Acct 2101 Test 1 Chapters 1 2 5 6 09 30 2014 Managerial Accounting useful information for management to make decisions Managerial vs Financial o Internal External o Internal Reports Quarterly o Specific General o Segment Units GAAP o Non Audited Audited Functions of Management Planning Organizing looking ahead by establishing company objectives Directing Leading coordinating human resources Controlling measuring monitoring insuring that planned goods activities are being followed Types of Organizations Manufacturing Firms purchased raw materials from suppliers convert them into finished goods Merchandising Companies sell the good that manufactures produce o Wholesalers merchandise to other businesses o Retailers merchandise to general public Variable those that change in TOTAL in direct proportion to change in activity levels However PER UNIT or AVG variable remains the same VC units sold Manufacturing represents all cost associated w producing a physical product Indirect Materials IDM Indirect Labor IDL Direct Materials DM Direct Labor DL Manufacturing Overhead MOH Supervisor s Salary Rent Utilities Maintenance Deprecation Taxes License Permits Insurance Product Cost Cost of Goods Sold cost assigned to the product Product Cost DM Used Direct Labor MOH Period Cost expenses are incurred Prime Cost basic cost of unit Prime Cost DM Used DL Conversion Cost cost of transforming raw materials into finished units Conversion Cost DL MOH Cost of Goods Sold Manufacturing Report Beginning Work in Progress BWIP Manufacturing Cost DM Purchases Total Ending Raw Materials DM Used DL Applied MOH Total Manufacturing Cost Ending WIP COGS Cost Account Systems measuring recording reporting of product cost Process Cost System cost are accumulated assigned to jobs Job Order Cost System assigned to each job individually KNOW Raw Materials RM o D C Beg Bal x Purchased M x DM x WIP o D C Beg Bal x DM x DL x MOH Applied x COGS x MOH o D C Beg Bal x Applied MOH x IDM x IDL x Utilities x Rent x Deprecation x Sales Revenue SR o D C Beg Bal x SR x COGS o D C Beg Bal x COGS x Finished Goods o D C Beg Bal x Applied MOH x Job Cost x INCOME STATEMENT Revenue COGS Gross Profit Expenses Net Income Taxes Cost Components DM VC DL VC o MOH Cost Behavior total cost responds to changes in same measure of activity level Relevant Range range over which a company expects to operate during a year Insurance FC IDM VC IDL VC Rent FC Utilities MC Depreciation FC Supervisor s Salary FC Maintenance MC License Permit FC Property Tax FC Variable Cost those that change in TOTAL directly and proportionally w changes in activity level However PER UNIT or AVG variable remains the same Remains the SAME per unit levels As activity increases price increases VC is a set amt for each extra o VC units sold Fixed Cost remains the same in total FC per unit very inversely FC are not sensitive o FC TC VC Contribution Margin Unit CMPU amount of each sales that remains to cover fc then to profit CMPU Sales Price Variable Cost Contribution Margin Ration CMR percent of each sale CMR CM SR Break Even Point BE fc are covered ZERO profit BE TFC CMPU Target Profit amount of income a company wants to generate Target Profit Units Target Profit Sales o Target Profit Units FC Target Operating CMPU o Target Profit Sales FC Target Operating CMR Margin of Safety MOS difference between actual or expected sales sales BE Margin of Safety Budgeted Actual Sales Breakeven Sales CVP for Decision Making Change prices Change VC Volume Change FC prices Operating Leverage fc are used to operate business and how a company net income reacts to given change Operating Leverage CM Net Operating Income o Higher FC the higher Operating Leverage EQUATIONS High Low o High Low Difference High Low High Low TC High Acct Cost Low Acct Cost Total Variable Cost o TVC VC unit Activity Fixed Cost o FC TC VC Variable Cost o VC units sold Total Cost o TC FC VC Product Cost o Product Cost DM Used DL MOH Prime Cost o Prime Cost DM Used DL Conversion Cost o Conversion Cost DL MOH Assets o Assets Liabilities Equity Revenue Expenses Predetermined Overhead Rate PDOR o PDOR Annual OH Cost Annual Activity Contribution Margin o CM SP VC Contribution Margin Ration o CMR CM SP Operating Leverage o Operating Leverage CM Net Operating Income Break Even o BE TFC CMPU Break Even Sales o BES FC CMR Target Profit Units o TPU FC Target Operating CMPU Target Profit Sales o TPS FC Target Operating CMR Margin of Safety o MOS Sales BES Applied Manufacturing Overhead o Applied MOH PDOR DLC Variable Cost Unit o VC Unit VC Units Fixed Cost Unit o FC Unit FC VC unit 09 30 2014 09 30 2014