Managerial Accounting - Amazon S3

[Pages:350]9/25/2017

Managerial Accounting

Managerial Accounting

Managerial Accounting

Developed in conjunction with Debra Porter, Tidewater Community College, tcc.edu

Cover photo: ,What if politicians innovated the open source way?, CC-BY, photos/library_of_congress/2162720993/



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CONTENTS

Chapter 1: Nature of Managerial Accounting and Costs Chapter 1 Study Plan 1.1 The Role of Accounting in the Basic Management Process 1.2 Characteristics of Managerial Accounting Reports 1.3 Costs and Expenses 1.4 Cost Classifications Used for Planning and Control 1.6 The Statement of Cost of Goods Manufactured Chapter 1 Key Points Glossary Chapter 1: Exercises

Chapter 2: Job Order Cost System Chapter 2 Study Plan 2.1 Characteristics of Job Order Costing 2.2 Subsidiary Ledgers Needed for Job Order Costing 2.3 Job Costing Process with Journal Entries 2.4 Actual Vs. Applied Factory Overhead 2.5 Under- or Over-applied Overhead 2.6 Accounting in the Headlines Chapter 2 Key Points Glossary Chapter 2: Exercises

Chapter 3: Process Cost System Chapter 3 Study Plan 3.1 Process Costing Vs. Job Order Costing 3.2 Equivalent Units (Weighted Average) 3.3 Process Costing (Weighted Average) 3.4 Journal Entries For the Flow of Production Costs 3.5 Process Costing (FIFO Method) 3.6 Process Cost Demonstration (FIFO Method) 3.7 Accounting in the Headlines Chapter 3 Key Points Glossary Chapter 3: Exercises

Chapter 4: Activity-Based Costing Chapter 4 Study Plan 4.1 Activity-Based Costing and Management 4.2 Activity Based-Costing Method 4.3 Accounting in the Headlines Chapter 4 Key Points Glossary Chapter 4: Exercises

Chapter 5: Cost Behavior and Cost-Volume-Profit Analysis Chapter 5 Study Plan 5.1 Cost Behavior Vs. Cost Estimation 5.2 Fixed and Variable Costs 5.3 Mixed Costs



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5.4 Accounting in the Headlines: Costs 5.5 Cost-Volume-Profit Analysis In Planning 5.6 Break - Even Point for a single product 5.7 Break Even Point for Multiple Products 5.8 Cost-Volume-Profit Analysis Summary 5.9 Accounting in the Headlines: Breakeven Chapter 5 Key Points Glossary Chapter 5: Exercises

Chapter 6: Variable and Absorption Costing Chapter 6 Study Plan 6.1 Absorption Costing 6.2 Variable Costing 6.3 Comparing Absorption and Variable Costing Chapter 6 Key Points Chapter 6: Exercises

Chapter 7: Budgeting Chapter 7 Study Plan 7.1 Introduction to Budgeting and Budgeting Processes 7.2 Master Budgets 7.3 Operating Budgets 7.4 Manufacturing Budgets 7.5 Cash Budgets 7.6 Budgeted Balance Sheet 7.7 Budgeting in a Merchandising Company 7.8 Other Budgeting Methods 7.9 Flexible Budgets 7.10 The Performance Report Glossary Chapter 7: Exercises

Chapter 8: Standard Cost Systems Chapter 8 Study Plan 8.1 The Role of Standard Costs in Management 8.2 Calculations for Direct Materials and Labor 8.3 Calculations for Overhead 8.4 Advantages and Disadvantages of Standard Costing 8.5 Variance Summary 8.6 Accounting in the Headlines Glossary Chapter 8: Exercises

Chapter 9: Responsibility Accounting for Cost, Profit and Investment Centers Chapter 9 Study Plan 9.1 Types of Costs 9.2 Responsibility Accounting in Management 9.3 Responsibility Reports 9.4 Responsibility Centers 9.5 Investment Center Analysis 9.6 Segmented Income Statements 9.7 Accounting in the Headlines 9.8 Transfer Pricing



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9.9 Balanced Scorecard Chapter 9 Key Points Glossary Chapter 9: Exercises

Chapter 10: Differential Analysis (or Relevant Costs) Chapter 10 Study Plan 10.1 Differential Analysis 10.2 Applying Differential Analysis in Managerial Decision Making 10.3 Applying Differential Analysis to Quality Decisions 10.4 Accounting in the Headlines Glossary Chapter 10: Exercises

Chapter 11: Capital Investment Analysis Chapter 11 Study Plan 11.1 Capital Investment Analysis 11.2 Short Term Business Decisions 11.3 Accounting in the Headlines - Payback 11.4 The Capitol Rationing Process 11.5 Controlling Capital Investment Expenditures Chapter 11 Key Points Glossary Chapter 11: Exercises

Chapter 12: Financial Statement Analysis Chapter 12 Study Plan 12.1 Analyzing Comparative Financial Statements 12.2 Calculating Trend Percentages 12.3 Common-Size Financial Statements 12.4 Accounting in the Headlines 12.5 Calculate Ratios That Analyze a Company's Short-Term Debt-Paying Ability 12.6 Ratios That Analyze a Company's Long-Term Debt Paying Ability 12.7 Ratios That Analyze a Company's Earnings Performance 12.8 Ratio Summary Chapter 12: Exercises

Appendix: Service Department Allocation Allocation of Service Department Costs Direct Method of Allocation Step Method of Allocation Reciprocal Method of Allocation



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CHAPTER 1: NATURE OF MANAGERIAL ACCOUNTING AND

COSTS

CHAPTER 1 STUDY PLAN

Knowledge Targets I can define the following terms as they relate to our unit:

Direct Cost

Indirect Cost

Prime Cost

Conversion Cost

Product Cost

Period Cost

Direct Material Direct Labor

Overhead

Raw Materials

Cost of Goods Sold Variable Cost

Indirect Materials

Fixed Cost

Indirect Labor

Cost of Goods Manufactured

Financial Accounting

Managerial Accounting

Goods in Process

Finished Goods

Reasoning Targets



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I can identify differences between financial and managerial accounting. I can classify costs as direct or indirect, fixed or variable, prime or conversion, and product or period. I can identify product costs as direct materials, direct labor or overhead. I can understand the flow of goods from raw materials inventory to goods in process inventory to finished goods inventory. I can understand the difference between cost of goods manufactured and cost of goods sold in a manufacturing environment. I can prepare a manufacturing statement with cost of goods manufactured calculated.

Skill Targets

I can calculate direct materials used from raw materials inventory data. I can calculate cost of goods manufactured for a manufacturer. I can calculate cost of goods sold for a merchandiser and a manufacturer. I can prepare a manufacturing statement with cost of goods manufactured calculated.

Click Chapter 1 Plan for a printable copy.

1.1 THE ROLE OF ACCOUNTING IN THE BASIC MANAGEMENT PROCESS

Managerial accounting helps managers make good decisions. Managerial accounting provides information about the cost of goods and services, whether a product is profitable, whether to invest in a new business venture, and how to budget. It compares actual performance to planned performance and facilitates many other important decisions critical to the success of organizations.

The remaining chapters in this book focus on managerial accounting. This chapter provides an overview of managerial accounting and shows how to determine the cost of a particular type of product known as a job.

Watch this video online:

Compare managerial accounting with nancial accounting

Whereas financial accounting provides financial information primarily for external use, managerial accounting information is for internal use. By reporting on the financial activities of the organization, financial accounting provides information needed by investors and creditors.

Most managerial decisions require more detailed information than that provided by external financial reports. For instance, in their external financial statements, large corporations such as General Electric Company show single amounts on their balance sheets for inventory. However, managers need more detailed information about the cost of each of several hundred products.

We show the fundamental differences between managerial and financial accounting in the chart and video.



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Financial accounting

Users

External users of information ? usually shareholders, financial analysts, and creditors

GAAP

Must comply with generally accepted accounting principles.

Time Period

Uses historical (or past) data.

Detail

Presents summary data, costs, revenues, and

presented profits.

Managerial accounting

Internal users of information ? usually managers.

NO generally accepted accounting principle requirements

May use estimates of the future for budgeting and decision making.

More detailed data are presented about product.

Watch this video online:

Accountants currently face a big challenge: designing information systems that provide information for multiple purposes. Some people at lower levels in the organization need detailed information, but not the big picture provided by a company's income statement. However, managers at top levels need to see the big picture.

All of you will use accounting information in your careers. Therefore, you need to know enough about accounting to get the information you need for decision making.

Managerial accountants face many choices involving ethics. For example, managers are responsible for achieving financial targets such as net income. Managers who fail to achieve these targets may lose their jobs. If a division or company is having trouble achieving financial performance targets, managers may be tempted to manipulate the accounting numbers.

In its Standards of Ethical Conduct for Management Accountants, the Institute of Management Accountants (IMA) states that management accountants have an obligation to maintain the highest levels of ethical conduct by maintaining professional competency, refraining from disclosing confidential information, and maintaining integrity and objectivity in their work.[1]

The standards recommend that people faced with ethical conflicts follow the company's established policies that deal with such conflicts. If the policies do not resolve the conflict, accountants should consider discussing the matter with their superiors, potentially going as high as the audit committee of the board of directors. In extreme cases, the accountants may have no alternative but to resign.

Licensing & Attributions

CC licensed content, Shared previously

Accounting Principles: A Business Perspective. . Authored by: James Don Edwards, University of Georgia & Roger H. Hermanson, Georgia State University.. Provided by: Endeavour International Corporation. Project: The Global Text Project. License: CC BY: Attribution

All rights reserved content

Introduction to Managerial Accounting. Authored by: Education Unlocked. Located at: . License: All Rights Reserved. License Terms: Standard YouTube License Financial Accounting vs Managerial Accounting. Authored by: Education Unlocked. Located at: . License: All Rights Reserved. License Terms: Standard YouTube License

1.2 CHARACTERISTICS OF MANAGERIAL ACCOUNTING REPORTS



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Financial reporting by manufacturing companies

Many of you will work in manufacturing companies or provide services for them. Others will work in retail or service organizations that do business with manufacturers. This section will help you understand how manufacturing companies work and how to read both their internal and external financial statements.

Assume you own a bicycle store and purchase bicycles and accessories to sell to customers. To determine your profitability, you would subtract the cost of bicycles and accessories from your gross sales as cost of goods sold. However, if you owned the manufacturing company that made the bicycles, you would base your cost of goods sold on the cost of manufacturing those bicycles. Accounting for manufacturing costs is more complex than accounting for costs of merchandise purchased that is ready for sale.

Perhaps the most important accounting difference between merchandisers and manufacturers relates to the differences in the nature of their activities. A merchandiser purchases finished goods ready to be sold. On the other hand, a manufacturer must purchase raw materials and use production equipment and employee labor to transform the raw materials into finished products.

Thus, while a merchandiser has only one type of inventory--merchandise available for sale--a manufacturer has three types--unprocessed materials, partially complete work in process, and readyfor-sale finished goods. Instead of one inventory account, three different inventory accounts are necessary to show the cost of inventory in various stages of production. Looking at Exhibit 2, you can see how the inventory cost flows differ between manufacturing and merchandising companies.

We compare a manufacturer's cost of goods sold section of the income statement to that same section of the merchandiser's income statement in the chart below. There are two major differences in these cost of goods sold sections: (1) goods ready to be sold are referred to as merchandise inventory by a merchandiser and finished goods inventory by a manufacturer, and (2) the net cost of purchases for a merchandiser is equivalent to the cost of goods manufactured by a manufacturer.

Merchandiser Cost of goods sold: Merchandise inventory, Beginning

Manufacturer Cost of goods sold: $ 25,000 Finished goods inventory, Beginning

$ 50,000

Net cost of purchases

165,000 Cost of goods manufactured

Cost of goods available for sale Merchandise inventory, Ending Cost of goods sold

$ 190,000 Cost of goods available for sale 30,000 Finished goods inventory, Ending

$ 160,000 Cost of goods sold

1,100,000 $1,150,000

60,000 $1,090,000

Unlike a merchandiser's balance sheet that reports a single inventory amount, the balance sheet for a manufacturer typically shows materials, work in process, and finished goods inventories separately.



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