Financial&managerial accounting_15e williamshakabettner chap 16

8/14/2019 Financial&managerial accounting_15e williamshakabettner chap 16

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McGraw-Hill/Irwin Copyright 2010 by The McGraw-Hill Companies, Inc. All rights

Management Accounting:Management Accounting:

A Business PartnerA Business Partner

Chapter 16

McGraw-Hill/Irwin


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16-2

A c c o u n t i n g s y s t e m

w h o h a s a u t h o r i t y

A c c o u n t i n g i n f o r mp l a n n i n g a n d d e c i

A c c o u n t i n g r e p o r t s

m o n i t o r i n g , e v a l u a t i n g

M a n a g e m e n t a c

a s s i g n i n g d e c i s i o

Management Accounting:Management Accounting:

Basic FrameworkBasic Framework


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Management AccountingManagement Accounting

System FrameworkSystem Framework

Budget Plans:Future

Budget Plans:Future

Top Management

Top Management

Assign

Decision Making

Assign

Decision Making

Actual Results:Current

Actual Results:Current

Support

Decision Making

Support

Decision Making

PerformanceEvaluation: Past

PerformanceEvaluation: Past

Evaluate

Decision Making

Evaluate

Decision Making


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Demand for AccountingDemand for Accounting

InformationInformation


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The cost to

produce a unit of

product includes:Direct materialDirect labor

Manufacturingoverhead

Accounting forAccounting for

Manufacturing OperationsManufacturing Operations


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Raw materials& component

parts that

become an

integral partof finished

products.

Can be traced

directly and

conveniently

to products.

Direct MaterialsDirect Materials

If materials cannot be traced directly to products,

the materials are considered indirect and are part

of manufacturing overhead.


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Includes the payroll cost ofdirect workers.

Direct LaborDirect Labor

Those employeeswho work directly

on the goods beingmanufactured.

The cost of employees who do not workdirectly on the goods is consideredindirectlaborand is part of manufacturing overhead.


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All manufacturing costs other than direct

materials and direct labor.

Includes: Indirect materials. Indirect labor.

Machinery and equipmentcosts.Cost of regulatory

compliance.

Manufacturing OverheadManufacturing Overhead

Does not includeselling or generaland administrative

expenses.


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DirectMaterials

Purchased

DirectMaterials

Used

DirectLabor

ManufacturingOverhead

FinishedGoods

GoodsSold

MegaLoMart

Flow of Physical Goods inFlow of Physical Goods in

ProductionProduction


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DirectMaterials

DirectMaterials

DirectLabor

DirectLabor

Prime

CostConversion

Cost

Manufacturing costs are oftencombined as follows:



Flow of Physical Goods inFlow of Physical Goods in

ProductionProduction


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Balance Sheet

Current assets

and finished

goods inventory

Product Costs

(manufacturingcosts)

Income Statement

Revenue

COGS

Gross margin

Period expenses

Operating profit

When

goods

are sold

asincurred

Period Costs

(operatingexpenses andincome taxes)

as

incurred

Product Costs versus PeriodProduct Costs versus Period

CostsCosts


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Raw materials - inventory on

hand and available for use.

Work in

process -partially

completed

goods.

Finishedgoods-

completed

goods awaiting

sale.

Inventories of aInventories of a

Manufacturing BusinessManufacturing Business


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Directmaterials

purchased

MaterialsInventory

$$$ $$$

Flow of Costs AssociatedFlow of Costs Associated

With ProductionWith ProductionDirect

materialsused

Work in ProcessInventory

$$$ $$$

Direct labor &Manufacturing Overhead

Cost ofGoods Sold

$$$

Cost of goodsmanufactured

Finished GoodsInventory

$$$ $$$


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Direct costsCosts that can be

easily and

convenientlytraced to a unit ofproduct or othercost objective.

Examples: directmaterial anddirect labor

Indirect costsCosts cannot be

easily andconvenientlytraced to a unit ofproduct or othercost object.

Example:manufacturingoverhead

Direct Costs and IndirectDirect Costs and Indirect

CostsCosts

D t i i th C t fD t i i th C t f


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A schedule of the cost

of finished goods

manufacturedisprepared to provide

managers with an

overview of

manufacturingactivities during a

period.

Determining the Cost ofDetermining the Cost ofFinished GoodsFinished Goods

ManufacturedManufactured


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Financial Statements of aFinancial Statements of a

Manufacturing CompanyManufacturing Company

Income Statement

Balance Sheet


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End of Chapter 16End of Chapter 16

Financial&managerial accounting_15e williamshakabettner chap 16

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