Mang. Acct. 1st Exam Study Guide
Mang. Acct. 1st Exam Study Guide NACC 206-01
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This 9 page Study Guide was uploaded by Michaela Zerbo on Monday September 12, 2016. The Study Guide belongs to NACC 206-01 at Rochester Institute of Technology taught by Professor Ann Hager in Fall 2016. Since its upload, it has received 42 views. For similar materials see Managerial Accounting in Accounting at Rochester Institute of Technology.
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Date Created: 09/12/16
1 NACC 206 Managerial Accounting Exam 1 Terms ormulas Exam Materials ★ Terms ○ Managerial Accounting vs Financial Accounting pg 2 ○ The 4 W’s pg 2 ○ 4 Standards of Ethical Conduct pg 2 ○ Job order costing system (importance and purpose) pg 3 ★ 4 Cost Classifications g 34 ○ Traceability ○ Cost Behavior ○ Value Attractions ○ Financial Reporting ★ 3 Elements of Products Costs pg 6 ○ Direct Materials ○ Direct Labor ○ Manufacturing Overhead ★ Procedures ○ Calculating Product Costs pg 6 ○ Calculating Prime Costs and Conversion Costs pg 6 ○ Cost of Goods Manufactured pg 6 ○ Cost of Goods Sold (Income Statement Prep) pg 6 ○ Calculating Predetermined Overhead Rate pg 6 ○ Journal Entries pg 7 ○ Checklist Sheet Example pg 8 ○ Recommended Way of Doing for Statements pg 9 2 Managerial vs Financial ★ Managerial ○ The process of identification, measurement, accumulation, analysis, preparation, interpretation, and communication of financial information used by management plan, evaluate, and control within the organization ★ Financial ○ Takes the actual results of management's decisions about operating, investing, and financing activities and prepares financial statements for parties outside organizations The Four W’s ★ What ○ What info is needed ★ When ○ Due date/deadline ★ Why ○ Know the purpose and focuses ★ Who ○ Identify audience/readers The 4 Standards of Ethical Conduct ★ Competence ○ Maintain an appropriate level of professional expertise regarding skills and experience ★ Confidentiality ○ Refraining from using confidential information for personal gain or outside legal rights ★ Integrity ○ Refraining from participating in any activity that would prejudice carrying out duties ethically ★ Credibility 3 ○ Giving information honestly and within a timely manner Job Order Costing System (Preferred) ❖ Direct materials, labor, overhead ➢ Uses a s ingle WIP ➢ Costs are traced using a subsidiary ledger ❖ Cost Card ➢ A document on which all costs incurred ➢ Used to measure cost of each completed unit The 4 Cost Classifications Cost Traceability ★ Goal is to develop a fairly accurate measurement of costs ■ Product/Service ■ Sales territories ■ Departments ❖ Direct Costs ➢ Costs can be conveniently and economically traced ■ EX. Type of metal in a car can be traced. ❖ Indirect Costs ➢ Costs that cannot be conveniently or economically traced ■ EX. Items with small value or lack of easy visibility 4 Cost Behavior ★ The way costs responds to changes in volume of activity ■ Analyze patterns of cost behavior to gain information ❖ Variable Cost ➢ A cost that changes in direct proportion to a change in productive output ■ Sugar ■ Oil ❖ Fixed Cost ➢ A cost that remains constant within a defined range of activity ■ Supervisor’s salary ■ Depreciation on machinery ■ ValueAdding Attributes ★ Managers examine valueadding attributes of operations ■ This information influences the design of future products ❖ Costs of Administrative Activities ➢ Nonvalue adding cost ➢ Necessary for operation businesses Financial Reports ★ Cost Classifications ❖ Product Costs ➢ “Inventoriable” costs ■ Includes Direct Materials, Direct Labor, and Overhead (Indirect) ➢ Financial Reporting of Product Costs ■ Appears as COGS on income statements ■ Appears on Finished Goods on balance sheets ❖ Period Costs ➢ Cost of resources used during accounting period ■ Selling and administrative expense ■ Non Inventoriable cost ➢ Financial Reporting of Period Costs ■ Appears as operating expenses on income statements 5 Additional Terms (Believed to be on exam) ★ Administrative Costs ○ All executive, organizational, and clerical costs associated with the general management of an organization rather than manufacturing, or selling. ★ Controller ○ The member of the top management team who is responsible for providing relevant and timely data to managers and for preparing financial statements for external users. The controller reports to the CFO. ★ Define the following: (a) direct materials, (b) indirect materials, (c) direct labor, (d) indirect labor, and (e) manufacturing overhead. ○ A. Direct materials are an integral part of a finished product and their costs can be conveniently traced to it. ○ B. Indirect materials are generally small items of material such as glue and nails. They may be an integral part of a finished product but their costs can be traced to the product only at great cost or inconvenience. ○ C. Direct labor consists of labor costs that can be easily traced to particular products. Direct labor is also called "touch labor." ○ D. Indirect labor consists of the labor costs of janitors, supervisors, materials handlers, and other factory workers that cannot be conveniently traced to particular products. These labor costs are incurred to support production, but the workers involved do not directly work on the product. ○ E. Manufacturing overhead includes all manufacturing costs except direct materials and direct labor. Consequently, manufacturing overhead 6 includes indirect materials and indirect labor as well as other manufacturing costs. The 3 Elements of Product Costs ★ Direct Materials ○ Materials that become an integral part of a finished product and whose costs can be conveniently traced to it. ★ Direct Labor ○ Factory labor costs that can be easily traced to individual units of product. Also called touch labor. ★ Manufacturing Overhead ○ All manufacturing costs except direct materials and direct labor. Procedures ★ Total Product Cost ○ Direct materials + Direct labor + Manufacturing overhead ★ Prime Cost ○ Direct materials + Direct labor ★ Conversion Cost ○ Direct labor + Manufacturing overhead ★ Cost of Goods Manufactured ○ Direct materials used in production ○ + Direct labor used in production ○ + Manufacturing overhead costs used in production ○ + Beginning WIP inventory ○ Ending WIP inventory ★ Cost of Goods Sold ○ Beginning finished goods inventory ○ + Cost of goods manufactured ○ Ending finished goods inventory ★ Calculating Predetermined Overhead ○ Divide the estimated total manufacturing overhead costs by the estimated total amount of cost driver 7 8 Checklist Sheet Example Cost Direct Indirect Variable Fixed Cream X X Cocoa X X Vanilla X X Sugar X X Choc. Chips X X Wafer X X Cookies Depreciation X X on Machinery Sales X X Person’s Salary Ice Cream X X Maker’s Salary Factory Rent X X Factory X X Utilities Delivery X X Truck Lease Gas, Oil, X X Truck Maintenance Packaging X X and Wrapper Janitor X X Wages 9 Recommended Way of Doing for Statements Materials Beg. Balance + Purchased Materials = Materials Available Ending balance COST OF DIRECT MATERIALS Labor & + MOH (5 costs!) 1. Depreciation 2. Insurance 3. Utilities 4. Indirect Labor 5. Other costs TOTAL MANUFACTURING COST WIP + WIP Beg. Balance = Cost of Wip Ending Balance = COST OF GOODS MANUFACTURED
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