Chapter 1 Introduction to Managerial Accounting I Managerial Accounting A Primary Responsibilities 1 Planning I Types of Business products 1 No Inventory B Merchandising Company suppliers 2 Directing 3 Controlling means overseeing the companys day to day operations setting goals and objectives for the company and determining how to achieve them plan and making adjustments to keep the company pressing toward its goal controlling to make informed decisions B Differences between Managerial and Financial Accounting evaluating the results of business operations against the gathers information from planning directing and 4 Making Decisions 1 Managerial is internal versus Financial is External users 2 Managerial uses info to plan and direct versus Financial to help external users to make decisions Chapter 2 Building Blocks of Managerial Accounting A Service Companies in business to sell intangible services rather than tangible resell tangible products that they buy from sell to consumers 1 Retailers 2 Wholesalers 3 have inventory but just one category buy products from manufacturer then sell to retailers i calculated by cost of goods sold and any freight and tariffs duties C Manufacturing Companies materials into new finished products use labor plant and equipment to convet raw all raw materials used in i Raw Materials Inventory 1 Types of inventory manufacturing other physical materials used within the plant to manufacture the goods ii Work in Process Inventory manufacturing process but not yet complete sold completed goods that have yet to be goods that are part way through the iii Finished Goods Inventory 1 Research Development the activities that add value to the companys products and D Value Chain services improved products or services and the process for producing them for producing them detailed engineering of products and services and the process researching and developing new or 2 Design II Defining Cost cost 3 Production or Purchases resources used to produce a product or service or to purchase finished merchandise intended for resale promotional and advertising of products and services 4 Marketing 5 Distribution 6 Customer Service Support provided for customers after the sale delivery of products or services to customers A Cost Object is anything for which managers want a separate measurement of a Direct Cost b Indirect Cost traced to it is a cost that can be traced to the cost object is a cost that relates to the cost object but cannot be B Total Cost for Internal Decision Making used through the value chain C Inventoriable Product Costs production or purchases stage of the value chain inclide only the cost incurred during the includes the cost of all resources a Period Costs distribution and customer service refer to the other costs i e R D design marketing D Manufactoring Companies Production Costs b Direct Labor a Direct Materials are the primary raw materials that become a physical part of the finished product convert raw materials into the companies products includes all manufacturing costs other than direct materials and direct labor All other indirect costs is the cost of compensating employees who physically c Manufacturing Overhead MOH Imdirect materials Indirect Labor i ii iii Other Indirect manufacturing costs d Prime Costs labor manufacturing overhead e Conversion Costs refer to the combination of direct materials and direct refer to the combination of direct labor and III Costs in financial Statements A Service Companies a No Inventory No COGS B Merchandising Company a Has Inventory Has COGS C Manufacturing Company a Has Inventory Has COGS D See Formulas on Page 60 64 65 66 Chapter 3 Job Costing I Methods Used to Determine Costing A Process Costing identical units through series of uniform production steps or possesses used by companies that produce extremely large numbers of a Costs are averaged by taking cost of production and hoe many products are produced b Oil Refining Food Beverage Industry paper products etc B Job Costing relatively small batches of different products used by companies that produce unique custom orders products or a Used when time series materials and costs vary depending on job b Large differences between jobs II Determining a Jobs Cost A Raw Materials Work In Progress Inventory Finished goods Inventory Cost of Goods Sold When good is sold B Purchasing Raw Materials a Engineers prepare a bill of materials b Order materials not inventory c Pull supplies from store room C Tracing Direct Labor a Track hourly workers how many hours it takes to work on a task D Allocating Manufacturing Overhead a Company Estimates Total Manufacturing Overhead Costs for the b Company selects an allocation base and estimates the total amount that Coming Year will be used during the year c Calculate predetermined Manufacturing Overhead MOH i Total estimated MOH Costs Total Estimated amount of the allocation base d Allocates some MOH to e individual job i MOH allocated to a job Predetermined MOH rate actual amount of allocation base used by the job III Dealing with over allocating or under allocating Manufacturing Overhead A MOH Allocated MOH Actual MOH Under allocated Jobs were undercoated a Cost of Goods Sold is too low Increase Cost of Goods Sold to the amount of the under allocation B MOH Allocated MOH Actual MOH Over allocated Jobs were Overcastted a Cost of Goods Sold is too High Decrease COGS for the amount of Read 124 126 over allocation Chapter 4 Activity Based Costing Lean production and Cost of Quality Cost Distortion occurs when some products are overallocated while other products are undercosted by the cost allocation system Plant Wide Overhead Rate any job produced I the plant would be allocated to manufacturing overhead Predetermined MOH Manufacturing Overhead for the year Direct Labor Hours I Using Departmentla Overhead TAes to Allocated Indirect Costs A Problems with PlantWide Overhead Rate a Different Departments incur different amounts and types of manufacturing overhead b Different Jobs or products use the departments to a different extent B 4 Basic Steps to Computing Using Departmental Overhead Rates a Estimate the Total MOH Costs for the coming year for each b department company selects an allocation base for each department and estimates the total amount that will be used during each year c Company calculates its departmental overhead rates using the information estimated in steps 1 and 2 i Departmental Overhead Rate Total Estimated
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