Managerial Accounting - Notes
Managerial Accounting - Notes 23021
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This 6 page Class Notes was uploaded by Shaiann Wilson on Thursday February 18, 2016. The Class Notes belongs to 23021 at Kent State University taught by Michael Selzer in Winter 2016. Since its upload, it has received 16 views. For similar materials see INTRO TO MANAGERIAL ACCOUNTING in Accounting at Kent State University.
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Date Created: 02/18/16
Chapter 1 Planning: to set goals & figure how to go about achieving them Directing: the overseeing of a company’s daily operations Here you can adjust workforce levels Controlling: evaluate the results of an operation along with the plans to make needed adjustments Managers: decision makers within a company Financial Accounting: provides reports on past performance of a company to external parties Credibility: the ability to communicate fairly & objectively Competence: the ability to properly do your job Integrity: the ability to complete resolve conflicts professionally Confidentiality: the ability to not “spill the beans” unnecessarily on your company or your customers ERP: combines software systems XBRL: quarterly & annual reports SOX Act (2002): tests for effectiveness & policies for compliance Sustainability: reduce, reuse, recycle ISO 9001: 2008: competitive advantage Chapter 2 Types of companies: 1. Service: provides service(s), no inventory 2. Merchandise: resell products from suppliers, one inventory account, retailers & wholesalers 3. Manufacturer: uses labor(& other inputs) to make finished goods, three inventory accounts(raw materials, work in process[DirectLabor, DirectMaterial, Manu.Overhead], finished goods) Value Chain: activities that add value to goods & services, usually will cost money 1. Research & Development:Period Costs 2. Design:Period Costs 3. Production/purchases: Inventoriable Product Costs 4. Marketing:Period Costs 5. Distribution:Period Costs 6. Customer Service:Period Costs Costs(object): separate measure of cost Direct Costs: costs that can be traced directly to a cost object (direct materials & direct labor) Indirect Costs: costs that cannot be traced directly to a cost object, but is allocated to a cost object (Manu.Overhead indirect materials, indirect labor, & other indirect manu. costs) Total Costs: used internally only, includes cost of all resources in the value chain Inventoriable Product Costs: used for external reports, recorded on balance sheet as inventory until sold, recorded as an expense on income statement once sold(CoGS) Period Costs: operating expense, immediately placed on the income statement Prime Costs: Direct Materials + Direct Labor Conversion Costs: Manu.Overhead + Direct Labor GAAP: requires use of inventoriable product costs for inventory on external financial statements, included in inventoriable product costs for merchandise Equation: Inventoriable Product Costs Merchandiser: + Purchase price from suppliers + Cost to get ready for sale + Freightin + Import duties or tariffs Income Statement Service Company: Service Revenues Operating Expenses = Operating Income Income Statement Merchandiser: Sales CoGS = Gross Profit > Gross Profit Operating Expense = Operating Income Cost of goods sold(CoGS): + Beg. inventory + Purchases + Import duties or tariffs + Freightin = Costs of goods available for sale Ending inventory = Cost of goods sold Income Statement Manufacturer: Direct Materials Used(DMU): + Beg. Raw Materials + Purchase of Raw Materials + FreightIn………………….. = Materials Available to use End. Raw Materials………. = DMU Cost of Goods Manufactured(CoGM): + Beg. Work in Process + DMU + Direct Labor + Manu.Overhead Costs…. = Total Manu. Costs End. Work in Process…… = CoGM Cost of Goods Sold(CoGS): + Beg. Finished Goods + CoGM…………………… = CoG available for use End. Finished Goods….... = CoGS Chapter 3 Job Costing: unique/custom small batches of items, total costs are accumulated by job Process Costing: similar mass produced items, total costs are averaged over all units Flow of Inventory in Manufacturing: Raw Materials(store room) > Work in Process(production dept.) > Finished Goods(ready to sell) > CoGS(sold) Predetermined Manu.Overhead Rate(PMOHR): Total est. MOH Rate / Total est. amt. of Allocation Base MOH (allocated to job#) = PMOHR * Actual amt. of Allocation Used by Job# Management needs for Product Costs include: reduction of future job costs, assessment of profitability models, pricing decisions, discounts & high volume sales, bids on custom orders, and financial statement preparation Job Cost Record: captures the essential resources required to create a product, adds up all cost associated with each job Over/Under Allocation/Costing: occurs when too many/little jobs are allocated Raw Materials Record: a way to keep track of total raw materials in a storeroom Materials Requisition: needed to get direct materials Purchase Orders: issued by the purchasing dept. to the suppliers before production for needed direct materials Receiving Report: copy of the Purchase Order minus the quantity of materials Bill of Materials: list of all necessary materials needed to produce a certain good Labor Time Record: a form all direct laborers must fill out Invoice: not paid unless the quantity of parts ordered & received is matched Chapter 4 Departmental Overhead Rate(DOHR): separate PMOHR for each dept., used when dept.’s incur different amounts & types of MOH. DOHR = DOHcost / Total Dept. Allocation Elliptical = DOHR * Actual use of Dept. Allocation ActivityBased Costing(ABC): allocates indirect costs to production, focuses on activity & cost of activity, separate allocation rate for each activity ActivityBased Management(ABM): uses ABC to make decisions pricing & product mixing: change prices after identifying the total cost, market the more profitable product(s), shift away from less profitable products cost cutting: analyzes the costs in the value chain(valueadded activity product willing to pay for, nonvalueadded activity packaging not willing to pay for) planning & control: uses cost of activities to create budgets, compares actual activities to see if goal are being met Lean Thinking: business strategy that seeks to efficiently and effectively by means of sustainability, uses Just in Time(JIT) strategies Total Quality Management(TQM): seeks to provide customer with superior goods & services Prevention Costs: avoids poor quality goods/services through employee training, improved materials, maintenance Appraisal Costs: detects poor quality goods/services through testing and inspection Internal Failure Costs: avoids poor quality before delivery by avoiding rework & spoilage External Failure Costs: incurred after a defective product has been delivered and leads to disappointed customers and warranty costs Cost Hierarchy: FacilityLevel: costs incurred regardless of the number of units, batches, or products produced ProductLevel: costs incurred for a particular product regardless of the number of units or batches produced BatchLevel: costs incurred for every batch regardless of the number of unit in that batch UnitLevel: costs incurred for every unit of product produced Cost Distortion: when products are not allocated with the proper amount of indirect costs; results in over/undercosting DOWNTIME: acronym for the 8 wastes 1. Defects 2. Overproduction 3. Waiting 4. Not used talent 5. Transportation 6. Inventory 7. Motion 8. Extra processing POUS: storage system used to reduce waste from transportation by storing materials close to where they can be utilized Takt Time: the rate of production at which demands are met, but overproduction is avoided Kaizen: “Change for the better”
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