ch 14 powerpoint Flashcards
Managerial accounting
provides financial and
nonfinancial information for managers of an
organization and other decision makers.
M.A. in planning
Develop new products?
* Expand into new markets?
* Build a new factory?
m.a. in control
Are costs too high?
* Are services profitable?
* Are customers satisfied?
Diff between managerial and financial accounting
- users and decision makers
- purpose of information
- flexibility of reporting
etc…
What is an internal control system?
policies and procedures used to:
- Ensure reliable accounting
- Protect assets
- Uphold company policies
- Promote efficient operations
The Institute of Management Accountants has issued a code of ethics to help accountants involved in solving ethical dilemmas.
managerial accountants must
Have knowledge of Financial accounting
* Have knowledge of Managerial accounting
* Have strong communication skills
* Have knowledge of how businesses work
* Be a team player
careers in m.a.
top level
senior management
etc..
Following are aspects of accounting information.
Classify each as pertaining more to financial accounting or to managerial accounting.
- Primary users are external
- Includes more nonmonetary information
- Focuses more on the future
- Uses many estimates and projection
- Controlled by GAAP
- Used in managers’ planning decisions
- Focuses on the whole organization
- Not constrained by GAAP
What is cost behavior?
refers to how a cost
will react to changes in the level of
business activity.
What is total fixed costs?
do not change
when activity changes
What is total variable costs?
change in proportion to activity changes
2 types of cost classifications
direct vs indirect
What is direct costs?
Costs traceable to a single cost object.
* Examples: material and labor cost for a
product
What is indirect costs?
Costs that cannot be traced to a single cost
object.
* Example: maintenance expenditure benefiting
two or more departments
What is product cost?
-Direct Labor
* Direct Material
* Manufacturing Overhead
What are period costs?
-expenses not attached to the product
- Selling costs are incurred to obtain orders and
to deliver finished goods to customers. - Administrative costs are non-manufacturing
costs of staff support and administrative
functions.
How do period and product cost affect financial statements?
- period costs(expenses) affect income statement (operating expenses)
- product costs(inventory) affect
-income statement (costs of goods sold) bc (invent. sold)
&
-balance sheet (inventory) bc of (invent. NOT sold)
Exs of variable or fixed.
exs of direct or indirect
exs of product or period
The cost concepts described are generally
applicable to service organizations
—-For example, the cost of beverages for
passengers of Southwest Airlines is a variable
cost based on number of passengers
Direct material or Direct labor or product costs or period costs
- Plastic board used to mount the chip
- Advertising costs
- Factory maintenance workers’ salaries
- Real estate taxes paid on the sales office
- Real estate taxes paid on the factory
- Factory supervisor salary
- Depreciation on factory equipment
- Assembly worker hourly pay to make chips
Direct materials
costs are the expenditures for
direct materials that are separately and readily
traced through the manufacturing process to
finished goods
Example:
Steel used in the frame of a mountain bike.
Direct labor
costs are the wages and salaries for
direct labor that are separately and readily
traced through the manufacturing process to
finished goods
Example:
Wages paid to a mountain bike assembly
worker.
Factory overhead
consists of all manufacturing
costs that are not direct materials or direct
labor and the costs cannot be separately or
readily traced to finished goods.
Examples:
* Indirect labor – maintenance.
* Indirect material – cleaning supplies.
* Factory utility costs.
* Supervisory costs
Manufacturing costs
- Prime Cost:
– Direct Material
– Direct Labor - Conversion Cost
– Direct Labor
– Manufacturing Overhead
Reporting Manufacturing Activities
- Merchandisers . . .
– Buy finished goods.
– Sell finished goods. - Manufacturers . . .
– Buy raw materials.
– Produce and sell finished goods.
