ACCT 2521: Exam 1
34 Cards in this Set
| Front | Back |
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Planning
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Setting goals and objectives and how to achieve them
Budgets
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Example of Planning
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Generate more sales via opening new stores
Reduce labor costs by reducing store hours
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Directing
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Overseeing day-to-day operations
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Examples of Directing
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-Using daily/weekly sales reports to adjust marketing strategies
-Using product cost reports to adjust raw material usage
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Controlling
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Evaluating results of operations against plans and making adjustment as needed
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Controlling Examples
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-Comparing budgeted sales with actual sales to take corrective actions
-Comparing budgeted product costs against actual product costs to take corrective action
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Managerial
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Internal Users
-Does not follow GAAP
-Focus on future
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Financial
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External
-Must follow GAAP
-Focus on historical transactions
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The three types of companies
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service
merchandisers
manufacturers
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Service Companies
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Provide a service only
-no inventory
(examples: accountants, banks, doctors, lawyers, auto repair)
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Merchandisers
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Resell products purchased from suppliers
-One inventory account
(Examples: Amazon.com, JC Penney, The Gap)
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Manufacturers
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Use labor and other inputs to convert raw materials into finished products (make their own product)
(examples: Crayola crayons, Dell COmputers, Craftsman Tools)
-Three Inventory accounts
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Manufacturers 3 inventory accounts
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-Raw Materials
-Work in Process
-Finished Goods
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Raw Materials
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Materials waiting to be used
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Work in Process
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Units partially complete
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Finished Goods
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Units complete, waiting for sale
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Cost Object
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Anything for which managers want a separate measurement of cost
-Direct cost and Indirect Cost
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Direct Cost
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Traceable to product
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Indirect Cost
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Not traceable to product (allocated)
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Product Cost
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The cost of making our product
-also called "Manufacturing Cost" or "Inventoriable Product Costs"
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Total Costs
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Need to know total costs to set a price to cover ALL costs plus return a profit
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Period Costs
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All costs incurred in the other stages of the value chain
(Research and Development, Design, Customer Service, Distribution, Marketing)
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Inventoriable Product Cost (Merchandiser)
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+Purchase price from suppliers
+Cost to get ready for sale
+Freight-in
+Import duties or tariffs
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Inventoriable Product Costs (Manufacturer)
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Direct Material
Direct Labor
Manufacturing Overhead(indirect cost)
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Manufacturing Overhead
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Indirect costs related to manufacturing that are not direct materials or direct labor
(Indirect materials, Indirect Labor, Other indirect manufacturing overhead)
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Indirect Materials
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Not easily traced (glue, nails)
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Indirect Labor
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Other then DL
(custodial, maintenance, plant manager)
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Other Indirect Manufacturing Overhead
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(factory insurance, depreciation, rent, utilities)
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Prime Costs
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Direct Materials + Direct Labor
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Conversion Costs
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Direct Labor + Manufacturing Overhead
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Direct and Indirect labor costs include
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Salaries and wages, Fringe benefits, Payroll taxes
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Do Service Companies have Inventory Accounts?
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No
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Do Merchandisers have Inventory Accounts?
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Merchandise Inventory
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Do Manufacturer have Inventory Accounts?
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Raw Materials, WIP, FG inventory
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ACCT 2521: CHAPTER 1