What information should managerial accountants provide?
Managerial accounting provides information that helps managers make better decisions.
What is the primary focus of managerial accounting?
- Focus on relevance to business decisions and
- Future orientation
How do you decide on a company's managerial accounting system, which is not regulated by GAAP?
Use cost/benefit analysis: Design the managerial accounting system so that benefits (from helping managers make wise decisions) outweigh the costs of the system.
How do you distinguish among service, merchandise, and manufacturing companies?
- Provide customers with intangible services
- Have no inventories on teh balance sheet
- Resell tangible products purchased ready make from suppliers
- Have only one category of inventory
- Use labor, plant, and equipment to transform raw materials into new finished products
- Have three categories of inventory:
- Materials inventory
- Work in process inveotnry
- Finished goods inventory
How do you compute the cost of goods sold?
No cost of goods sold, because they do not sell tanglible goods
Beginning merchandise inventory
+ Purchases and freight in
- Ending merchandise inventory
= Cost of goods sold
Beginning finished goods inventory
+ Cost of goods manufactured
- Ending finished goods inventory
= Cost of goods sold
How do you compute the cost of goods manufactured for a manufacturer?
Beginning work in process inventory
+ Current period manufacturing costs (direct materials used + direct labor + manufacturing overhead)
- Ending work in process inventory
= cost of goods manufactured
How do you compute the cost per unit?
Cost of goods manufactured
- Total units produced
= Unit product cost
Which costs are initially treated as assets for external reporting? When are these costs expensed?
Inventoriable products costs are initially treated as assets (Inventory); these costs are expensed (as Cost of goods sold) when the products are sold.
What costs are inventoriable under GAAP?
No inventoriable product costs
Purchases and freight in
- Direct materials used
- Direct labor
- Manufacturing overhead
What costs are never inventoriable product costs?
There are always expensed as incurred
What is a budget?
A manthematical expression of the plan that managers use to coordinate the business's activities.
What is controlling?
Implementing plans and evaluating the results of business operations by comparinb the actual results to the budget
What are conversion costs?
Direct labor plus manufacturing overhead
What is a cost/benefit analysis?
Weighing costs against benefits to help make decisions
What is a cost object?
Anything for whch manager want a separate measurement of cost
What is cost of goods manufactured?
The manufacturing or plant-related costs of the goods that finished the production process in a given period.
What is a direct cost?
A cost that can be traced to a cost object
What is direct labor?
The compensation of employees who physically convert materials into finished products.
What are direct materials?
Materials that become a physical part of a finsihed product and whose costs are traceable to the finished product.
What is Enterprise Resource Planning (ERP)?
Software systems that can integrae all of a company's worldwide functions, departments, and data into a single system.
What is factory overhead?
All manufacturing costs other than direct materials and direct labor. Also called manufacturing overhead or indirect manufacturing costs
What is finished good inventory?
Completed goods that havenot yet been sold
What are indirect costs?
Costs that cannot be traced to a cost object
What is indirect labor?
Labor costs that are necessary to make a product but whose costs eighter cannot conveniently be direclty traced to specific finished products or whose costs are not large enough to justify tracing to the specific product.
What are indirect manufacturing costs?
All manufacturing costs other than direct materials and direct labor. Also called factory overhead or manufacturing overhead
What are indirect materials?
Materials used in making a product but whose costs either cannot conveniently bedirectly traced to specific finished products or whose costs are not large enought to justify tracing to the specific product.
What are Inventoriable Product Costs?
All costs of a product that GAAP require companies to treat as an asset for external financial reporting. These costs are not expensed until the product is sold.
What is Just-in-Time (JIT)?
A system in which a company produces just in time to satisfy needs. Suppliers deliver materials just in time to begin production and finished units are completed just in time for delivery to the cusotmer.
What is management accountability?
The manager's responsibility to manage the resources of an organization
What is a manufacturing company?
A company that uses labor, equipment, supplier, and facilities to convert raw materials into new finished products