manegerial ch1

7/27/2019 Manegerial CH1

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2

Managers

Suppliers

Government Creditors

Owners

Customers

.



Financial Accounting Management Accounting

For external reporting For internal planning andcontrol

3.



4

Management Accounting Financial Accounting

Primary users Internal – the company’smanagers

External – investors andcreditors

Purposes of

information

Help managers plan and

control operations

Help with investment and

credit decisions

Focus and time

dimension

Relevance of information;

focus on the future

Relevance and reliability

of information; focus onthe past

Type of report Internal reports

No audit needed

Financial statements

prescribed by GAAP

Audit by CAs

Scope of information Detailed reports on a weekly

or daily basis

Summarized reports

quarterly and/or annually

Behavioral Concern about how reports

affect employee behavior

Concern about adequate

disclosure

.

Management versus Financial Accounting



Seek to provide services

Simplest accounting

All costs are period costs

5.



6

Net income

Revenues Expenses

.



Resell products purchased from suppliers

Keep an inventory of products

Cost of goods sold is a major expense

7.



Includes cost to purchase goods plus freight-in

8

Beginning inventory

Plus: Purchases, net

Plus: Freight-in

Less: Ending inventory

Equals: Cost of goods sold

.



Productcosts

• Part of

inventory• Expensed

when sold

Periodcosts

• Not part of

inventory• Expensed

when

incurred

.



Net sales revenue $$$$Cost of goods sold $$$$

Gross profit $$$

Operating expenses $$$

Operating income $$$

Other income (expense) $$Net income $$$

Any Company

Income Statement

For the year ended December 31, 2011

.



Use labor, plant, supplies and facilities to convertraw materials into finished products

Three kinds of inventory

11

Materials

inventory

Work in process

inventory

Finished goods

inventory

.



.

. 12

.

Cost object: Anything for which managers want aseparate measurement of cost.

Cost drivers: are any factors that affect cost

Opportunity cost: Is the forgone income from using anasset in its best alternative.

Direct cost: Relate directly to the cost object for whichcost is to be measured.

Indirect cost: Indirectly related to the cost of a costobject



Variable cost: Change in total as the level of activitychanges.

Fixed cost: Do not change in total with changes in the

level of activity.

Semi Variable Cost : cost composed of a mixture offixed and variable components. Costs are fixed for aset level of production or consumption, becoming

variable after the level is exceeded

. 13



Directmaterials

Direct laborManufacturing

overhead

14.



Other costs related to the manufacturing facilityand plant assets

◦ Repairs & maintenance

◦ Utilities

◦ Rent & insurance

◦ Property taxes

◦ Depreciation

16.



17

Net sales revenue $$$$$$$

Cost of goods sold: Beginning finished goods inventory $$$$$$

Plus: Cost of goods manufactured $$$$$

Less: Ending finished goods inventory ($$$$$)

Cost of goods sold $$$$$$Gross profit $$$$$$

Selling and administrative expense $$$$$

Operating income $$$$$$

Any Manufacturing CompanyIncome Statement


.



Type of company Inventoriable

product costs

Period costs

(Expenses)

Service company None Salaries, depreciation,

utilities, advertising,

insurance, property

taxes

Merchandising

company

Purchases plus freight in Salaries, depreciation,

utilities, advertising,

insurance, property

taxes and delivery

expense

Manufacturing

company

Direct materials, Direct

labor and manufacturing

overhead

Office salaries,

depreciation, utilities,

advertising, insurance,

property taxes on office,

selling expenses

18.



19

Materials

Inventory

Finished

GoodsInventory

Sales

Cost of

Goods Sold

INCOME STATEMENT

Operating

Expenses

BALANCE SHEET

=Operating Income

Whensalesoccur

-

-

Work in

ProcessInventory

Period

Costs

Purchases

of

materials

Direct labor &

manufacturing

overhead

.



20

Beginning Work in process inventory $$$

Add: Direct materials used

Beginning direct materials inventory $$$ Plus: Direct materials purchased $$$

Less: Ending direct materials inventory ($$$)

Direct materials used $$$

Direct labor $$$

Manufacturing overhead $$$

Total manufacturing costs incurred during the year $$$

Total manufacturing costs to account for $$$

Less: Ending Work in process inventory $$$

Cost of goods manufactured $$$

Any Manufacturing CompanySchedule of Cost of Goods Manufactured


.



21

BeginningWork in

process

Directmaterials

used

Direct

labor

Manufacturing

overhead

EndingWork in

process

Total

manufacturing

costs

Cost of goodsmanufactured

manegerial ch1

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