ACCT 2020 1nd Edition Exam 1 Study Guide Lectures 1 4 Lecture 1 September 3 3 Processes of Managers o Planning Establish goals specify how goals will be achieved Develop budget o Controlling How are things going 1000 dollar revenue goal 2 weeks into the month revenue only 200 Either they are doing something wrong or they have made an improper goal The controlling function gathers feedback to ensure plans are being followed Feedback in the form of performance reports that compare actual results to projected goals o Decision Making What should we be selling Who should we be serving How should we execute How does Managerial accounting apply to you o Marketing Majors Planning how much should we budget for TV print advertising Controlling its he budget of price cut increasing unit sales as expected are we accumulating too much inventory during the holiday shopping season Decision making should we sell our service in a bundle or separately o Accounting majors Many accounting graduates begin working for public accounting firms However most leave at some point to work in other organizations The IMA estimates that 80 of accountants are in an accountant role Customer Value Propositions o Customer intimacy strategy Understand and respond to individual customer needs Ex luxury hotels and department stores o Operational Excellence Strategy Deliver products and services faster more conveniently and at lower prices Ex Wal Mart as fast as low cost as possible Maybe not best customer service but inventory always available o Product Leadership Strategy Offers High quality products not just standard THE BEST Apple Bose Trying to offer innovative products to their customers Theory of Constraints o A constraint also called a bottleneck is anything that prevents you from getting what you want The theory of constraints is based on the observation that effectively managing the constraint is the key to success o ONLY ACTIONS THAT STRENGTHEN THE WEAKEST LINK IN THE CHAIN CAN IMPROVE THE PROCESS 1 Identify the weakest link 2 Allow the weakest link to set the tempo 3 Focus on improving the weakest link 4 Recognize that the weakest link is stronger Importance of Ethics o Remember that if ethics didn t exist there would be no trust among participating members of the market If business practices were corrupt prices would go up and product quality would decrease o The institute of Management Accountant IMA creates managerial guidelines that accountants SHOULD follow Remember there are no laws governing the guidelines of internal accounting o Do not disclose confidential information unless legally obligated to do so and communicate information fairly and objectively Six skills of effective leaders 1 Technical competence MOST IMPORTANT 2 High integrity 3 Understand how to implement organizational change 4 Strong communication skills 5 Capable of motivating and mentoring other people 6 Effectively manage team based decision processes Definitions o Strategy is a game plan that enables a company to attract customer by distinguishing itself from competitors The focal point of a company s strategy should be its target customers o Risk Management Evaluate all risks for company then mitigate and reduce risk by implementing controls Ex harmful products more rigorous testing o Business process is a series of steps that are followed in order to carry out some task in business o Value chain The Chain of processes that end in value for the business Ex R D product design manufacture marketing distribution customer service o Corporate Social Responsibility Can t reduce cost in expense of other factors like society the environment or health o Lean production the components are not bought until ordered the product not made until it was ordered Often called JIT just in time production Lecture 2 September 5 Manufacturing Cost Categories o The Product Cost Direct material Raw materials that become an integral part of the product and that can be conveniently traced directly to it Ex Flour for the loaf of bread Direct labor those labor cost that can be easily traced to the individual units of the product Ex Wages paid to bakers Manufacturing overhead costs that cannot be easily traced to the specific units produced basically everything else If it relates to the manufacturing of the product Manufacturing Overhead also can be split into several costs Indirect material used to support production like lubricants and cleaning supplies for machines or equipment Indirect labor wages paid to laborers not directly involved in production ex supervisors janitors etc The building the lighting the desks the utilities Non manufacturing costs o Selling costs costs necessary to secure the order and delivery of the product o Administrative costs all executive organizational and clerical costs Products Cost vs Period Cost o Product costs include direct materials direct labor and manufacturing overhead while period costs Include all selling costs and administrative costs Which of the following costs would be considered a period cost rather than a product cost in a manufacturing company Property taxes on headquarters and selling commission are both period costs Prime cost vs Conversion Costs o Prime costs vary directly with the amount of product produced Direct materials Direct Labor while conversion costs are those required to turn raw materials into sellable goods Labor overhead Cost Categories o Variable costs vary in total in direct proportion to changes in the level of product produces In some cases you total texting bill if not on plan is bases on how many texts you send 1text 10ct so 5texts 50cents The cost per unit remains constant o Fixed costs remain constant and total regardless of changes in the level of activity A monthly cellphone contract that is unlimited would be constant In this case cost per unit varies inversely with changes in activity If you talk 1 minute then my cost per minute is 60 min If I talk 10 minutes then my cost per minute is 10 min fixed costs often have a relevant range For example if a company needs 1020 square feet and the only options are 1000sqft 2000sqft or 3000sqft they must take the available option of 2000sqft This creates different thresholds which has a flat relative range If they needed 2500sqft they would then need to go to the 3000sqft range Activity level does NOT affect these costs o Committed costs are long term and cannot be significant reduced in the short term Ex Depreciation and building payments o