Value Chain 1 Research Development 2 Design 3 Production for purchases 4 Marketing 5 Distribution 6 Customer service Inventoriable product costs production purchases Period Costs 5 others Income statement service company all cost are period cost service revenue operation revenue operation income Merchandise sales cost of goods sold inventoriable product costs operating income Cost of goods sold Merchandise beginning inventory purchases import duties tariffs freight in Inventoriable Product costs Cost of goods sold manufacturer DM DL MOH IFRS International Financial Reporting Standards The SEC has recently moved to adopt IFRS for all publicly traded companies within the next few years In many instances IFRS vary from GAAP reporting SOX 1 CEO CFO assume responsibility for the company s financial statements internal control system and procedures for financial 2 Audit committee must be independent and should include a financial expert 3 New requirements for CPA firms including limited non audit services for audit clients and periodic quality review 4 Stiffer imprisonment and monetary fines for white collar crimes Previously paid CEO and CFO bonuses can be recovered if financial statements were improperly state due to misconduct XBRL Extensible Business Reporting Language enables companies to release financial and business information in a format that can be quickly efficiently and cost0effectively accessed sorted and analyzed over the Internet tag each piece of reported financial and business data so that it can be read by computer programs Advantages decreases retrieval time decreases conversion time facilitates comparisons customizes information more consistent use of financial terminology Sustainability sustainability social responsibility triple bottom line profit people and planet Company Corporate Social Responsibility CSR Reports ISO 9001 2008 Firms may become ISO 9001 2008 certified by complying with the quality management standards set forth by the ISO and undergoing extensive audits of their quality management processes Shifting economy shift away from manufacturing toward service Managerial accounting has expanded Competing in Global Marketplace barriers to international trade have fallen More accurate and timely information needed Advanced Information System Enterprise resource planning ERP Lean production Just in time Total quality management TQM Enterprise resource planning ERP System that integrates a company s functions departments and data ADVANTAGES Streamline operation Respond quickly to changes replace separate software systems Disadvantage expensive US companies must follow GAAP IFRS in their financial accounting systems Financial accounting develops reports for external parties such as creditors shareholders When managers evaluate the company s performance compared to the plan they are performing the controlling role of management Managers are decision makes inside a company Financial accounting provides information on a company s past performance to external parties Managerial accounting systems are not restricted by GAAP IFRS but are chosen by comparing the costs versus the benefits of the system Choosing goals and the means to achieve them is the planning function of management Managerial accounting systems report on various segments or business units of the company Financial accounting statements of public companies are audited annually by CPAs Competence 1 Maintain an appropriate level of professional expertise 2 Preform professional 3 Provide decision support information 4 Recognize and communicate professional limitations or other constraints Confidentiality Keep information confidential expect when disclosure is authorized or legally required 2 Inform all relevant parties 3 Refrain from using confidential information for unethical or illegal advantage Integrity Mitigate actual conflicts of interest 2 Refrain from engaging in any conduct 3 Abstain from engaging in or supporting any activity that might discredit the profession Credibility Communicate information fairly and objectively 2 Disclose all relevant information that could reasonably be expected to influence an intended user s understanding of the reports analyses or recommendations 3 Disclose delays or deficiencies in information timeliness processing or internal controls in conformance with organization policy and or applicable law VALUE CHAIN 1 Research Development 2 Design 3 Production for purchases 4 Marketing 5 Distribution 6 Customer service Inventoriable Product Costs Production Purchases Period Costs Inventoriable Product Costs Merchandiser Purchase price from suppliers Cost to get ready for sale Freight in Import duties or tariffs Does the cost relate to producing the product If yes then it is probably an inventoriable product costs classified as either DM DL or MOH If no then it is probably a period cost Prime costs DM DL Conversion costs MOH DL Direct and Indirect Labor Costs Include salaries and wages fringe benefits payroll taxes 1 Service companies typically do not have an inventory account 2 Honda motors converts raw materials inventory into finished products 3 An insurance company a health care provider and a bank are all examples of service companies 4 Wholesalers buy products in bulk from producers marks them up and resell to retailers 5 Land s End Sears Roebuck Co and L L Bean are all examples of merchandising companies Job cost DM DL MOH MOH Allocate via Predetermined Overhead Rate Process Costing Mass production similar items total costs are averaged over all units Example a system for assigning costs to a large number of identical units that typically pass thought a series of uniform production steps Job costing Unique custom products or small batches total costs are accumulated by jobs differ in the amount of materials labor overhead required Reasons why management needs product cost 1 Reduce future job costs 2 Assess and compare profitability of models 3 Pricing decisions 4 Discounts on high volume sales 5 Bids for custom orders 6 Financial statement preparation Sustainability and Job Costing Job cost record captures the essential resources required to manufacture a product Job cost record can be enhanced with information about 1 Product production s effect on the environment 2 Employees involved in manufacturing process 3 Future consumers 4 Future disposal Subcategories Extended Producer Responsibility EPR Job Costing at a Service Firm Similar to job costing at a