Chapter 1 Manager s decision making planning budgets directing is using info day to day controlling is analysis and comparisons budget vs actual Managerial primary users managers purpose is to plan direct control and decide internal reports from acct included is defined by management focus on the future from transaction data emphasis on relevant data show segments of the business prepared as needed verified by internal a Financial external users used to make investments and lending decisions external FS from acct included is determined by GAAP based on historical transactions data must be relevant and objective show company as a whole prepared annually periodically verified by external audit SEC required Which one Hard ones company controller both board of director both internal auditor both DON T OVERTHINK Internal audit internal controls and risk management Controller responsible for reporting FS and what s on it taxes budgets Treasurer raises capital and does investing Audit committee subset of board of directors controls who is the external auditor means CEO CFO can t pick a bad one reported to directly by internal audit Cross Functional Teams working with other departments in groups Institute of Management Accountants professional association responsible for certification education networking ethical standards Confidentiality isn t on here but it s easy Ethical behavior doing the right thing regardless of the consequences Illegal vs Unethical unethical doesn t mean illegal but don t do it also every illegal this is unethical Sarbanes Oxley restore trust in public companies CEO CFO sign off on FS and internal controls and are liable for mistakes formed the audit committee increased penalties for white collar crime Extensible Business Reporting Language standardized tagging sstem for financial reports decreases retrieval conversion time comparisons easier customizes information Sustainability the ability to meet the needs of the present without compromising the ability of future generations to meet their needs aka social responsibility Triple bottom line not just profit but people and planet Shifting economy more towards service so acct is important manufacturing outsourced so as manager must deal with laws taxes regulations Enterprise Resource Planning system that complies all of a company s data func departments awesome but expensive hard to use Lean operations running without waste Just in time inventory reduces inventory raw materials costs Total Quality Management goal to provide superior product service ISO distinction for quality Throughput time raw materials to finished goods Chapter 2 Service provide services no inventory Merchandisers resell products purchased from suppliers 1 inventory type consists of cost of merch and freight in break down into retailers and wholesalers direct from manufacture Manufacturers use labor raw materials to make finished goods 3 inventory accts raw material work in process finished goods Prime cost DM and DL Conversion cost DL and MOH cost of turning raw material into finished goods Product cost production and purchases block used for external reporting Period cost 5 other blocks Examples asking consultant about new store R D sales person salaries marketing rearrange store before opening design toll line for customer orders website marketing Product Cost Merchandiser add purchase price from suppliers add cost to get ready for sale add freight in and import duties and tariffs Product Cost Manufacturers add direct materials add direct labor add manufacturing overhead Total cost used internally only covers all 6 blocks Cost object anything for which managers want a separate measurement of cost Direct traced directly to cost object direct materials and labor Indirect can t be traced to cost object so allocated OverHead ASK YOURSELF does the cost relate to production Yes means product cost no means period cost I S for Service Company service revenues minus operating expenses equals operating income I S for Merchandiser sales minus COGS equals gross profit minus operating expenses equals operating income COGs has separate equation Beg inventory plus purchases plus import duties and tariffs plus freight in equals cost of goods available for sale minus ending inventory equals COGS merch COGS is to COGM manu I S for Manufacturer Sales minus COGS equals gross profit minus operating expenses equals operating income COGS equals beg finished goods inventory plus cost of goods manufactured equals costs of goods available for sale minus ending finished goods inventory equals COGS Cost of goods manufactured equals beg work in progress inventory plus direct materials used plus direct labor plus manufacturing overhead equals total manufactured costs either incurred during period or account for minus ending work in progress inventory equals cost of goods manufactured Direct Materials Used equals beg raw materials inventory plus purchases plus freight in equals materials available for use minus ending raw materials inventory equals direct materials use Chapter 3 Process costing mass production similar item total costs are averages over all units ex paint oil cereal Job costing unique and custom products or small batches total costs are accumulated by job ex hospitals custom homes Both use averages I guess Flow of inventory through Manufacturing System Raw materials in storeroom work in process plant floor productions dept finished goods ready for sale COGS sold Production schedule knowing what materials are needed to do jobs to complete orders includes start and end date scheduled shut for holidays Bill of materials how do I make product take one job off schedule how many to make what you are making recipe for job makes sure enough DM and DL are on hand for the job Purchasing process internal controls purchasing determines ordering needs issues purchase order shipping and receiving prepares receiving report acct marches invoice with purchase order acct pays invoice if all above matches purchases orders Job cost report tracks direct materials direct labor overhead job number start end date Work in Process inventory job cost report on complete jobs sums to the total WIP inventory shown on balance sheet Materials requisition job needs materials system generates report of what s needed be careful of tracking traces DM to individual job records Raw materials record tracks materials you have in your inventory to see what needs purchased Direct labor costs