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CHAPTER 14Managerial Accounting: A field of accounting that provides economic and financial information for managers and other internal users.Managerial Accounting applies to only businesses and organizations.a. trueb. falsefalse: also applies to non profits and profit oriented companies.Managerial Accounting is responsible for:a. all managers.b. All roles of the companyc. Strategic cost managementd. Informing managers of the current business environment.C. strategic cost managementManagerial Accounting Distinguishing Features:- Applies to all types of business-Service, Merchandising, and Manufacturing.- Applies to all forms of business organizations-Proprietorships, Partnerships, and Corporations.- Applies to not-for-profit as well as profit-oriented companies.- Changed role in collecting and reporting costs to management as a result of increasingly automated business environment.- Now more responsible for strategic cost management – assisting in evaluating how well resources are employed by the company.- Accountants now serve on teams with people from production, marketing, engineering, etc.- Aid in making critical strategic decisions.Managerial and Financial Accounting are similar in:a. They both deal with economic events of a businessb. They both determine who is responsible for economic eventsc. They both require that economic events be quantifies and communicated to interested partiesd. Both a and cD. Both a and cSIMILARITIES between Managerial and Financial Accounting:- Both managerial and financial accounting deal with economic events of a business-Thus, interests overlap.- Both require that economic events be quantified and communicated to interested parties -Determining unit cost is part of managerial accounting, Reporting cost of goods manufactured is a part of financial accounting.DIFFERENCES between Managerial and Financial Accounting:Managerial:- Primary Users of Reports: Internal Users; Officers, Managers- Types and Frequency of Reports: Internal Reports; as frequent as needed- Purpose of reports: Special purpose for specific decisions- Content of Reports: Sub units of the business. Very detailed. Extends beyond double entry accounting to any relevant data. Standard is relevance to decisions.- Verification Process: No independent audits.Financial: - Primary Users of Reports: External Users; stockholders, creditors and regulators.- Types and Frequency of Reports: Financial statements; quarterly and annually.- Purpose of Reports: General Purpose.- Content of Reports: Pertains to business as a whole. Highly condensed. Limited to double entry accounting and cost data. Generally accepted accounting principles.- Verification Process: Audit by CPAWhat are the 3 broad functions of management?a. Distinguishing, Planning and Controllingb. Planning, Completing and Directingc. Distinguishing, Planning and Completingd. Planning, Directing and ControllingD. Planning, Directing and ControllingThe key objective to Planning is to:a. add value to the businessb. implement planned objectivesc. determine whether goals are metd. provide a smooth operationA. Add VALUE to the businessManagement Functions- PLANNING:- Look ahead and establish objectives such as-Maximize short-term profit and market share.Commit to environmental protection and socialprograms.- Key Objective: Add value to the business -Value measured by trading price of stock and by potential selling price of the company.Value is measured by:a. trading price of a stock and the buyer’s price on a potential contractb. trading price of stock and by potential selling price of the companyc. Potential selling price of the company and stock salesd. Stock sales and potential selling price of half of a company’s worth.B. Trading price of stock and by potential selling price of the companyManagement Functions- DIRECTING:- Coordinate diverse activities and human resources.- Implement planned objectives.- Provide incentives to motivate employees.- Hire and train employees including executives, managers, and supervisors.- Produce smooth-running operation.Management Functions- CONTROLLING:- Process of keeping activities on track.- Determine whether goals are met.- Decide changes needed to get back on track.- May use an informal or formal system of evaluations.Decision making is not a separate management function, but the OUTCOME of the exercise of good judgment in planning, directing, and controlling.Within a company, an organization chart shows:The interrelationships of activities and the delegation of authority and responsibility.Manufacturing consists of:a. activities and processes to convert direct material into direct laborb. activities and processes to convert raw materials into finished goodsc. activities and processes to convert raw materials into costsB. activities and processes to convert raw materials into finished goodsManufacturing Costs- Manufacturing consists of activities and processes to convert raw materials into finished goods.- In contrast, a merchandising firm sells goods in the form in which they were purchased. - Manufacturing costs are typically classified as:Raw materials are:a. Raw materials that can be physically and directly associated with the finished product during the manufacturing processb. Raw materials that cannot be easily associated with the finished productc. basic materials and parts used in the manufacturing processC. basic materials and parts used in the manufacturing processDirect materials are:a. Raw materials that can be physically and directly associated with the finished product during the manufacturing processb. Raw materials that cannot be easily associated with the finished productc. basic materials and parts used in the manufacturing processA. raw materials that can be physically and directly associated with the finished product during the manufacturing process.Indirect Materials are:a. Raw materials that can be physically and directly associated with the finished product during the manufacturing processb. Raw materials that cannot be easily associated with the finished productc. basic materials and parts used in the manufacturing processManufacturing Costs -> MATERIALS:Raw Materials:- Basic materials and parts used in the manufacturing process.Direct Materials :- Raw materials that can be physically and directly associated with the finishedproduct during the manufacturing process.Indirect Materials:- Raw materials that cannot be easily associated with the finished product.- Not


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LSU ACCT 2000 - Chapter 14

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