ACCT 2102 1nd Edition Exam 1 Study Guide Lectures 1 5 Lecture 1 January 9 Chapter 1 Differences of Managerial and Financial Accounting Managerial internal users no rules time span of the future relevant Financial external users GAAP is the governing rule time span of the past reliable Ethics What are the IMA s Ethical Standards Competence level of professional expertise continually develops skills performs duties in accordance to laws and regulations Confidentiality refrains from using information for unethical advantages keeps information confidential unless authorized Integrity refrain from activity that may discredit the profession advise parties on future conflicts Credibility communicate fairly disclose all relevant information Sustainability What is sustainability Focusing back on people and the planet making it last Why should Businesses care about sustainability Public Opinion Cost and Benefits Lectures 2 and 3 January 14 Chapter 2 Generating Profit 1 Cut costs 2 Increase revenue through increasing prices 3 Basic Business Models Service Company A Has no inventory B Has no product costs C Sales Revenue Selling General and Administrative Expenses Operating Income Merchandising Company A Has a single Merchandise Inventory B Includes Product Costs C Sales Revenue Cost of Goods Sold Gross profit D Gross Profit Selling General and Administrative Expenses Operating Income Manufacturing Company A Has a 3 types of inventory 1 Raw Material cost of material that has been used 2 Work In Process holds units and costs that have not been finished 3 Finished Goods units and costs for units finished but not sold B Includes Product Costs C Sales Revenue Cost of Goods Sold Gross profit D Gross Profit Selling General and Administrative Expenses Operating Income The Value Chain Period Costs Research and Development Design Marketing Distribution Customer Service Product Costs Production Purchase What are product costs Product costs are costs associated with Cost of Goods Sold that deal with the production or purchasing stages of a company A good way to distinguish whether it is a product cost is whether or not the words factory plant or manufacturing are used What are the two types of product costs Direct any cost that is easy and convenient for us to trace the unit of cost we want to measure o Direct material raw material that is integral to the production of a unit Example Steel o Direct Labor any worker that touches or makes the product Example Factory Worker Indirect any cost that is difficult to trace o Manufacturing Overhead costs not associated with DM or DL that are still vital to the production Example Utilities of Manufacturing Plants Cost of Goods Sold Beginning Inventory of Raw Materials Purchases of Raw Materials Freight In Import Duties Tax Ending Inventory Raw Materials Used Raw Materials Used Direct Labor Manufacturing Overhead Total Manufacturing Cost Total Manufacturing Cost Beginning Balance of Work in Process Ending Balance of Work in Process Cost of Goods Manufactured also known as the decrease to Work in Process and the increase to Finished Goods Inventory Cost of Goods Manufactured Beginning Balance of Finished Goods Ending Balance of Finished Goods Cost of Goods Sold also known as the decrease in Finished Goods Inventory Lectures 4 and 5 January 14 Chapter 3 3 Steps to Calculating Manufacturing Overhead 1 Before the year begins calculate the POHR rate a POHR the budgeted MOH divided by the budgeted Allocation Base i The allocation bases are usually Direct Labor per hours or Machine per hours 2 During the year allocate MOH with the Job Cost Record a Allocated MOH POHR multiplied by the actual amount of allocation used b Job Cost Record Beginning Balance Direct Materials Direct Labor Manufacturing Overhead Job cost divide by the number of units unit cost c Sometimes you must calculate Direct Labor if so i Direct Labor Direct Labor per hours multiplied by the wage rate ii The wage rate should be given d If the amount of direct labor hours is not given however the Direct Labor Cost is use this formula to calculate MOH i MOH Direct Labor Cost Wage rate multiplied by the POHR 3 When the year ends close out MOH by comparing a Compare Actual MOH to the Allocated MOH i If Actual Allocated then it was an underallocation 1 Then you must increase cost of goods sold to make up for the loss ii If Actual Allocated then it was an overallocation 1 Then you must decrease cost of goods sold