FSU ACG 2071 - Introduction to Managerial Accounting

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Chapter 1 Introduction to Managerial Accounting What is Managerial Accounting Managerial accounting provides information that helps managers fulfill their three primary responsibilities planning directing and controlling operations Integrated throughout all of these responsibilities is decision making Planning Setting goals and objectives Directing Overseeing day to day operations Controlling Evaluating our results and making adjustments Managerial accounting emphasizes relevant information that can be used to make business decisions that will positively impact the future operations of the company Financial Accounting vs Managerial Accounting Characteristic Financial Accounting Managerial Accounting Users of information Purpose of information Primary product Reporting format Focus basis of information Characteristic of information Reporting unit Reporting frequency Verification of information Requirement of information Impact on employee behavior EXTERNAL INTERNAL Investing decision Planning directing controlling Preparing Financial Statements Variety of reports GAAP Historical Reliable objective Company as a whole Annually quarterly Audited by CPAs SEC Adequate disclosure Whatever we want Future Relevant Segments As needed No formal audit Not required Concern for behavioral implications The Importance of Ethical Behavior Ethical behavior means doing the right thing regardless of the consequences Not all unethical behavior is illegal but all illegal behavior is unethical 1 Unethical behavior includes Dishonesty Unfairness Lack of objectivity Irresponsibility Sustainability and Managerial Accounting Sustainability as defined by the United Nations is the ability to meet the needs of the present without compromising the ability of future generations to meet their own needs The Three Pillars of Sustainability S O C I A L E N V I R O N M E N T E C O N O M I C S The triple bottom line recognizes that a company s performance should be viewed in terms of the following three items 1 PROFIT economic 2 PEOPLE social 3 PLANET environmental Regulatory Issues and Other Trends SOX IFRS XBRL IR JIT TQM 2 Building Blocks of Managerial Accounting Chapter 2 8 27 2014 Aside from governmental agencies and not for profit companies all companies are in business to generate profits What are the two basic ways of generating more profit Hint think about the Income Statement Increase Revenues Sales 1 2 Decrease Expenses How do companies that embrace sustainability differ Still focus on profits but also consider environment and people Common Types of Companies Service Companies Sell intangible services 0 inventory accounts Merchandising Companies reselling tangible products 1 inventory accounts Manufacturing Companies converting raw materials into a final product EX Toyota making their own cars 3 inventory accounts Manufacturing companies carry three types of inventory Raw materials inventory all materials that go into making our final product engines Work in process inventory partially completed goods partially completed cars Finished goods inventory Goods that are completed and ready to be sold but not yet steel tires sold What is the role of management accounting regardless of the type of company Providing relevant information so that our managers can make the right decisions 3 A company incurs cost in every activity of the value chain What is the value chain The Value Chain Activities that add value Understanding Costs What is a cost object If you were President of FSU what might be some cost objects of interest to you Cost object anything that we want to figure out the cost of President of FSU cost of having dining halls libraries sports teams etc What is the difference between direct and indirect costs Discuss the comfort level associated with both types of costs Direct costs any cost we can trace to any particular cost object FSU Jimbo Fisher s salary to having a football team Comfort level VERY COMFORTABLE Indirect costs Cannot trace to a cost object Must allocate FSU Athletic director s salary cannot be traced to football team Comfort level If you managed a grocery store what costs would you consider to be direct costs of the Deli Department What costs would be indirect costs of the Deli Department Direct costs deli meats cheeses equipment employees Indirect costs cashiers cost of shopping carts 4 As mentioned earlier a company incurs cost in every activity of the value chain However GAAP says we must treat certain costs as inventoriable product costs and other as period costs for financial reporting purposes i e for creating financial statements that go to investors and creditors Which costs along the value chain are inventoriable product costs From production or purchases costs Which costs along the value chain are period costs Research and development design marketing distribution customer service How do period costs flow through the financial statements Period costs are also commonly referred to by another name What is the conventional name for period costs Expensed in the period incurred Operating expense or selling general and administrative SG A How do inventoriable product costs flow through the financial statements Flow through inventory balance sheet first Until sold Do service companies have inventoriable product costs No intangible goods have nothing to story in inventory What costs are considered inventoriable product costs for merchandising companies such as Walmart How are these costs shown on the company s balance sheet Include the cost of the merchandise itself Plus freight in shipping Customs or duties from abroad 1 inventory account The inventoriable product costs for manufacturing companies include three types of manufacturing costs Direct Materials DM Materials ex making tables wood Direct Labor DL Wages ex making tables employee wages Manufacturing Overhead MOH traced to a direct cost All indirect manufacturing costs Anything tied to manufacturing that can t be Direct Materials DM Direct Labor DL Prime costs Direct Labor DL Manufacturing Overhead MOH Conversion costs 5 Dell incurs the following costs Classify the costs as either period costs or inventoriable product costs For inventoriable product costs further classify it as DM DL or MOH Cost Janitorial supplies used at the manufacturing plant Depreciation on computers used at Dell s headquarters Hard drives used in laptops Depreciation on manufacturing equipment Wages of assembly line workers Cardboard foam used for


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FSU ACG 2071 - Introduction to Managerial Accounting

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