………………………………………

$ 70,000

Finished goods inventory, January 1………………………………
Cost of goods manufactured…………………………………………
Cost of finished goods available for sale…………………………
Less finished goods inventory, January 31………………………
Cost of goods sold……………………………………………………

$ 29,400
84,000

88,200
$158,200
74,200
$ 84,000

$113,400
33,600
$ 79,800

PE 18–5B
a.

b.

Work in process inventory, July 1…………………………………
Cost of direct materials used in production……………………… $67,200
Direct labor………………………………………………………………
88,000
44,800
Factory overhead………………………………………………………
Total manufacturing costs incurred during July…………………
Total manufacturing costs…………………………………………
Less work in process inventory, July 31……………………………
Cost of goods manufactured…………………………………………

$ 32,800

Finished goods inventory, July 1…………………………………
Cost of goods manufactured…………………………………………
Cost of finished goods available for sale…………………………
Less finished goods inventory, July 31……………………………
Cost of goods sold……………………………………………………

$ 37,600
203,200

200,000
$232,800
29,600

$203,200

$240,800
27,200
$213,600


EXERCISES
Ex. 18–1
a.
b.
c.
d.

Direct materials cost
Factory overhead cost
Factory overhead cost
Direct materials cost

e.
f.
g.
h.

Direct labor cost
Direct materials cost
Direct materials cost
Factory overhead cost

f.

g.
h.
i.
j.

Direct materials cost
Factory overhead cost
Direct labor cost
Direct materials cost
Factory overhead cost

j.
k.
l.
m.
n.
o.
p.
q.

Period cost
Period cost
Product cost
Product cost
Period cost
Product cost
Product cost
Product cost

e.

f.
g.

conversion
costs
cost object

Ex. 18–2
a.
b.
c.
d.
e.

Factory overhead cost
Direct labor cost
Factory overhead cost
Direct materials cost
Factory overhead cost

Ex. 18–3
a, c, e, g, h

Ex. 18–4
a.
b.
c.
d.
e.
f.

g.
h.
i.

Period cost
Product cost
Period cost
Period cost
Period cost
Product cost
Product cost
Product cost
Period cost

Ex. 18–5
a.
b.
c.
d.

improve
decreases
period
work in process inventory


Ex. 18–6
a.
b.
c.

d.

product
operational
improving
prime

e.
f.
g.

materials inventory
indirect
plant depreciation

g.
h.
i.
j.
k.
l.

indirect
indirect
direct
indirect
direct
indirect

Ex. 18–7

a.
b.
c.
d.
e.
f.

direct
indirect
indirect
indirect
indirect
direct

Ex. 18–8
1.

The maintenance salaries and indirect materials should be included as factory
overhead.

2.

The factory overhead incorrectly includes the following items: sales salaries,
promotional expenses, corporate office insurance and property taxes, and corporate
office depreciation. These items should not be included as factory overhead. The
corrected report is as follows:
FARRAR INC.
Manufacturing Costs
For the Quarter Ended June 30, 2014
Cost of direct materials used in production

Direct labor
Factory overhead:
Maintenance salaries
Indirect materials
Supervisor salaries
Heat, light, and power
Insurance and property taxes—plant
Depreciation—plant and equipment
Total

$ 612,500
531,250
$ 93,750
62,500
575,000
156,250
168,750
137,500

1,193,750
$2,337,500


Ex. 18–9
CHATERJEE MANUFACTURING COMPANY
Income Statement
For the Month Ended January 31, 2014

a.

Revenues
Cost of goods sold

$450,000
280,000

Gross profit
Operating expenses:
Selling expenses
Administrative expenses

$170,000
$65,400
54,600

Total operating expenses
Net income
b.

120,000
$ 50,000

Inventory balances on January 31, 2014:
Materials ($95,200 – $67,200)……………………………………………………… $28,000
Work in Process ($67,200 + $128,800 + $151,200 – $303,800)………………… $43,400
Finished Goods ($303,800 – $280,000)…………………………………………… $23,800

Ex. 18–10
BERENTE COMPANY
Balance Sheet

December 31, 2014
Current assets:
Cash
Accounts receivable
Inventories:
Finished goods
Work in process
Materials
Supplies
Prepaid insurance
Total current assets

$ 89,600
84,000
$ 32,200
126,000
70,000

228,200
57,040
22,000
$480,840


Ex. 18–11
Materials inventory, April 1, 2014………………………………………………………
Add materials purchased during April………………………………………………
Cost of materials available for use……………………………………………………
Less materials inventory, April 30, 2014………………………………………………
Cost of direct materials used in production……………………………………

$ 310,000
920,000
$1,230,000
280,000
$ 950,000

Ex. 18–12
a.
b.
c.
d.
e.
f.

$153,600
$124,800
$208,800
$194,400
$8,400
$7,200

($19,200 + $134,400)
($153,600 – $28,800)
($252,000 – $43,200)
($252,000 – $57,600)
($58,800 – $50,400)
($58,800 – $51,600)

Ex. 18–13

Work in process inventory, January 1, 2014………………………
Add manufacturing costs incurred during January:
Cost of direct materials used in production……………………
$325,000
Direct labor……………………………………………………………
280,000
195,000
Factory overhead……………………………………………………
Total manufacturing costs incurred………………………………
Total manufacturing costs……………………………………………
Less work in process inventory, January 31, 2014…………………
Cost of goods manufactured…………………………………………
Ex. 18–14
a.
b.
c.
d.
e.
f.

$334,800
$272,400
$183,600
$170,400
$36,800
$17,600

($52,800 + $282,000)
($334,800 – $62,400)
($223,200 – $39,600)

($223,200 – $52,800)
($360,000 – $323,200)
($360,000 – $342,400)

$135,000

800,000
$935,000
142,000
$793,000


Ex. 18–15
TIWANA MANUFACTURING COMPANY
Statement of Cost of Goods Manufactured
For the Month Ended May 31, 2014

a.

Work in process inventory, May 1, 2014
Direct materials:
Materials inventory, May 1, 2014
Purchases
Cost of materials available for use
Less materials inventory, May 31, 2014

$ 142,800
$210,000
403,200
$613,200

184,800

Cost of direct materials used in
production

$428,400

Direct labor

Factory overhead:
Indirect labor
Machinery depreciation

378,000

$ 40,320
24,000

Heat, light, and power

8,400

Supplies

6,720

Property taxes
Miscellaneous cost
Total factory overhead

5,880
10,920
96,240

Total manufacturing costs incurred during May

b.

902,640

Total manufacturing costs
Less work in process inventory, May 31, 2014

$1,045,440
159,600

Cost of goods manufactured

$ 885,840

Finished goods inventory, May 1, 2014…………………………………………
Cost of goods manufactured………………………………………………………
Cost of finished goods available for sale…………………………………………
Less finished goods inventory, May 31, 2014…………………………………
Cost of goods sold…………………………………………………………………

$109,200
885,840
$995,040
126,000

$869,040


Ex. 18–16
a.

b.

c.

Finished goods inventory, July 1, 2014……………………………
Cost of goods manufactured…………………………………………
Cost of finished goods available for sale…………………………
Less finished goods inventory, July 31, 2014……………………
Cost of goods sold………………………………………………………

$ 81,000
360,000

Sales………………………………………………………………………
Cost of goods sold………………………………………………………
Gross profit………………………………………………………………

$729,000
366,000

Gross profit……………………………………………………………
Operating expenses:
Selling expenses…………………………………………………… $114,750
60,750

Administrative expenses…………………………………………
Total operating expenses………………………………………
Net income………………………………………………………………

$363,000

$441,000
75,000
$366,000

$363,000

175,500
$187,500

Ex. 18–17
a.

b.

c.

d.

Sales………………………………………………………………………
Less gross profit…………………………………………………………
Cost of goods sold………………………………………………………

$792,000
462,000

Cost of goods manufactured…………………………………………
Less cost of goods sold………………………………………………
Finished goods inventory……………………………………………

$396,000
330,000

Purchased materials…………………………………………………
Less materials inventory………………………………………………
Direct materials cost……………………………………………………

$244,200
33,000

Total manufacturing costs……………………………………………
Less: Direct materials……………………………………………… $211,200
Factory overhead costs (indirect labor
and factory depreciation)*………………………………… 198,000
Direct labor cost………………………………………………………

$455,400

$330,000

$ 66,000

$211,200

409,200

$ 46,200

* $171,600 + $26,400
e.

Total manufacturing costs……………………………………………
Less cost of goods manufactured……………………………………
Work in process inventory……………………………………………

$455,400
396,000
$ 59,400


PROBLEMS
Prob. 18–1A
Product Costs

Cost

Direct
Materials
Cost

Direct
Labor
Cost

Period Costs
Factory

Overhead
Cost

c

X
X
X
X

d
e
f

X
X

g
h

X
X
X

i
j
k

X
X

l
m
n

X
X
X

o

X
X

p
q

X

r
s

X
X

t

X

u

v
w
x
y

z

Administrative
Expense

X

a
b

Selling
Expense

X
X
X
X
X


Prob. 18–2A
Product Costs

Cost

Direct
Materials
Cost

Direct
Labor
Cost

Period Costs

Factory
Overhead
Cost

a

X

b
c

X

Selling
Expense

X
X

d
e

X
X

f

X

g

X

h
i

X
X
X

j
k

X

l
m

X

X

n
o

p
q
r
s
t
u

X
X
X
X
X
X
X
X

v
w

x

Administrative
Expense

X

X


Prob. 18–3A
1.

2.

The most logical definition for the final cost object would be the patient. The
reason is that the cost can be accumulated at the patient level for billing and
insurance reimbursement purposes.
Cost

Direct

X
X
X
X

a
b
c
d
e
f
g
h

X

X
X
X
X
X
X
X
X

i
j
k
l
m
n

X
X

o
p
q
r
s
t
u

Indirect

X

X
X
X
X
X


Prob. 18–4A
1.

Prius Company
a.
b.
c.
d.
e.
f.

$240,680
$2,138,400
$2,224,800
$2,203,200
$1,936,800
$1,396,800

($712,800 + $280,280 – $752,400)
($752,400 + $1,058,400 + $327,600)
($2,138,400 + $540,000 – $453,600)
($475,200 + $2,224,800 – $496,800)
($4,140,000 – $2,203,200)

($1,936,800 – $540,000)

Volt Company
a.
b.
c.
d.
e.
f.

$339,000
$516,000
$453,000
$177,000
$624,000
$240,000

($177,000 + $342,000 – $180,000)
($1,035,000 – $339,000 – $180,000)
($1,477,500 – $1,024,500)
($1,024,500 + $204,000 – $1,051,500)
($1,675,500 – $1,051,500)
($624,000 – $384,000)
VOLT COMPANY

2.

Statement of Cost of Goods Manufactured
For the Month Ended December 31, 2014
Work in process inventory, December 1, 2014

$ 442,500

Direct materials:
Materials inventory, December 1, 2014
Purchases

$177,000

Cost of materials available for use
Less materials inventory, December 31, 2014

$519,000

Cost of direct materials used in production
Direct labor
Factory overhead
Total manufacturing costs incurred during December

342,000
180,000
$339,000
516,000
180,000
1,035,000

Total manufacturing costs
Less work in process inventory, December 31, 2014

$1,477,500

Cost of goods manufactured

$1,024,500

453,000


Prob. 18–4A (Concluded)
VOLT COMPANY
Income Statement
For the Month Ended December 31, 2014

3.

Sales

$1,675,500

Cost of goods sold:
Finished goods inventory, December 1, 2014
Cost of goods manufactured

$

Cost of finished goods available for sale
Less finished goods inventory, December 31, 2014

$1,228,500
177,000

Cost of goods sold
Gross profit

Operating expenses
Net income

204,000

1,024,500

1,051,500
$ 624,000

240,000
$ 384,000


Prob. 18–5A
THE LUCILLE CORPORATION

1.

Statement of Cost of Goods Manufactured
For the Year Ended December 31, 2014
Work in process inventory, January 1, 2014

$ 526,500

Direct materials:

Materials inventory, January 1, 2014
Purchases

$292,500

Cost of materials available for use
Less materials inventory, December 31, 2014

$842,400

549,900
364,000

Cost of direct materials used in
production

$478,400
559,000

Direct labor
Factory overhead:
Indirect labor

$ 65,620

Depreciation expense—factory equipment

46,800

Heat, light, and power—factory

18,720

Property taxes—factory

15,210

Rent expense—factory

25,740

Supplies—factory
Miscellaneous cost—factory

12,870

Total factory overhead
Total manufacturing costs incurred during
the year

7,956
192,916
1,230,316

Total manufacturing costs
Less work in process inventory,
December 31, 2014

$1,756,816

Cost of goods manufactured

$1,262,816

494,000


Prob. 18–5A (Concluded)
THE LUCILLE CORPORATION

2.

Income Statement
For the Year Ended December 31, 2014
$2,574,000

Sales
Cost of goods sold:
Finished goods inventory, January 1, 2014
Cost of goods manufactured

$ 507,000
1,262,816
$1,769,816

Cost of finished goods available for sale
Less finished goods inventory,
December 31, 2014

480,000

1,289,816

Cost of goods sold

$1,284,184

Gross profit
Operating expenses:

Administrative expenses:
Office salaries expense
Depreciation expense—office
equipment
Property taxes—office building
Selling expenses:
Advertising expense
Sales salaries expense
Total operating expenses
Net income

$191,750
35,100
31,590

$ 258,440

$247,000
315,900

562,900

821,340
$ 462,844


Prob. 18–1B
Product Costs

Cost
a

b

Direct
Materials
Cost

Direct
Labor
Cost

Period Costs

Factory
Overhead
Cost

Selling
Expense

X

X
X
X
X

c
d
e

X

f

X
X

g
h

X

i

X

j
k
l

X

X
X

m

X

n

X

o

p

X
X

q
r
s

X
X
X

t
u

X

X

v
w

Administrative
Expense

X
X

x
y

z

X*
X

*Item y might also be classified as direct material cost if the cost is significant, since it
can be directly traced to the end product.


Prob. 18–2B
Product Costs

Cost

Direct
Materials

Cost

Direct
Labor
Cost

Period Costs

Factory
Overhead
Cost

X

b
c

f

X
X
X
X
X
X

g
h

X

i
j

X
X

k

X

l

X
X

m
n

X

o

X
X
X

p
q
r

s
t

X
X
X

u
v
w

x

Administrative
Expense

X

a

d
e

Selling
Expense

X
X
X

CHAPTER 18

Managerial Accounting Concepts and Principles

Prob. 18–3B
1.

2.

The most logical definition for the final cost object would be a hotel guest.
Guests consume services such as a meal, a night’s stay in a hotel room, room
service,
a telephone call, etc.
Cost

Direct

a

X

b
c
d
e

X
X
X

X
X

f
g
h

X
X
X

i
j
k
l

X
X
X
X
X
X
X

m
n
o
p
q
r

s
t
u
v
w

Indirect

X
X
X
X
X
X
X


CHAPTER 18

Managerial Accounting Concepts and Principles

Prob. 18–4B
1.

On Company
a.
b.
c.
d.
e.

f.

$30,800
$854,000
$800,800
$827,400
$299,600
$182,000

($282,800 + $65,800 – $317,800)
($317,800 + $387,800 + $148,400)
($854,000 + $119,000 – $172,200)
($224,000 + $800,800 – $197,400)
($1,127,000 – $827,400)
($299,600 – $117,600)

Off Company
a.
b.
c.
d.
e.
f.

$581,560
$685,720
$195,300
$256,060
$399,280
$234,360

($685,720* + $91,140 – $195,300)
($1,519,000 – $256,060 – $577,220)
($1,727,320 – $1,532,020)
($1,532,020 + $269,080 – $1,545,040)
($1,944,320 – $1,545,040)
($399,280 – $164,920)

* Note: The student must calculate part (b) prior to calculating part (a), since
the solution to part (b) is needed as an input to part (a).
ON COMPANY

2.

Statement of Cost of Goods Manufactured
For the Month Ended December 31, 2014

$119,000

Work in process inventory, December 1, 2014
Direct materials:
Materials inventory, December 1, 2014
Purchases
Cost of materials available for use
Less materials inventory, December 31, 2014
Cost of direct materials used in production
Direct labor
Factory overhead
Total manufacturing costs incurred during
December

Total manufacturing costs
Less work in process inventory, December 31, 2014
Cost of goods manufactured

$ 65,800
282,800
$348,600
30,800
$317,800
387,800
148,400
854,000
$973,000
172,200
$800,800


Prob. 18–4B (Concluded)
ON COMPANY

3.

Income Statement
For the Month Ended December 31, 2014
Sales

$1,127,000

Cost of goods sold:
Finished goods inventory, December 1, 2014

Cost of goods manufactured

$

Cost of finished goods available for sale
Less finished goods inventory, December 31, 2014

$

224,000
800,800

1,024,800
197,400

Cost of goods sold
Gross profit

827,400
$

Operating expenses
Net income

299,600

117,600
$

182,000

Prob. 18–5B
SHANIKA COMPANY

1.

Statement of Cost of Goods Manufactured
For the Year Ended December 31, 2014
Work in process inventory, January 1, 2014

$109,200

Direct materials:
Materials inventory, January 1, 2014
Purchases

$ 77,350

Cost of materials available for use
Less materials inventory, December 31, 2014

$200,850

123,500
95,550

Cost of direct materials used in production
Direct labor

$105,300
186,550

Factory overhead:
Indirect labor
Depreciation expense—factory equipment

$ 23,660
14,560

Heat, light, and power—factory

5,850

Property taxes—factory

4,095

Rent expense—factory

6,825

Supplies—factory
Miscellaneous cost—factory

3,250

Total factory overhead

4,420

62,660

Total manufacturing costs incurred during the year

354,510

Total manufacturing costs
Less work in process inventory, December 31, 2014

$463,710

Cost of goods manufactured

$367,510

96,200


Prob. 18–5B (Concluded)
SHANIKA COMPANY

2.

Income Statement
For the Year Ended December 31, 2014
Sales

$864,500

Cost of goods sold:

Finished goods inventory, January 1, 2014
Cost of goods manufactured

$113,750

Cost of finished goods available for sale
Less finished goods inventory,
December 31, 2014

$481,260

367,510

100,100

Cost of goods sold

381,160
$483,340

Gross profit
Operating expenses:
Administrative expenses:
Office salaries expense
Depreciation expense—office equipment
Property taxes—headquarters building
Selling expenses:
Advertising expense
Sales salaries expense
Total operating expenses

Net income

$ 77,350
22,750
13,650

$113,750

$ 68,250
136,500

204,750
318,500
$164,840


CASES & PROJECTS
CP 18–1
Although Fred may appear to have technically complied with company policy, his
computation of the cost of lumber is unethical. Fred has created an apparent
conflict-of-interest situation. Thus, although it is appropriate for Fred to take
advantage of H. Jeckel’s policy of allowing employees to purchase materials at
cost, he should have had someone else (such as his supervisor) determine the
amount that he owed for the lumber. Clearly, selecting the lowest price has opened
the door for criticism.

CP 18–2
The objectives of managerial accounting and financial accounting are different;
therefore, the vice president’s statement is very incomplete. In one sense, the
statement may be true at only very high levels in the organization. For example,

the division manager may be evaluated on the basis of financial accounting profit.
Thus, the divisional manager would be evaluated by central management in nearly
the same way that central management is evaluated by shareholders.
Lower in the organization, the financial concerns of the stockholder begin to
diverge significantly from the day-to-day operating decision needs of the manager.
As such, the statement becomes very inaccurate the closer one gets to the actual
operations. Operational performance measures will focus on cost, quality, delivery
time, equipment availability, inventory levels, scrap, waste, and efficiency. This list
is much broader and more detailed than the financial statement numbers provided
to the stockholders.
The stockholders’ interest in profit is related to increasing shareholder value.
Managers must increase long-term shareholder value by engaging in strategies
that enhance people, product, and processes in the delivery of value to customers.
These strategies can be measured by both financial and nonfinancial means.
Therefore, it is not surprising to see a much broader set of objective and
subjective measures used internally in the organization to guide strategy and
operations.


CP 18–3
1.

The vice president of the Information Systems Division can use managerial
accounting information in a number of different ways. For example, the vice
president might use these data to determine resources that will be required
based on a projection of amount and type of work required for the next period.
Managerial accounting information would also be used to determine whether
the bank should lease additional processing capacity or purchase a new central
processing unit. Additionally, managerial accounting information could also be
used to achieve better control over information systems activities by evaluating

the costs of ongoing operations, based on the demand for information services.

2.

The hospital administrator can use managerial accounting information in a
number of different ways. One way is for cost planning and control. The
administrator could use managerial information to keep costs commensurate
with services provided and to plan for staffing and nursing levels. This
information can be used to determine the cost of various services, and thereby
in making decisions with respect to the amount of service that is appropriate
in each particular case. The administrator can also use managerial accounting
information to determine if the hospital’s costs are being covered by fixed
payments from Medicare, Medicaid, or insurance. If not, the administrator needs
to know the source of the cost overruns. Does the hospital allow too many
procedures? Require longer bed days? Have resources that are underutilized
(e.g., a cancer wing with three patients)?

3.

The CEO of the food company will use managerial accounting information to
support the control of the three divisions. Each of the three divisions will be
subject to a number of financial goals. The CEO also needs to support
strategic decision making. In this regard, the CEO needs managerial
accounting information on the profitability of various product families,
profitability of different regions, and profitability of various customer
segments. This information can guide the CEO in allocating future effort
and resources.

4.

The copy shop manager needs fairly simple managerial accounting information.
At the most basic level, the copy shop manager needs to know the costs of
performing various copy tasks, such as one-sided copy, two-sided copy,
collating, binding, etc. These activities will have some direct costs, such as
paper, and some indirect costs, such as copy machine time. The manager will
need to estimate the impact of both of these costs in order to price the various
copy jobs to the public. Managerial accounting information will include the cost
details necessary to price the various copy shop services at a level to cover
equipment costs, lease expenses, and profit.