ONE Understand the general role of management accounting Focused on the future Provides information to managers and other internal users to enhance decision making and the efficiency effectiveness of the company s operations The four primary responsibilities of a manager Differences between management accounting and financial accounting Plan by setting goals Direct day to day operations Control the company Make critical business decisions Management Internal provides internal reports Aids in planning directing and controlling Emphasizes on the future Focuses on segments Financial External Aids in credit and investment decisions Reports on a company as a whole Information is independently verified How management accountants fit into an organization s structure Perform tasks related to cost accounting and management reporting Designing implementing and testing internal controls Act as internal consultants for business advisers Skills required of management accountants Work well in teams Analyze business and financial information Understand how businesses function as well as knowledge in managerial and financial accounting The role of the IMA Provide a forum for research education and practice development in management accounting and finance and the advocacy of the highest ethical and best business practices in these fields Offers professional certification Ethical decision making framework Follow company s established procedures Notify an immediate supervisor Consult objective adviser Consult an attorney The purpose and major provisions of the Sarbanes Oxley Act Restore trust in financial reporting CEO CFO assume and acknowledge their responsibility for the company s financial statements internal controls and accounting procedures for financial reporting Audit committees be made of independent members CPA firms limited types of non audit services they can provide to audit clients TWO Understand general terminology and concepts The difference between service companies merchandising and manufacturing companies and the types of inventories they have Service Sell intangible services instead of tangible products Largest part of the economy Generally little to no inventory Merchandising Resell tangible products purchased from suppliers Retailers Customers Wholesalers Retail Carry significant inventory Manufacturing Use labor plant and equipment to convert raw materials into finished producs Products Wholesalers Retailers Carry either Raw material Work in Process Finished goods The value chain and its elements Chain of interdependent activities that add value to the company s products and services Elements Research and Development new products and services created Design transformation of an idea needs or wants by consumers Production purchase of raw materials and the deployment of labor Marketing promotion and sale of a company s products services Distribution moving products from their source to the customer Customer Service enhance customer satisfaction and retention Terms used to describe costs Cost Objects Direct Costs and Indirect Costs Cost Object anything for which managers want a separate cost measurement for Direct cost Cost that can be traced to a cost object Indirect Cost relates to a cost object but cannot be traced directly to it Inventoriable Costs only costs incurred during the production or purchases phase of the value chain Period Costs expenses recognized as costs in the period in which they were incurred Operating expenses Prime Costs costs directly traced to finished products and consists of direct material and labor Conversion Costs costs incurred to convert raw materials to finished goods and consists of direct labor and manufacturing overhead Controllable Costs expenditures that are subject to the discretion of a manager Uncontrollable Costs costs locked in for the near term and cannot be reduced w o fundamental changes to a company s operation Relevant Costs costs that are different between two or more decision alternatives Irrelevant Costs costs that are the same between two or more decision alternatives Fixed Costs remain constant over a wide range of activities Variable Costs changes in total in direct proportion to changes in volume Total average costs and how they respond to changes in volume TAC lowers as volume rises THREE Understand concepts related to Job Costing The difference between Process Costing and Job Costing Process Costing Mass production of identical products Average costs across all units produced Job Costing Unique custom orders small batches of different products Costs for each job are accumulated Inventory flow raw materials to work in process to finished goods Raw Material Inventory Work in Process Materials consumed costs transferred Direct labor is added as an incurred expense Manufacturing overhead accumulates and then transfers to WIP as products are finished Costs transferred to Finished Goods Inventory Documents used in a job cost system production plan bill of materials raw materials record job cost record materials requisition and how they are used Production plan fills customer orders and stocks inventory Bill of materials prepped by production engineers and identify all needed raw materials for a job Raw materials record consulted to determine the raw materials already on hand maintained for each item in stock Job cost record prepped for each job and identifies a jobs cost for direct materials Materials requisition used to request materials for production update raw materials record Allocation of manufacturing overhead to jobs Estimated total Manufacturing Overhead costs Estimated total amount of Allocation Base Disposition of over and under allocated manufacturing overhead Journal entries related to job costing Purchase of raw materials DR Raw Materials CR Cash Acct Payable Use of direct and indirect materials DR Work in Process CR Raw Materials Use of direct and indirect labor DR Work in Process CR Salaries Wages Payable Incurring other manufacturing overhead costs DR Manufacturing OH CR Salaries Wages Payable Allocation of manufacturing overhead DR Work in Process CR Manufacturing OH Completion of jobs Sale of units DR Finished Goods Inventory CR Work in Process DR Cost of Goods Sold CR Finished Goods Incurring operating expenses Disposing of under over applied manufacturing overhead Under applied Over Applied DR Cost of Goods Sold CR Manufacturing OH DR Manufacturing OH CR Cost of Goods Sold FOUR Understand concepts related