Manegerial CH1
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Transcript of Manegerial CH1
7/27/2019 Manegerial CH1
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Managers
Suppliers
Government Creditors
Owners
Customers
.
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Financial Accounting Management Accounting
For external reporting For internal planning andcontrol
3.
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Management Accounting Financial Accounting
Primary users Internal – the company’smanagers
External – investors andcreditors
Purposes of
information
Help managers plan and
control operations
Help with investment and
credit decisions
Focus and time
dimension
Relevance of information;
focus on the future
Relevance and reliability
of information; focus onthe past
Type of report Internal reports
No audit needed
Financial statements
prescribed by GAAP
Audit by CAs
Scope of information Detailed reports on a weekly
or daily basis
Summarized reports
quarterly and/or annually
Behavioral Concern about how reports
affect employee behavior
Concern about adequate
disclosure
.
Management versus Financial Accounting
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Seek to provide services
Simplest accounting
All costs are period costs
5.
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Net income
Revenues Expenses
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Resell products purchased from suppliers
Keep an inventory of products
Cost of goods sold is a major expense
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Includes cost to purchase goods plus freight-in
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Beginning inventory
Plus: Purchases, net
Plus: Freight-in
Less: Ending inventory
Equals: Cost of goods sold
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Productcosts
• Part of
inventory• Expensed
when sold
Periodcosts
• Not part of
inventory• Expensed
when
incurred
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Net sales revenue $$$$Cost of goods sold $$$$
Gross profit $$$
Operating expenses $$$
Operating income $$$
Other income (expense) $$Net income $$$
Any Company
Income Statement
For the year ended December 31, 2011
.
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Use labor, plant, supplies and facilities to convertraw materials into finished products
Three kinds of inventory
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Materials
inventory
Work in process
inventory
Finished goods
inventory
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.
. 12
.
Cost object: Anything for which managers want aseparate measurement of cost.
Cost drivers: are any factors that affect cost
Opportunity cost: Is the forgone income from using anasset in its best alternative.
Direct cost: Relate directly to the cost object for whichcost is to be measured.
Indirect cost: Indirectly related to the cost of a costobject
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Variable cost: Change in total as the level of activitychanges.
Fixed cost: Do not change in total with changes in the
level of activity.
Semi Variable Cost : cost composed of a mixture offixed and variable components. Costs are fixed for aset level of production or consumption, becoming
variable after the level is exceeded
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Directmaterials
Direct laborManufacturing
overhead
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Includes only indirect costs related tomanufacturing
Examples:
◦ Indirect materials
◦ Indirect labor
15Copyright (c) 2009 Prentice Hall. All rights reserved.
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Other costs related to the manufacturing facilityand plant assets
◦ Repairs & maintenance
◦ Utilities
◦ Rent & insurance
◦ Property taxes
◦ Depreciation
16.
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Net sales revenue $$$$$$$
Cost of goods sold: Beginning finished goods inventory $$$$$$
Plus: Cost of goods manufactured $$$$$
Less: Ending finished goods inventory ($$$$$)
Cost of goods sold $$$$$$Gross profit $$$$$$
Selling and administrative expense $$$$$
Operating income $$$$$$
Any Manufacturing CompanyIncome Statement
For the year ended December 31, 2011
.
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Type of company Inventoriable
product costs
Period costs
(Expenses)
Service company None Salaries, depreciation,
utilities, advertising,
insurance, property
taxes
Merchandising
company
Purchases plus freight in Salaries, depreciation,
utilities, advertising,
insurance, property
taxes and delivery
expense
Manufacturing
company
Direct materials, Direct
labor and manufacturing
overhead
Office salaries,
depreciation, utilities,
advertising, insurance,
property taxes on office,
selling expenses
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Materials
Inventory
Finished
GoodsInventory
Sales
Cost of
Goods Sold
INCOME STATEMENT
Operating
Expenses
BALANCE SHEET
=Operating Income
Whensalesoccur
-
-
Work in
ProcessInventory
Period
Costs
Purchases
of
materials
Direct labor &
manufacturing
overhead
.
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Beginning Work in process inventory $$$
Add: Direct materials used
Beginning direct materials inventory $$$ Plus: Direct materials purchased $$$
Less: Ending direct materials inventory ($$$)
Direct materials used $$$
Direct labor $$$
Manufacturing overhead $$$
Total manufacturing costs incurred during the year $$$
Total manufacturing costs to account for $$$
Less: Ending Work in process inventory $$$
Cost of goods manufactured $$$
Any Manufacturing CompanySchedule of Cost of Goods Manufactured
For the year ended December 31, 2011
.
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BeginningWork in
process
Directmaterials
used
Direct
labor
Manufacturing
overhead
EndingWork in
process
Total
manufacturing
costs
Cost of goodsmanufactured