Managerial accounting The gathering and preparing of accounting information that is used within a company to help ensure the organization s goals and objectives are met efficiently and effectively Difference between Managerial and Financial Managerial Flexible Internal users managers Financial Everything is by the books External users creditors investors Rules Controlled with GAAP Rules Non GAAP Divisional Department Reporting Companywide reporting Focus Looks at the present and is future oriented Reports prepared whenever needed Focus Historical Reports prepared at the end of the accounting period quarterly or annually Not detail oriented Detail oriented 1 Planning setting goals and how to reach them 2 Controlling actions for implementing plans 3 Evaluating using feedbacks to reach goals 4 Decision making Product differentiation and low cost production A marketing process that showcases the differences between products tries to make a product look more attractive when competing with other products Providing goods or services at a low cost example Walmart matches or lowers prices compared to other companies Balance scorecard supply chain management just in time inventory and enterprise resource planning systems A performance measurement system that considers not only financial measures but also customer business process and learning measures Use if Managerial Accounting is in assisting Managers with What are the two different approaches to developing a competitive advantage Product differentiation Low cost production How is strategic performance monitored Balance scorecard Supply chain management The management of an interconnected or interlinked between network Just in time inventory Enterprise resource planning systems What was one must always be considering 4 common cost behavior patterns Difference between variable and fixed cost Variable cost Fixed cost Cost behavior Cost drivers What happens if the sales activity increases meaning we sell more stuff or services What happens if the sales activity decreases channel and node business involved in the provision of product and service packages required by the end customers in a supply chain Supply chain management spans the movement and storage of raw materials work in process inventory and finished goods from point of origin to point of consumption Demand driven inventory system in which materials parts sub assemblies and support items are delivered just when needed and neither sooner nor later Its objective is to eliminate product inventories from the supply chain Software system used for identifying and planning the resource needs of an enterprise Provides one user interface for the entire organization to manage product planning materials and parts purchasing inventory control distribution and logistics production scheduling capacity utilization order tracking finance and human resources The ethics of accounting and conducting oneself accordingly 1 variable costs 2 fixed costs 3 step costs 4 mixed costs Fixed Variable Varies in total Constant per unit Cost does increase or decrease as you produce more unit and the activity level changes Consumers have an effect on the cost Ex paper for a printing company Fixed in total Vary per unit Cost does not increase or decrease as you produce more unit and the activity level changes Cost that incurs no matter how many consumers Ex rent A cost that changes in total as the cost drive activity changes A variable cost changes in direct proportion to changes in the cost driver activity When working with variable costs think of them on a per unit basis A cost that remains constant does not change in total as the cost driver activity changes When working with fixed costs think of them in total Refers to the way a cost behaves or reacts to changes in activity levels The activity levels that drive or cause costs to change The variable cost total will rise The variable cost per unit will stay the same no matter the activity The fixe cost total will stay the same The fixed cost per unit will decrease because with more people the cost is lessened The variable cost total will decrease The variable cost per unit will stay the same The fixed cost total will stay the same The fixed cost per unit will increase Discretionary fixed cost Committed fixed costs Step cost Relevant range Mixed cost Cost function equation Methods of cost estimation Visual fit scatter graph method How do you determine how often and for how much something is used Hi low method Steps of the hi low method Regression Analysis What is the best and worst method to use for cost estimation GAAP format of the income statement formats Fixed costs that management has the ability to change in the short run Fixed costs that the company cannot change in the short run A cost that remains constant for a small range of activity but then changes abruptly once outside of that range of activity Realistic range A cost that has both a fixed component which remains constant and a variable component which varies as the cost driver activity varies Y mx b Y total cost M VC per unit X activity level of units B total fixed cost Visual fit hi low method regression The line cost function is placed through the data where the user thinks it fits the best Basically the user is eye balling where the line should be drawn Change in cost divided by Change in activity these numbers are determined by the scatter graph The line cost function is placed through the data so that the data points at the highest and lowest activity points are connected The variable cost per unit of cost driver activity is then calculated followed by the fixed cost Step 1 Look for the high and the low points b looking for the biggest and smallest cost driver the cost numbers are ALWAYS your y coordinates and the units or cost driver are normally the x coordinates Step 2 Find the slope by using the formula m y2 y1 x2 x1 The slope is the variable cost per unit Step 3 Find the y intercept by plugging in your either your high point or low point into the main mix total cost formula for the Y and x along with the slope fond in step 2 for B in the total cost function y mx b Step 4 Determined the estimated cost at a certain activity level or unit by plugging the x unit number under the equation Uses statistical software in order to derive a cost function from all of the historical data available Best regression analysis 2nd best scatter graph method Worst hi low method focuses on the good day and
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