DOC PREVIEW
PSU ACCTG 211 - Introducing Managerial Accounting

This preview shows page 1 out of 4 pages.

Save
View full document
View full document
Premium Document
Do you want full access? Go Premium and unlock all 4 pages.
Access to all documents
Download any document
Ad free experience
Premium Document
Do you want full access? Go Premium and unlock all 4 pages.
Access to all documents
Download any document
Ad free experience

Unformatted text preview:

ACCTG 211 1st Edition Lecture 18 Outline of Last Lecture I. Examples of different instances on different ratiosOutline of Current Lecture I. Managerial vs. Financial AccountingII. Definitions from the bookIII. Flow of inventoryIV. Budgeting Current LectureV. Introduction to Managerial Accounting and The Master Budgeting ProcessVI. Differences between Financial and Managerial Accounting These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.VII. Historical implications of managerial accounting a. Born out of the Second Industrial Revolution (late 1800’s to early 1900’s) – history: economies of scaleb. Need for information drove the innovation of managerial accounting datac. Originally called “cost accounting systems”d. Used by railroad and steel companiese. Goal: maintain profit margins as sales prices declined (due to efficiencies of scale and scope)f. Shift to “management accounting systems”g. Integrated companies such as DuPont and GMh. Included measures of quality and serviceVIII. Definitions from the booka. Cost Objecti. The object to which we are interested in assigning costsii. Size-dependent: Apple laptop keyboard vs. entire Apple laptop computer vs. factory where Apple laptop was built vs. laptop division of Appleb. Direct Cost vs. Indirect Costi. Direct: used in one (and only one) cost object. Traceable to that cost object.ii. Indirect: shared by more than one cost object. Allocated to the cost objects.c. Product Costs (a.k.a. “Manufacturing Costs”)i. Materials + Labor + Manufacturing (Mfg) Overheadii. Abbreviations: DM (Direct Materials), DL (Direct Labor), OVHD (Mfg Overhead)iii. Materials and Labor are direct costs; Mfg Overhead is an indirect cost.iv. So formula is often expressed as: DM + DL + OVHDd. Prime Costs vs. Conversion Costsi. Prime Costs: DM + DLii. Conversion Costs: DL + OVHDe. Product Costs vs. Period Costsi. Product costs: related to the production of a particular productii. Period cost: recurring each period, accounted for on a periodic basis iii. Period cost examples: salaries, rent, depreciation, insurance, utilitiesf. Difference Between a Product Cost and a Period Costi. DM and DL are product costsii. Selling, General, and Administrative expenses are period costsiii. Research and Development costs are period costsiv. OVHD can be either a product cost or a period costv. If it is related to the manufacturing facility: product costvi. If it is related to the administrative facility: period costvii. So OVHD that is not related to the production facility is NOT considered tobe a product cost…rather, it is considered to be a period cost.g. Variable Costi. Remains constant on a “per unit” basis, but varies in totalii. Example: an hourly wageh. Fixed Costi. Remains constant in total, but varies on a “per unit” basisii. Example: renti. Mixed Costi. Has characteristics of both a fixed cost or a mixed costii. Example: cell phone bill or moving truckj. Relevant Range Concepti. Economic costs typically follow a curved path in a “P-Q” graphii. To evaluate these costs, we would typically employ Calculusiii. For Accounting, we prefer Algebra – it is linear rather than curvi-lineariv. Thus, we assume that costs are linear within a defined range of productionv. Relevant Range and Linearity Assumption 1. When Relevant Range is Exceeded, Fixed Costs Often Changek. Total Costs = Total Fixed Costs + Total Variable Costsl. Total Variable Costs = Variable Cost per Unit x # Units Producedm. Average Total Cost = Total Cost / # Units Producedi. Also known as Average Cost per Unitii. Valid ONLY for the level of output in the denominatoriii. If interested in Average Manufacturing Cost per Unit, must ensure that numerator includes only manufacturing costsI. Flow of Inventory in Managerial Accounting a. Raw Materials (RM)i. Beginning RMii. Plus: RM Purchases (direct material purchases, including freight-in)iii. Minus: RM Used (text uses “direct materials used,” or transferred, to WIP)iv. Equals: Ending RMb. Work in Process (WIP)i. Beginning WIPii. Plus: RM Used (from RM roll-forward) + DL + OVHD (Manufacturing OVHD)iii. Minus: Cost of Goods Manufactured (COGM, which is transferred to FG)iv. Equals: Ending WIPc. Finished Goods (FG)d. Beginning FGe. Plus: COGMf. Minus: Cost of Goods Sold (COGS, which is transferred to Income Statement)g. Equals: Ending FGII. Why Budgets?a. Plan, Organize, Control processb. Process is “iterative” and “cyclical”c. Budgeting fits into the Planning and Controlling phases of the processIII. Master Budgeting Process (Exhibit 9-4, Braun Page 519)a. Start with a Sales Budget, driven by demand forecastingb. Then, determine how much inventory is needed to support the salesc. Then, determine the operating expenses needed to support the salesd. Then, produce budgeted financial statements (I/S, S/E, B/S, SOCF)e. In the financial statement process, isolate the company’s cash needs (i.e., cash budget) and also isolate the company’s fixed asset needs (i.e., capital expenditures budget)f. MUCH easier said than


View Full Document

PSU ACCTG 211 - Introducing Managerial Accounting

Download Introducing Managerial Accounting
Our administrator received your request to download this document. We will send you the file to your email shortly.
Loading Unlocking...
Login

Join to view Introducing Managerial Accounting and access 3M+ class-specific study document.

or
We will never post anything without your permission.
Don't have an account?
Sign Up

Join to view Introducing Managerial Accounting 2 2 and access 3M+ class-specific study document.

or

By creating an account you agree to our Privacy Policy and Terms Of Use

Already a member?