Chapter 1: Basics of Managerial Accounting Flashcards
What users and set of rules does managerial accounting have?
Internal users inside the company and does not follow any set of rules.
(Cost classification) What are period (non-inventoriable) costs?
Outside the factory (headquarters), expensed immediately on the income statement. Never on the balance sheet inventory acct.
Ex. (Marketing, utilities of hq)
(Cost classification) what are Product (inventoriable) costs?
Inside the factory. Included in the inventory acct on the balance sheet as an asset.
Inventory accts: Raw materials after purchase, Work in process during production, and finished goods acct when sold.
Once product is sold, total product costs are transferred to the COGS acct on the income statement.
What is a single step income statement?
Revenue
- Expenses
= Net income
Single step is more simple than multi step where it separates operating and non-operating income and expenses,
What is a multi step income statement?
Revenue
- COGS
= Gross profit
- Operating expenses
= Net income
separates operating and non-operating income and expenses for a more detailed view
What are variable costs
(Direct relationship) Total variable costs increase when more quantity is produced. They are tied to the amount produced. When quantity increases, variable costs also increase. When quantity decreases so do variable costs.
Cost per unit also remains the same no matter the quantity.
What are fixed costs
(Inverse relationship) When production increases, fixed costs per unit decrease. When production decreases, fixed costs per unit increase.
In total no matter production levels fixed cost remains the same.
What is the total product cost formula and examples?
(Raw) direct materials
Ex: leather & plastic
+
Direct labor
Ex: “Touch labor” & hourly employees on the factory line
+
Allocated manufacturing overhead
- Indirect material (glue, nails, staples)
- Indirect labor (supervisors salary)
- Other Exs: (Factory only) factory rent, property tax, utilities
