Chapter 1-1 - CPA Diary · PDF fileManagerial accounting practices Preview of Chapter. ......
-
Upload
nguyenngoc -
Category
Documents
-
view
238 -
download
3
Transcript of Chapter 1-1 - CPA Diary · PDF fileManagerial accounting practices Preview of Chapter. ......
Chapter 1-1
Chapter 1-2
CHAPTER CHAPTER 11
MANAGERIAL MANAGERIAL ACCOUNTINGACCOUNTING
Managerial Accounting, Fourth Edition
Chapter 1-3
1. Explain the distinguishing features of managerial accounting.
2. Identify the 3 broad functions of management.3. Define the 3 classes of manufacturing costs.4. Distinguish between product and period costs.5. Explain the differences between a merchandising
and a manufacturing income statement.
Study ObjectivesStudy ObjectivesStudy ObjectivesStudy Objectives
Chapter 1-4
Study ObjectivesStudy ObjectivesStudy ObjectivesStudy Objectives
6. Indicate how cost of goods manufactured is determined.
7. Explain the difference between a merchandising and a manufacturing balance sheet.
8. Identify trends in managerial accounting.
Chapter 1-5
Managerial Accounting BasicsCompare managerial and financial accounting,Management functions, Organizational structure, and Business ethics
Managerial Cost ConceptsManufacturing costsProduct vs. period costs
Manufacturing Costs in Financial StatementsIncome Statement and Balance SheetCost concepts – A review
Managerial Accounting TodayService industry trendsManagerial accounting practices
Preview of ChapterPreview of ChapterPreview of ChapterPreview of Chapter
Chapter 1-6
Managerial AccountingManagerial AccountingManagerial AccountingManagerial Accounting
Managerial Managerial AccountingAccounting
BasicsBasics
Managerial Managerial Cost Cost
ConceptsConcepts
Managerial Managerial Accounting Accounting
TodayToday
Comparing Comparing managerial and managerial and financial financial accountingaccountingManagement Management functionsfunctionsOrganizational Organizational structurestructureBusiness ethics Business ethics
Manufacturing Manufacturing costscostsProduct vs. Product vs. period costsperiod costs
ServiceService--industry industry trendstrendsManagerial Managerial accounting accounting practicespractices
Manufacturing Manufacturing Costs in Costs in Financial Financial
StatementsStatements
Income Income statementstatementBalance sheetBalance sheetCost concepts Cost concepts ––A review A review
Chapter 1-7
Managerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting Basics
A field of accounting that provides economic and A field of accounting that provides economic and financial information for managers and other financial information for managers and other
internal users.internal users.
Also calledAlso called Management AccountingManagement Accounting
Definition of Managerial Accounting
Chapter 1-8
Managerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting Basics
Managerial Accounting Activities
Explaining manufacturing and nonmanufacturing costs and how they are reported in the financial statements. (Chapter 1)
Computing the cost of providing a service or manufacturing a product. (Chapters 2, 3, and 4)
Determining the behavior of costs and expenses as activity levels change and analyzing cost-volume-profit relationships within a company. (Chapters 5 and 6)
Chapter 1-9
Managerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting Basics
Managerial Activities: Continued
Accumulating and presenting data for management decision making. (Chapter 7)
Determining prices for external and internal transactions. (Chapter 8)
Assisting management in profit planning and formalizing these plans in the form of budgets. (Chapter 9)
Chapter 1-10
Managerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting Basics
Managerial Activities: Continued
Providing a basis for controlling costs and expenses by comparing actual results with planned objectives and standard costs. (Chapters 10 and 11)
Accumulating and presenting data for capital expenditure decisions. (Chapter 12)
Chapter 1-11
Managerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting Basics
Applies to all types of business -Service, Merchandising, and Manufacturing
Applies to all forms of business organizations –Proprietorships, Partnerships, and Corporations
Applies to not-for-profit as well as profit-oriented companies
Distinguishing Features
LO 1 Explain the distinguishing features of managerial accounting.LO 1 Explain the distinguishing features of managerial accounting.
Chapter 1-12
Managerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting Basics
Changed role in collecting and reporting costs to management as a result of increasingly automated business environmentNow more responsible for strategic cost management –assisting in evaluating how well resources are employed by the company.
Teams with people from production, marketing, engineering, etc.
Aid in making critical strategic decisions
Distinguishing Features: Continued
LO 1 Explain the distinguishing features of managerial accounting.LO 1 Explain the distinguishing features of managerial accounting.
Chapter 1-13
Comparing Managerial and Financial AccountingComparing Managerial and Financial AccountingComparing Managerial and Financial AccountingComparing Managerial and Financial Accounting
Both managerial and financial accounting deal with economic events of a business –
Thus, interests overlap
Both require that economic events be quantified and communicated tointerested parties –
Determining unit cost is part of managerial accounting,Reporting cost of goods manufactured is a part of financial accounting
Similarities
LO 1 Explain the distinguishing features of managerial accounting.LO 1 Explain the distinguishing features of managerial accounting.
Chapter 1-14
Comparing Managerial and Financial AccountingComparing Managerial and Financial AccountingComparing Managerial and Financial AccountingComparing Managerial and Financial Accounting
Differences
LO 1 Explain the distinguishing features of managerial accountingLO 1 Explain the distinguishing features of managerial accounting..
Chapter 1-15
Managerial accounting:Managerial accounting:
a.a. Is governed by generally accepted accounting principles.
b. Places emphasis on special-purpose information.
c. Pertains to the entity as a whole and is highly Pertains to the entity as a whole and is highly aggregatedaggregated.
d. Is limited to cost data.
Review QuestionReview Question
Managerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting Basics
LO 1 Explain the distinguishing features of managerial accounting.LO 1 Explain the distinguishing features of managerial accounting.
Chapter 1-16
Managerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting Basics
Management’s activities and responsibilities can be Management’s activities and responsibilities can be classified into the following three broad functions:classified into the following three broad functions:
PlanningPlanningDirectingDirecting
ControllingControlling
Management Functions
LO 2 Identify the 3 broad functions of management.LO 2 Identify the 3 broad functions of management.
Chapter 1-17
Management FunctionsManagement FunctionsManagement FunctionsManagement Functions
Look ahead and establish objectives such as –Maximize short-term profit and market shareCommit to environmental protectionand social programs
Key Objective: Add value to the businessValue measured by trading price of stock and by potential selling price of the company
Planning
LO 2 Identify the 3 broad functions of management.LO 2 Identify the 3 broad functions of management.
Chapter 1-18
Management FunctionsManagement FunctionsManagement FunctionsManagement Functions
Coordinate diverse activities and human resources
Implement planned objectives
Provide incentives to motivate employees
Hire and train employees including executives, managers, and supervisors
Produce smooth-running operation
Directing
LO 2 Identify the 3 broad functions of management.LO 2 Identify the 3 broad functions of management.
Chapter 1-19
Management FunctionsManagement FunctionsManagement FunctionsManagement Functions
Process of keeping activities on track
Determine whether goals are met
Decide changes needed to get back on track
May use an informal or formal system of evaluations
Decision making is not a separate management function, but the outcome of the exercise of good judgment in
planning, directing, and controlling.
Controlling
LO 2 Identify the 3 broad functions of management.LO 2 Identify the 3 broad functions of management.
Chapter 1-20
Within a company, organization charts show:The interrelationships of activities and
The delegation of authority and responsibility
Organizational StructureOrganizational StructureOrganizational StructureOrganizational Structure
Chapter 1-21
Business EthicsAll employees are expected to act ethically An increasing number of organizations have codes of business ethicsDespite organizational efforts:
Business scandals have caused massive investment losses and employee layoffs.Corporate fraud has increased 13% in last 5 years.Employee fraud – 60% of all fraudIntentional misstatement of financial reports
Aka financial reporting fraud is most costly
Good Ethics Good Ethics –– Good BusinessGood BusinessGood Ethics Good Ethics –– Good BusinessGood Business
Chapter 1-22
Creating Proper Incentives
Companies like Motorola, IBM, and Nike expend substantial resources to monitor and evaluate the actions of employees & managers.
Monitoring can have the negative result of producing incentives for unethical actions.
Employees may feel that they must succeed no matter what.
Ineffective and unrealistic controls may also result in declining product quality.
Good Ethics Good Ethics –– Good BusinessGood BusinessGood Ethics Good Ethics –– Good BusinessGood Business
Chapter 1-23
Sarbanes-Oxley Act of 2002
Clarifies management’s responsibilitiesCertifications by CEO and CFO -
fairness of financial statements andadequacy of internal control
Selection criteria for Board of Directors and Audit CommitteeSubstantially increased penalties for misconductIMA Statement of Ethical Professional Practices
Good Ethics Good Ethics –– Good BusinessGood BusinessGood Ethics Good Ethics –– Good BusinessGood Business
Code of Ethical Standards
Chapter 1-24
The management of an organization performs several The management of an organization performs several broad functions. They are:broad functions. They are:
a.a. Planning, directing, and sellingPlanning, directing, and selling.
b. Directing, manufacturing, and controlling.
c. Planning, manufacturing, and controlling.
d. Planning, directing, and controlling.
Review QuestionReview Question
Management FunctionsManagement FunctionsManagement FunctionsManagement Functions
LO 2 Identify the 3 broad functions of management.LO 2 Identify the 3 broad functions of management.
Chapter 1-25
Manufacturing Costs
Manufacturing consists of activities and processes to convert raw materials into finished goods.In contrast, a merchandising firm sells goods in the form in which they were purchased.Manufacturing costs are typically classified as:
Managerial Cost ConceptsManagerial Cost ConceptsManagerial Cost ConceptsManagerial Cost Concepts
LO 3 LO 3 –– Define the three classes of manufacturing costs.Define the three classes of manufacturing costs.
Chapter 1-26
Manufacturing CostsManufacturing CostsManufacturing CostsManufacturing Costs
Materials
LO 3 Define the three classes of manufacturing costs.LO 3 Define the three classes of manufacturing costs.
Raw MaterialsBasic materials and parts usedin manufacturing process
Direct MaterialsRaw materials that can bephysically and directly associatedwith the finished productduring the manufacturing process
Materials
Chapter 1-27
Manufacturing CostsManufacturing CostsManufacturing CostsManufacturing Costs
Materials
LO 3 Define the three classes of manufacturing costs.LO 3 Define the three classes of manufacturing costs.
Indirect Materials
Raw materials that cannot be easily associated with the finished product
Not physically part of the finished product orthey are an insignificant part of finished product in terms of cost
Considered part of manufacturing overhead
Chapter 1-28
Manufacturing CostsManufacturing CostsManufacturing CostsManufacturing CostsLabor
LO 3 Define the three classes of manufacturing costs.LO 3 Define the three classes of manufacturing costs.
Direct LaborWork of factory employeesthat can be physically anddirectly associated withconverting raw materialsinto finished goods
Indirect LaborWork of factory employees that has no physical association with the finished product or for which it is impractical to trace costs to the goods produced
Chapter 1-29
Manufacturing CostsManufacturing CostsManufacturing CostsManufacturing Costs
LO 3 Define the three classes of manufacturing costs.LO 3 Define the three classes of manufacturing costs.
Manufacturing Overhead
Costs that are indirectly associated with manufacturing the finished product
Includes all manufacturing costs except direct materials and direct labor
Allocation of overhead to products can present problems
Also called factory overhead, indirect manufacturing costs, or burden
Chapter 1-30
Which of the following is Which of the following is notnot an element of an element of manufacturing overhead?:manufacturing overhead?:
a.a. Sales manager’s salary.Sales manager’s salary.
b. Plant manager’s salary.
c. Factory repairman’s wages.
d. Product inspector’s salary.
Review QuestionReview Question
Manufacturing CostsManufacturing CostsManufacturing CostsManufacturing Costs
LO 3 Define the three classes of manufacturing costs.LO 3 Define the three classes of manufacturing costs.
Chapter 1-31
Product Versus Period CostsProduct Versus Period CostsProduct Versus Period CostsProduct Versus Period Costs
LO 4 Distinguish between product and period costs.LO 4 Distinguish between product and period costs.
Product Costs
Components: direct material cost, direct labor cost, and manufacturing overhead
Costs that are a necessary and integral part of producing the product
Recorded as inventory when incurred, thus may be called inventoriable costs
Not an expense until the finished goods inventory is sold then cost of goods sold
Chapter 1-32
Product Versus Period CostsProduct Versus Period CostsProduct Versus Period CostsProduct Versus Period Costs
LO 4 Distinguish between product and period costs.LO 4 Distinguish between product and period costs.
Period Costs
Matched with revenue of a specific time period and charged to expense as incurred
Non-manufacturing costs
Deducted from revenues in period incurred to determine net income
Includes all selling and administrative expenses
Chapter 1-33
Product Versus Period CostsProduct Versus Period CostsProduct Versus Period CostsProduct Versus Period Costs
LO 4 Distinguish between product costs and period costsLO 4 Distinguish between product costs and period costs..
Chapter 1-34
Manufacturing Costs in Financial StatementsManufacturing Costs in Financial StatementsManufacturing Costs in Financial StatementsManufacturing Costs in Financial Statements
LO 5 Explain the difference between a merchandising LO 5 Explain the difference between a merchandising and a manufacturing income statement.and a manufacturing income statement.
Income Statement
The income statement for a manufacturer is similar to that of a merchandiser except
for the cost of goods sold section.
Chapter 1-35
Manufacturing Costs in Financial StatementsManufacturing Costs in Financial StatementsManufacturing Costs in Financial StatementsManufacturing Costs in Financial Statements
Cost of Goods Sold ComponentsMerchandiser versus Manufacturer
LO 5 Explain the difference between a merchandising LO 5 Explain the difference between a merchandising and a manufacturing income statement.and a manufacturing income statement.
Chapter 1-36
Manufacturing Costs in Financial StatementsManufacturing Costs in Financial StatementsManufacturing Costs in Financial StatementsManufacturing Costs in Financial Statements
Cost of Goods Sold Section of the Income Statement
LO 5 Explain the difference between a merchandising LO 5 Explain the difference between a merchandising and a manufacturing income statementand a manufacturing income statement..
Chapter 1-37
For the year, Red Company has cost of goods For the year, Red Company has cost of goods manufactured of $600,000, beginning finished manufactured of $600,000, beginning finished goods inventory of $200,000, and ending finished goods inventory of $200,000, and ending finished goods inventory of $250,000. goods inventory of $250,000.
The cost of goods sold isThe cost of goods sold isa.a. $450,000.$450,000.
b. $500,000.
c. $550,000.
d. $600,000.
Review QuestionReview Question
Manufacturing Costs in Financial StatementsManufacturing Costs in Financial StatementsManufacturing Costs in Financial StatementsManufacturing Costs in Financial Statements
LO 5 Explain the difference between a merchandising LO 5 Explain the difference between a merchandising and a manufacturing income statement.and a manufacturing income statement.
Chapter 1-38
Manufacturing Costs in Financial StatementsManufacturing Costs in Financial StatementsManufacturing Costs in Financial StatementsManufacturing Costs in Financial Statements
Determining the Cost of Goods Manufactured
LO 6 Indicate how cost of goods manufactured is determinedLO 6 Indicate how cost of goods manufactured is determined..
Work in Process – partially completed units of product
Total Manufacturing Costs – sum of direct material costs, direct labor costs, and manufacturing overhead; all incurred in the current period
Chapter 1-39
Manufacturing Costs in Financial StatementsManufacturing Costs in Financial StatementsManufacturing Costs in Financial StatementsManufacturing Costs in Financial Statements
LO 6 Indicate how cost of goods manufactured is determinedLO 6 Indicate how cost of goods manufactured is determined..
Chapter 1-40
Manufacturing Costs in Financial StatementsManufacturing Costs in Financial StatementsManufacturing Costs in Financial StatementsManufacturing Costs in Financial Statements
Balance Sheet - Inventories
LO 7 Explain the difference between a merchandising and a LO 7 Explain the difference between a merchandising and a manufacturing balance sheet.manufacturing balance sheet.
Merchandising CompanyOne category of inventory:Merchandise Inventory
Manufacturing CompanyMay have three inventories:
Raw Materials Work in ProcessFinished Goods
Chapter 1-41
Manufacturing Costs in Financial StatementsManufacturing Costs in Financial StatementsManufacturing Costs in Financial StatementsManufacturing Costs in Financial Statements
Balance Sheet - Inventories
LO 7 Explain the difference between a merchandising and a LO 7 Explain the difference between a merchandising and a manufacturing balance sheetmanufacturing balance sheet
Chapter 1-42
A cost of goods manufactured schedule shows A cost of goods manufactured schedule shows beginning and ending inventories for:beginning and ending inventories for:
a.a. Raw materials and work in process only Raw materials and work in process only
b. Work in process only
c. Raw materials only
d. Raw materials, work in process, and finished goods
Review QuestionReview Question
Manufacturing Costs in Financial StatementsManufacturing Costs in Financial StatementsManufacturing Costs in Financial StatementsManufacturing Costs in Financial Statements
Chapter 1-43
Managerial Accounting TodayManagerial Accounting TodayManagerial Accounting TodayManagerial Accounting Today
LO 8 Identify trends in management accounting.LO 8 Identify trends in management accounting.
Service Industry Trends
U.S. economy, in general, has shifted toward an emphasis on providing services rather than goods
Over 50% of U.S. workers are now employed by service companies
Trend is expected to continue in the future
Most of the techniques learned for manufacturing firms are applicable to service companies
Chapter 1-44
Managerial Accounting TodayManagerial Accounting TodayManagerial Accounting TodayManagerial Accounting Today
LO 8 Identify trends in management accounting.LO 8 Identify trends in management accounting.
Managerial Accounting Practices
Value Chain
Refers to all activities associated with providing a product or service
For a manufacturing firm these include the following:
Chapter 1-45
Managerial Accounting TodayManagerial Accounting TodayManagerial Accounting TodayManagerial Accounting Today
LO 8 Identify trends in management accounting.LO 8 Identify trends in management accounting.
Managerial Accounting Practices
Technological Change
Enterprise Resource Planning (ERP) – software programs designed to manage all major business processes
Computer-Integrated Manufacturing (CIM) –manufacturing products with increased automation
Just-In-Time (JIT) Inventory Methods
Inventory system in which goods are manufactured or purchased just in time for use
Chapter 1-46
Managerial Accounting TodayManagerial Accounting TodayManagerial Accounting TodayManagerial Accounting Today
LO 8 Identify trends in management accounting.LO 8 Identify trends in management accounting.
Managerial Accounting Practices
Quality
Increased emphasis on product quality because goods are produced only as needed
Total Quality Management (TQM) - a philosophy of zero defects –
Activity-Based-Costing (ABC)
Allocates overhead based on use of activities
Results in more accurate product costing and scrutiny of all activities in the value chain
Chapter 1-47
Managerial Accounting TodayManagerial Accounting TodayManagerial Accounting TodayManagerial Accounting Today
LO 8 Identify trends in management accounting.LO 8 Identify trends in management accounting.
Managerial Accounting Practices
Theory of ConstraintsConstraints (“bottlenecks” ) limit the company’s potential profitabilityA specific approach to identify and manage these constraints in order to achieve company goals
Balanced ScorecardEvaluates operations in an integrated fashionUses both financial and non-financial measuresLinks performance measures to overall company objectives
Chapter 1-48
Which of the following managerial accounting techniques attempts to allocate manufacturing overhead in a more meaningful manner?
a. Just-in-time inventory.b. Total-quality management.c. Balanced scorecard.d. Activity-based costing.
Review QuestionReview Question
Managerial Accounting TodayManagerial Accounting TodayManagerial Accounting TodayManagerial Accounting Today
LO 8 Identify trends in management accounting.LO 8 Identify trends in management accounting.
Chapter 1-49
All About YouAll About YouAll About YouAll About YouOutsourcing and Jobs
To reduce costs and remain competitive many companies are turning to outsourcing
“Outsourcing means hiring an outside supplier to provide elements of a product rather than producing them internally”
While outsourcing can be to another provider within the U.S., many professional services as well as manufacturing jobs have become candidates for outsourcing to foreign providers
By 2015, it has been predicted that 3.3 million service jobs will have been outsourced offshore.
Chapter 1-50
All About YouAll About YouAll About YouAll About YouOutsourcing and Jobs – What do you think?
Do you think outsourcing really reduces costs?
If costs are reduced, do you think that it justifies the loss of jobs to U.S. workers?
What would you say to your employees whose jobs have been outsourced?
Do you think that outsourced professional services performed in a foreign country or parts manufactured offshore will have the same quality and standards as those performed/manufactured in the U.S.?
Chapter 1-51
Indicate whether each of the following costs of an Indicate whether each of the following costs of an automobile manufacturer would be classified as automobile manufacturer would be classified as direct materials, direct labor, or manufacturing direct materials, direct labor, or manufacturing overhead.overhead.
Chapter Review Chapter Review -- Brief Exercise 1Brief Exercise 1--55Chapter Review Chapter Review -- Brief Exercise 1Brief Exercise 1--55
______ a. Windshield______ b. Engine______ c. Wages of assembly line worker______ d. Depreciation of factory machinery______ e. Factory machinery lubricants______ f. Tires______ g. Steering wheel______ h. Salary of painting supervisor
DMDMDLMOMODMDMMO
Chapter 1-52
Identify whether each of the following costs Identify whether each of the following costs should be classified as product costs or period should be classified as product costs or period costs.costs.
Chapter Review Chapter Review -- Brief Exercise 1Brief Exercise 1--66Chapter Review Chapter Review -- Brief Exercise 1Brief Exercise 1--66
____________ a. Manufacturing overhead____________ b. Selling expenses____________ c. Administrative expenses____________ d. Advertising expense____________ e. Direct labor____________ f. Direct material
ProductPeriodPeriodPeriod
ProductProduct
Chapter 1-53
Copyright © 2008 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.
CopyrightCopyrightCopyrightCopyright