Slide 1Slide 2Building Blocks of Managerial AccountingLearning Objective 1Three Types of CompaniesService CompaniesMerchandisersManufacturersSlide 9Learning Objective 2Value ChainLearning Objective 3Cost ObjectS2-5S2-5 (continued)Learning Objective 4Two Definitions of Product CostInventoriable Product CostsPeriod Costs: All Costs Incurred in the Other Stages of the Value ChainInventoriable Product Costs: MerchandiserInventoriable Product Costs: ManufacturerManufacturing OverheadS2-8S2-8 (continued)Slide 25Prime and Conversion CostsDirect and Indirect Labor CostsLearning Objective 5Income Statement: Service CompanyIncome Statement: MerchandiserCost of Goods Sold Calculation: MerchandiserSlide 32Income Statement: ManufacturerCost of Goods Sold Calculation: ManufacturerCost of Goods Manufactured Calculation: ManufacturerDirect Materials Used Calculation: ManufacturerProduct and Period CostsManufacturing Companies’ Inventory AccountsSlide 39Slide 40Balance Sheet DifferencesE2-20ASlide 43Slide 44Slide 45Learning Objective 6Controllable and Uncontrollable CostsRelevant and Irrelevant CostsLearning Objective 7Cost BehaviorTotal Variable CostsTotal Fixed Costs: Stay Constant in Total Over a Wide Range of Activity LevelsTotal CostAverage CostMarginal CostE2- 29ASlide 57Slide 58End of Chapter 2Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 1Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.2Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Building Blocks of Managerial AccountingChapter 23Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Learning Objective 1Distinguish among service, merchandising, and manufacturing companies4Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Three Types of Companies•Service•Merchandisers•Manufacturers5Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Service Companies•Provide a service only•No inventory•Examples–Accountants–Banks–Doctors–Lawyers6Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Merchandisers•Resell products purchased from suppliers •One inventory account•Examples–Amazon.com–J. C. Penney–Sears•Retailers vs. Wholesalers7Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Manufacturers•Use labor and other inputs to convert raw materials into finished products•Examples–Crayola Crayons–Dell Computers–Craftsman Tools•3 inventory accounts8Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Manufacturers•Three inventory accounts– Raw materials– Work in process– Finished goods9Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Learning Objective 2Describe the value chain and its elements10Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Value ChainActivities that add value to products and services and cost moneyR&D DesignProduction/PurchasesMarketingDistributionCustomer Service11Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Learning Objective 3Distinguish between direct and indirect costs12Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Cost ObjectAnything for which managers want a separate measurement of cost–Direct cost–Indirect cost13Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. S2-5a. Store utilitiesb. The CEO’s salaryc. The cost of the DVDsd. The cost of national advertisingDirect; traceDirect; traceIndirect; allocateIndirect; allocate14Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. S2-5 (continued)e. The wages of store employeesf. The cost of operating the corporate payroll deptg. The cost of Xbox, PlayStation, and Nintendo gamesh. The cost of popcorn and candy sold at the storeDirect; traceDirect; traceIndirect; allocateDirect; trace15Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Learning Objective 4Identify the inventoriable product costs and period costs of merchandising and manufacturing firms16Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Two Definitions of Product Cost•Total costs – used internally only (will see this in later chapters)•Inventoriable product costs – used for external reporting17Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. R&D DesignMarketingDistributionCustomer ServiceProduction/PurchasesInventoriable Product CostsInventoriable Product Costs18Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Period Costs: All Costs Incurred in the Other Stages of the Value ChainPeriod CostsMarketingDistributionCustomer ServiceR&D Design19Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Inventoriable Product Costs: Merchandiser•+ Purchase price from suppliers •+ Cost to get ready for sale•+ Freight-in•+ Import duties or tariffs20Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Inventoriable Product Costs: Manufacturer•Direct materials•Direct labor•Manufacturing overheadDirect CostsIndirect Costs21Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Manufacturing OverheadIndirect costs related to manufacturing that are not direct materials or direct labor•Indirect materials•Indirect labor•Other indirect manufacturing overhead22Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. S2-81. Cost of milk purchased from farmers2. Lubricants used in bottling machines3. Depreciation on refrigerated trucks to collect raw milk from local dairy farmers4. Property tax on dairy processing plantProduct, MOHProduct, DMProduct, MOHProduct, MOH23Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. S2-8 (continued)5. Television advertisements for Dairy Plains’ products 6. Gasoline used to operate refrigerated trucks used to deliver finished dairy products to grocery stores 7. Company president’s annual bonus 8. Plastic gallon containers in which milk is packaged PeriodPeriodPeriodProduct, DM24Copyright © 2010 Pearson