Managerial Accounting Chapter 1 01 21 2014 Chapter 1 Objective 1 Identify three responsibilities for managers Managerial vs Financial page 6 in textbook Organizational structure Cross functional teams o Employers representing various functions of the company Institute of Management accountants IMAS Professional association for management accountants IMAS function o Certification CMA o Practice development o Education o Networking o Ethical standards o Public education Summary of IMA ethical standards Competence maintain professional competence expertise by continuing developing knowledge and skills can you do your job Confidentiality of information Integrity uphold their integrity o Do the right thing o Reporting conflicts of interests Credibility perform duties with credibility o Giving information fairly and objectively o Work product credible Ethical behavior Means doing the right thing regardless of consequences Examples o Allowing reimbursement of false expense reports o Manipulating income o Performing tasks not qualified to perform Steps to resolve ethical dilemmas o Follow company s policies for reporting unethical behavior o If not resolved Discuss with immediate supervisor Discuss with objective advisor Consult an attorney Unethical versus illegal behavior Not all unethical behavior is illegal but all illegal is unethical Regulatory and Business issues Sarbanes Oxley act of 2002 SOX o Restore trust in publicly traded corporations management financial statements and auditors o CEO CFO requirements Financial statements Internal control structure Annual assessment o Independent audit committee o Increase white collar crime penalties International financial reporting standards IFRS o Results of globalization Consistent reporting standards needed worldwide SEC is studying IFRS Extensible Business Reporting Language XBRL o Standardized tagging system for financial reports o Advantages Decrease retrieval time Decreases conversion times Facilitates comparisons Customizes information Sustainability and Managerial Accounting Sustainability o The ability to meet the needs of the present without compromising the ability of future generations to meet their own needs Social responsibility Triple bottom line o Profit o People o Planet Shifting Economy Shift away from manufacturing toward service Managerial accounting has expanded Competing in Global Market Place Barriers to international trade have fallen More accurate and timely information Enterprise Resource Planning ERP System that integrates a company s functions departments and data Advantages o Streamline operation A philosophy and business strategy of manufacturing without waste o Respond quickly to changes o Replace separate software systems Disadvantage Lean Operations o Expensive maybe for small businesses o Lower costs o Increase competitive position Just in Time inventory JIT Manufacture just in time to fill orders Reduces o Raw materials inventory PUT IT RIGHT INTO PRODUCTION o Finished goods inventory o Storage costs o Handling costs TQM TOTAL Quality management Goal to provide customers with superior products and services Continually set higher goals for quality International organization for standardization ISO Managerial Accounting Chapter 2 01 21 2014 Building Blocks of managerial accounting The types of companies Service company simplest income statement o Provide a service only o No inventory your time is you inventory o Examples providing their expertise Accountants Banks Doctors Lawyers Ad Agencies Merchandiser o Resell product purchased from suppliers o On inventory account o Examples Amazon JC Penny Sears o Retailers vs Wholesalers Manufacturers finished products o Examples Crayola Crayons Dell Computers o 3 inventory accounts o Use labor and other inputs to convert raw materials into raw materials stick it on the shelf to build something work in process half done finished goods complete product ready to sell Objective 2 describe the value chain and its elements Value Chain Activities that add value to products and services and cost money Research and development design production or purchases marketing Distribution Customer Service E2 16A Cost Object Anything for which managers want a separate measurement of cost Direct cost o Cost that can be traced directly to a cost object Indirect cost o Cost that CANNOT be traced directly to a cost object o Allocated to the cost object S2 4 pg 76 Objective 4 Two definitions of product cost Total costs o Used internally only will see this in later chapters Inventoriable product costs o Used for external reporting o Production purchases Period costs o All cost incurred in other stages of the value chain o r d design customer service distribution marketing o EX operating expense SGA Treatment of costs Invetoriable product costs o Costs stay on the balance sheet as inventory until sold o When sold expensed on the income statement cost of goods sold Walmart Period Costs o Expense immediately on the income statement o SGA operating expenses Inventoriable Product Cost Merchandiser Purchase price from suppliers cost to get ready for sale Freight in Import duties or tarrifs Inventoriable product Costs Manufacturer Manufacturing Overhead o Indirect costs related to manufacturing that are not direct material or direct labor o Indirect materials o Indirect labor o Other indirect manufacturing overhead Ask Yourself S2 7 pg 77 Does the cost relate to producing the product o If yes then it is probably an inventoriable product cost DM DL MOH0 o If no then it is probably a period cost Direct and indirect labor costs include Salaries and wages Fringe benefits Payroll taxes Obejective 5 Income statement Service Company Simplest income statement All costs are period costs Income Statement Merchandiser Cost of good sold purchases and selling o Inventoriable product costs when sold Operating expenses the five blocks that are operating expenses period o 5 blocks on the value chain Cost of good sold calculation Merchandiser S2 9 pg 77 Look at the COGS calculation and this is for the income statement Income statement o s2 10 p 78 Income statement for merchandiser cost of goods available is the sum Cost of goods Sold Manufacturer Three formulas o Cost of goods sold o Cost of goods manufactured o Direct materials used DM used Cost of goods sold Calculation Manufacturer Cost of Goods Manufactured Calculation Manufacturer Direct Materials Used Calculation manufacturer Cost of Goods Sold