Charles Maxwell is starting a cheesecake bakery, Able Baker Charlie Company, to produce and sell different flavored cheesecakes to restaurants and the general public. He has just begun his study of accounting, and is a bit confused about the many types of reports he has read about and how they will help him run his business. He asks you to help him clarify what the differences between managerial accounting and financial accounting are. He’s also wondering how to set up his inventory, how to classify the costs of his business, and how to fill in some missing information.

Managerial vs. Financial

Select whether the following characteristics are most often associated with managerial accounting or financial accounting.

Charles has provided some of the costs he expects to incur as follows. Decide on the classifications that could be applied to each of these costs using the table provided. The cost object in each case is the cheesecake.

(Select "Yes" or "No" from the below dropdowns.)

harles found some sample income statements and balance sheets on the Internet, and asked which of them might be most appropriate for a manufacturing business like his. Review income statements A and B, and balance sheets C and D. Determine which income statement and balance sheet would be most appropriate for a manufacturing business like Able Baker Charlie Company.

Income Statement A

Income Statement B

Balance Sheet C

Balance Sheet D

Which income statement is most appropriate for a manufacturing business?

Income statement A

Which balance sheet is most appropriate for a manufacturing business?

Balance sheet D

At the end of February, after the second month of operations of Able Baker Charlie Company, Charles shows you the data he’s collected, but he was unable to figure out some of the amounts. Review the following data and fill in the missing amounts on the chart for Able Baker Charlie Company. Note: It may be helpful to use T accounts to map the flow of the amounts through the manufacturing accounts and solve for the missing dollar values. It may also be helpful to review the steps for determining the cost of materials used, total manufacturing cost incurred, and cost of goods manufactured.

1. Mastery Problem: Introduction to Managerial Accounting

   Able Baker Charlie Company

   Charles Maxwell is starting a cheesecake bakery, Able Baker Charlie Company, to produce and sell different flavored cheesecakes to restaurants and the general public. He has just begun his study of accounting, and is a bit confused about the many types of reports he has read about and how they will help him run his business. He asks you to help him clarify what the differences between managerial accounting and financial accounting are. He’s also wondering how to set up his inventory, how to classify the costs of his business, and how to fill in some missing information.

   Managerial vs. Financial

   Select whether the following characteristics are most often associated with managerial accounting or financial accounting.

   Primarily used for internal decision making
   Generally Accepted Accounting Principles (GAAP) must be used
   Prepared statements usually pertain to the company as a whole rather than individual departments or products
   Information provided will often be subjective, such as estimated future results
   Often prepared on an as-needed basis rather than at fixed intervals

   Cost Classification

   Charles has provided some of the costs he expects to incur as follows. Decide on the classifications that could be applied to each of these costs using the table provided. The cost object in each case is the cheesecake.

   (Select "Yes" or "No" from the below dropdowns.)

   Cost	Product Cost	Period Cost	Direct Materials	Direct Labor	Factory Overhead	Selling Expense	Administrative Expense	Direct Cost	Indirect Cost	Prime Cost	Conversion Cost
   Eggs used to make cheesecakes
   Baker’s wages
   Delivery driver wages
   Depreciation of office computers
   Power to run the cheesecake ovens
   President’s salary
   Sales commissions
   Factory supervisor salary

   Financial Statements

   Charles found some sample income statements and balance sheets on the Internet, and asked which of them might be most appropriate for a manufacturing business like his. Review income statements A and B, and balance sheets C and D. Determine which income statement and balance sheet would be most appropriate for a manufacturing business like Able Baker Charlie Company.

   Income Statement A

   Sample Company A Income Statement For the Year Ended December 31, 20Y8
   Sales		$42,000
   Finished goods inventory, January 1, 20Y8	$5,250
   Cost of goods manufactured	6,400
   Cost of finished goods available for sale	$11,650
   Finished goods inventory, December 31, 20Y8	(400)
   Cost of goods sold		(11,250)
   Gross profit		$30,750
   Operating expenses:
   Selling expenses	$6,400
   Administrative expenses	5,250
   Total operating expenses		(11,650)
   Net income		$19,100

   Income Statement B

   Sample Company B Income Statement For the Year Ended December 31, 20Y8
   Sales		$42,000
   Beginning inventory	$5,250
   Net purchases	6,400
   Inventory available for sale	$11,650
   Ending inventory	(400)
   Cost of goods sold		(11,250)
   Gross profit		$30,750
   Operating expenses:
   Selling expenses	$6,400
   Administrative expenses	5,250
   Total operating expenses		(11,650)
   Net income		$19,100

   Balance Sheet C

   Sample Company C Balance Sheet December 31, 20Y8
   Assets
   Cash		$20,800
   Accounts receivable (net)		10,000
   Inventory		6,000
   Supplies		2,100
   Land		17,000
   Total assets		$55,900
   Liabilities
   Accounts payable		$17,800
   Stockholders’ Equity
   Common stock	$19,000
   Retained earnings	19,100
   Total stockholders’ equity		38,100
   Total liabilities and stockholders’ equity		$55,900

   Balance Sheet D

   Sample Company D Balance Sheet December 31, 20Y8
   Assets
   Cash		$20,800
   Accounts receivable (net)		10,000
   Inventory:
   Direct materials	$2,500
   Work in process	1,500
   Finished goods	2,000
   Total inventory		6,000
   Supplies		2,100
   Land		17,000
   Total assets		$55,900
   Liabilities
   Accounts payable		$17,800
   Stockholders’ Equity
   Common stock	$19,000
   Retained earnings	19,100
   Total stockholders’ equity		38,100
   Total liabilities and stockholders’ equity		$55,900

   Which income statement is most appropriate for a manufacturing business?

   Which balance sheet is most appropriate for a manufacturing business?

   Costs and Balances

   At the end of February, after the second month of operations of Able Baker Charlie Company, Charles shows you the data he’s collected, but he was unable to figure out some of the amounts. Review the following data and fill in the missing amounts on the chart for Able Baker Charlie Company. Note: It may be helpful to use T accounts to map the flow of the amounts through the manufacturing accounts and solve for the missing dollar values. It may also be helpful to review the steps for determining the cost of materials used, total manufacturing cost incurred, and cost of goods manufactured.

   Data for February
   Decrease in materials inventory	$2,700
   Materials inventory on Feb. 28	50% of materials inventory on Jan. 31
   Direct materials purchased	$12,300
   Direct materials used	3 times the direct labor incurred
   Total manufacturing costs incurred in period	$28,000
   Total manufacturing costs incurred in period	70% of Cost of Goods Manufactured
   Total manufacturing costs incurred in period	$7,000 less than Cost of Goods Sold

   	Account Balances
   Account	Jan. 31	Feb. 28	Costs Incurred
   Materials Inventory	$	$	Direct Materials Used	$
   Work in Process Inventory	27,000		Direct Labor Incurred
   Finished Goods Inventory		16,000	Factory Overhead Incurred
   			Cost of Goods Sold

Charles Maxwell is starting a cheesecake bakery, Able Baker Charlie Company, to produce and sell different flavored cheesecakes to restaurants and the general public. He has just begun his study of accounting, and is a bit confused about the many types of reports he has read about and how they will help him run his business. He asks you to help him clarify what the differences between managerial accounting and financial accounting are. He’s also wondering how to set up his inventory, how to classify the costs of his business, and how to fill in some missing information.

Managerial vs. Financial

Select whether the following characteristics are most often associated with managerial accounting or financial accounting.

Charles has provided some of the costs he expects to incur as follows. Decide on the classifications that could be applied to each of these costs using the table provided. The cost object in each case is the cheesecake.

(Select "Yes" or "No" from the below dropdowns.)

harles found some sample income statements and balance sheets on the Internet, and asked which of them might be most appropriate for a manufacturing business like his. Review income statements A and B, and balance sheets C and D. Determine which income statement and balance sheet would be most appropriate for a manufacturing business like Able Baker Charlie Company.

Income Statement A

Income Statement B

Balance Sheet C

Balance Sheet D

Which income statement is most appropriate for a manufacturing business?

Income statement A

Which balance sheet is most appropriate for a manufacturing business?

Balance sheet D

At the end of February, after the second month of operations of Able Baker Charlie Company, Charles shows you the data he’s collected, but he was unable to figure out some of the amounts. Review the following data and fill in the missing amounts on the chart for Able Baker Charlie Company. Note: It may be helpful to use T accounts to map the flow of the amounts through the manufacturing accounts and solve for the missing dollar values. It may also be helpful to review the steps for determining the cost of materials used, total manufacturing cost incurred, and cost of goods manufactured.

The table to the right gives the per capita gross national product and the per capita expenditure on defense for eight developed countries. Gross domestic product​ (GDP) is a measure of the total economic output of a country in monetary terms. Per capita GDP is the GDP averaged over every person in the country. Complete parts a though c.

H            45,758                          1700

A. Make a scatter diagram for the data.

A.

200005500002000GDPDefense Spending

A scatterplot with a horizontal axis labeled G D P from 20000 to 55000 in increments of 5000 and a vertical axis labeled Defense Spending from 0 to 2000 in increments of 200 contains 8 points. (37500, 900); (32500, 800); (35000, 500); (35000, 1300); (35000, 300); (47500, 1200); (35000, 1000); (45000, 1700). All coordinates are approximate.

B.

200005500002000GDPDefense Spending

A scatterplot with a horizontal axis labeled G D P from 20000 to 55000 in increments of 5000 and a vertical axis labeled Defense Spending from 0 to 2000 in increments of 200 contains 8 points. (32500, 800); (32500, 650); (35000, 600); (35000, 1450); (35000, 100); (35000, 1400); (35000, 1000); (35000, 1700). All coordinates are approximate.

C.

200005500002000GDPDefense Spending

A scatterplot with a horizontal axis labeled G D P from 20000 to 55000 in increments of 5000 and a vertical axis labeled Defense Spending from 0 to 2000 in increments of 200 contains 8 points. (37500, 1700); (32500, 500); (35000, 1000); (35000, 800); (35000, 900); (47500, 300); (35000, 1300); (45000, 1300). All coordinates are approximate.

D.

200005500002000GDPDefense Spending

State whether the two variables appear to be​ correlated, and if​ so, state whether the correlation is​ positive, negative,​ strong, or weak.

A.

The two variables appear to be correlated and the correlation is strong and positive.

B.

The two variables appear to be correlated and the correlation is weak and negative.

C.

The two variables appear to be correlated and the correlation is weak and positive.

D.

The two variables appear to be correlated and the correlation is strong and negative.

E.

The two variables do not appear to be correlated.

C. Suggest a reason for the correlation or lack of correlation.

A.

The higher a​ country's per capita​ GDP, the less it can spend on per capita national defense.

B.

The higher a​ country's per capita​ GDP, the more it can spend on per capita national defense.

C.

There is no correlation between a​ country's per capita GDP and spending on per capita national defense.

Question 8: According to Classical economists, how are recessionary gaps and inflationary gaps eliminated?

A) Recessionary gaps are automatically eliminated as resource market and labor market surpluses put downward pressure on resource prices and wages, resulting in a rightward shift of the short-run aggregate supply curve.

Inflationary gaps are automatically eliminated as resource market and labor market shortages put upward pressure on resource prices and wages, resulting in a leftward shift of the short-run aggregate supply curve.


B) Recessionary gaps are automatically eliminated as resource market and labor market surpluses put downward pressure on resource prices and wages, resulting in a leftward shift of the short-run aggregate supply curve.

Inflationary gaps are automatically eliminated as resource market and labor market shortages put upward pressure on resource prices and wages, resulting in a rightward shift of the short-run aggregate supply curve.


C) Recessionary gaps are automatically eliminated as resource market and labor market surpluses put downward pressure on resource prices and wages, resulting in a rightward shift of the aggregate demand curve.

Inflationary gaps are automatically eliminated as resource market and labor market shortages put upward pressure on resource prices and wages, resulting in a leftward shift of the aggregate demand curve.


D) Recessionary gaps are automatically eliminated as resource market and labor market shortages put upward pressure on resource prices and wages, resulting in a leftward shift of the aggregate demand curve.

Inflationary gaps are automatically eliminated as resource market and labor market surpluses put downward pressure on resource prices and wages, resulting in a rightward shift of the aggregate demand curve.


Question #9: According to Keynes, how are recessionary gaps and inflationary gaps eliminated?

A) Recessionary gaps are eliminated by increases in aggregate spending, resulting in a rightward shift of the short-run aggregate supply curve. Inflationary gaps are eliminated by decreases in aggregate spending, resulting in a leftward shift of the short-run aggregate supply curve.

B) Recessionary gaps are eliminated by increases in aggregate spending, resulting in a leftward shift of the short-run aggregate supply curve. Inflationary gaps are eliminated by decreases in aggregate spending, resulting in a rightward shift of the short-run aggregate supply curve.

c) Recessionary gaps are eliminated by increases in aggregate spending, resulting in a rightward shift of the aggregate demand curve. Inflationary gaps are eliminated by decreases in aggregate spending, resulting in a leftward shift of the aggregate demand curve.

d) Recessionary gaps are eliminated by decreases in aggregate spending, resulting in a leftward shift of the aggregate demand curve. Inflationary gaps are eliminated by increases in aggregate spending, resulting in a rightward shift of the aggregate demand curve.

There is quite a bit of controversy over raising the Minimum Wage.

Proponents say it will bring the disadvantaged out of poverty, and increase spending which will be good for the economy.

Opponents say it will increase business costs that will in turn be passed on to consumers resulting in higher prices for goods and services, and will actually eliminate jobs.

What is your opinion on the Minimum Wage?

1. Find one article supporting increasing the Minimum Wage and copy and paste some of the more compelling arguments into the discussion.  Be sure to copy the source of your article.

2. Find another article that opposes increasing the Minimum Wage and copy and paste highlights of that article into this discussion.  Be sure to copy the source of your article into the post.

3. (300 words) Take a stand - are you in favor of raising the Minimum Wage, or opposed to it? Defend the arguments in the article you post, be it for or against raising the minimum wage. Also, dispute the argument for the other side - state WHY the article is incorrect.

Practice Questions The Azusa Better, Inc. has compiled the following information:

Begin End

Sales $3,813 $4,019

Long-term debt 1,555 899

Interest paid 121 143

Common stock 1,500 2,150

Accounts receivable 498 402

Depreciation 306 393

Cash 413 911

Inventory 1,516 1,533

Accounts payable 387 460

Retained earnings 1,700 1,550

Cost of goods sold 2,123 2,609

Net fixed assets 2,715 2,213

Other costs 391 514

Taxes paid 305 126

For End year, find the cash flow from assets, the cash flow to creditors and to stockholders.

Operating cash flow =

Change in net working capital =

Net capital spending =

Cash flow from assets =

Cash flow to creditors =

Addition to retained earnings =

Net income =

Dividends paid =

Cash flow to stockholders =

Cash flow from assets =

Short answer: Answer each of the questions in Section B. Answers should typically be no more than 2-3 sentences in length.

1. In the Mundell-Fleming model, what are the two endogenous variables that appear in the goods-market equilibrium condition (after substituting in all relevant functions, e.g., C = C(Y ? T), etc.)? How does this compare to the case in the (closed economy) IS-LM model? Be sure to explain the reason for any differences

2. Briefly describe how “debt deflation” works; that is, how this mechanism might cause an unexpected fall in the price level to produce a large fall in output (e.g., in the Great Depression).

3. Consider the IS-LM model, and suppose G increases by ?G units. In general equilibrium, does output increase by more, less, or the same amount as µG × ?G (where µG is the government spending multiplier)? Be sure to explain why this is the answer.

Question 2 ) Begin with the economy at full employment. Now assume that there is a decrease in Government purchases of goods and services. Analyze verbally the differing effects of this decrease in G in a i) Classical model and in a ii) fixed nominal wage Keynesian Model. Analyze what will be the effects on labor supply, labor demand, the level of unemployment, the level of prices, and the level of output? Show the effect in the labor market, the IS-LM model and the AS-AD model. In your answer explain fully why AD shifts or does not shift in each case. Explain both the short-run effect and the long-run effects in the Keynesian model.

Question 3) - Look at the variables you were asked to examine in question 2. What would happen to these variables in the Classical and Keynesian model had there been an increase in the money supply rather than a decrease in government spending as in question 2? Be sure to discuss the neutrality of money in your answer.

solve only question 3

1. As manager, you have decided that it’s time for some price discrimination to benefit your firm. There are typically three different “degrees” of price discrimination to choose from. Describe each “degree” of price discrimination, and then explain the specific “degree” you would use that has the greatest applicability to a range of goods that consumers typically purchase from your firm.

Again, no hedging your bet. :-) Select only one specific degree. Do not select more than one degree or combinations of degrees.

2. Being an intelligent manager of an electric utility company, you decide to take advantage of what’s called capacity utilization rates provided by the Federal Reserve to help you decide if more or less spending is a wise course to take. This month’s capacity utilization rate applicable to your company is 82%. Based on this information, what will you specifically advise the company to do in order to either expand or contract capacity? Explain why.