Exam 3 in class covers chapters 10 11 12 and 14 Make sure to do the practice problems as much as possible Formulas will be on the back of the exam and must be turned in with the exam Managerial Accounting is NOT GAAP Goal communicate info to decision makers INSIDE the company Go over the slide that compares managerial vs financial For internal not external users Basic Cost System Total costs Direct directly traced cost objects Indirect directly traced cost pools allocated cost objects Costs can be assets or expenses All product costs remain in an inventory account until revenue is earned when the inventory is sold Inventory is assets until disposed or sold Costs are not classified as product costs Making Cost info Useful 1 Full absorption coasting 2 Variable Accounting a Not GAAP Period Costs a Required by GAAP b Used for financial purposes and external reporting Are in SGA Do not create any assets on the balance sheet Components of Manufactured Product 1 Materials 2 Labor 3 Manufacturing overhead a Indirect materials utilities supplies tools 4 Allocate all materials back to products Know how to do COGS COGS Manufactured Cost behavior 1 Variable 2 Fixed Relevant Range a Total dollars change in proportion w output more output more cost b Cost per unit unchanged in relation to output a Total Dollars unchanged in relation to output b Cost per unit Change inversely with output more output lower cost per unit The sweet spot in a manufacturing plant Bakery example with over over cost 40k but with more units more ovens Fixed costs increased and relevant range changes Definition the range of activity e g production or sales over which these relationships are valid Determining Total Variable Cost Variable cost per unit does NOT change CVP Analysis Contribution margin Price per unit variable cost per unit Sales variable cost Senior executives make strategic decisions that impact the cost structure of the company formula Contribution Margin Operating Income The higher the organization s leverage the higher the break eleven points and the higher Operating Leverage the fixed cost Breakeven Analysis Breakeven profit equal to zero Break even in units fixed costs target profit contribution margin per unit Desired Profit Fixed Costs Target Profit Contribution Margin per unit Every single unit after break even is the Contribution Margin per unit Cross Subsidization Over costed vs under costed products Budgeting and Strategy Why we budget Planning and control operations Know the advantages of bottom up vs top down budget process Make sure you know how to calculate and know ab production purchases budget