CH.14

Question 1

What is managerial accounting?

Answer 1

It is accounting information provided to external users can be nonfinancial or financial. Will be provided to managers.

Question 2

What are direct costs and how are they broken down?

Answer 2

Direct: Can be easily traced to a specific object. The cost of making a book and the paper that is needed to produce that book. They are broken into two categories…

-Direct Material: Materials that can be traced throughout the manufacturing process until the goods are completed

-Direct Labor: The cost of wages/salaries for direct labor that can be traced throughout the manufacturing process until the goods are completed. An example of this would be wages paid to a bike assembler

Question 3

What are indirect costs and how are they broken up?

Answer 3

-Indirect Costs: Not easily traced to a specific object. (Quality assurance)

-They are broken up into factory overhead
-Factory Overhead or Manufacturing Overhead: All manufacturing costs that aren’t direct materials/labor and won’t be able to be traced to those finished goods.

Indirect labor: Maintenance workers
Indirect material- Screws, nuts, and staples
Indirect other costs: Rent, insurance, utilities