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Chapter 1: Managerial Accounting and Cost Concepts

by: Kimberly Portes

Chapter 1: Managerial Accounting and Cost Concepts ACC 252

Marketplace > Syracuse University > ACC 252 > Chapter 1 Managerial Accounting and Cost Concepts
Kimberly Portes
GPA 3.38
Intro to Managerial Accounting (ACC 252)
Prof. Zadzilka

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About this Document

Week 3: concepts of cost, cost classification and cost behavior
Intro to Managerial Accounting (ACC 252)
Prof. Zadzilka
Class Notes
managerial accounting, cost, cost classification, cost behavior
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This 7 page Class Notes was uploaded by Kimberly Portes on Sunday September 27, 2015. The Class Notes belongs to ACC 252 at Syracuse University taught by Prof. Zadzilka in Fall 2015. Since its upload, it has received 44 views.

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Date Created: 09/27/15
Accounting 252 Section M002 September 13 2015 Part 18 Introduction to Managerial Accounting Chapter 1 Managerial Accounting and Cost Concepts Connection with Financial Accounting Review Managerial Accounting Financial Accounting 0 Decisions ProductSales Transaction Income statement mix S 0 Balance sheet pricing 0 Statement of cash Suppliers ows Compensation OwnRent Good decisions lead to consistent pro tability Concept of quotCostquot 0 Cost amount given up to acquire something 0 Cost is not synonymous to price Cost Management Necessary element of long term success for an organization 0 Management needs to understand the nature of the different costs so they can be managed correctly Types of Cost Classi cation 0 Financial reporting Predicting cost behavior Assigning cost to cost objects 0 Decision making 0 Decision making 0 A single item can be classi ed in many different ways Appropriate way gt depends on the type of analysis being performed Manufacturing Costs Direct materials Direct labor Manufacturing overhead the Product Manufacturing vs Merchandising Manufacturing the inventory manufactural cost Merchandising the inventory acquisitional cost Direct Materials Raw materials that become an integral part of the product 0 Can be conveniently be traced directly to the product Ex radio installed in a car 0 If it s too small to be traced it s an indirect cost EX thread used in a factory ink used in textbooks gt a detail so minute it takes too much work to trace it directly to products Direct Labor Labor costs that can be easily traced to individual units of a product EX wages paid to car assembly workers Manufacturing Overhead Manufacturing costs that can t be traced directly to speci c units produces Indirect materials factory supplies utilities anything that s part of the product but isn t directly visiblemeasurable Indirect labor wages paid to employees who aren t directly involved in production work like supervisors 0 Also known as factory overhead factory burden and indirect costs Cost Classi cations for Financial Reporting Purposes Product costs All product costs are eventually expenses If it has ANYTHING to do with the factory it is a product cost gt EX subscriptions to magazines in the factory break room Direct c t f gt Direct 39 Inventorie OS 0 lt Goods Sold 7 As Manufacturin g overhead Period costs A period costs are immediate expenses As Selling and Administrativ gt D Cost Behavior 0 The way costs respond to changes in volumeactivity Types of Cost Behavior Patterns Total Text Messaging Bill Variable Total variable cost proportional to the activity level Depends on another variable in order to be calculated can t serve a functional use on its own Cost per unit remains the same over the relevant range of activity gt Examples of variables costs 1 Merchandising companies cost of goods sold 2 Manufacturing companies direct materials direct labor variable overhead 3 Merchandising and manufacturing companies assembly workers commissions shipping costs clerical costs Ex invoicing Ex volume based data plan Fer Text Charge of Texts of Texts Total xed cost remains the same even when the activity level changes within the relevant range Doesn t change no matter what Cost per unit does down as activity level goes up gt Examples of xed costs 1 Committed long term can t be signi cantly reduced in the short term gt depreciation on buildingsequipment real estate taxes manufacturing overhead wages that are by salary 2 Discretionary may be altered in the short term by current managerial decisions gt advertising research development gt Ex unlimited data plan Coal per Text TEII39HZEII Text W1 255349ng Eill Nllll39l lIJEllquot ll lexical Number of Texts The Relevant Range 0 Cost behavior linked to an expected range of activity 0 Like a boundary If the activity level changes signi cantly then cost will too Review of the Connection Between FinancialManagerial Accounting 0 Success of stockholders gt Success with the marketplace gt Success with the workplace Success of stockholders nancial accounting Success with the marketplace managerial accounting amp planningcontrol cycle 0 The front line is the bottom line blue usually means that it wasn t in the original powerpoint Practice Problems from class Page 52 E1 2 0 State whether is a product or period cost If it s a product cost state what kind 1 Cost of a hard drive installed on a computer Product cost direct material 2 Cost of advertising in x newspaper Period cost 3 Wages of employees who assemble computers from components Product cost direct labor 4 Sales commissions to sales people Period cost 5 Wages of the assembly shop s supervisor Product cost manufacturing overhead 6 Wages of the company s accountant Period cost 7 Depreciation on equipment used to test assembled computers before release to customers Product cost manufactured overhead Page 53 E1 4 o Fixed weekly expense 1200 0 Variable cost per cup 022 2000 Cups 0 Fixed cost 1200 0 Variable cost 022 2000 cups 440 0 Total cost 1200 022x 1200 0222000 Cups 1640 0 Average cost per cup total costnumber of cups 082 Variable cost 022 Fixed cost 060 2100 Cups 0 Fixed cost 1200 0 Variable cost 022 2100 cups 462 0 Total cost 1200 022x 1200 0222100 Cups 1662 0 Average cost per cup total costnumber of cups 079 Variable cost 022 Fixed cost 057 2200 Cups 0 Fixed cost 1200 0 Variable cost 022 2000 cups 484 0 Total cost 1200 022x 1200 0222200 Cups 1684 0 Average cost per cup total costnumber of cups 077 Variable cost 022 Fixed cost 055 notice how with more cups sold the average cost per cup decreases as well as the xed cost applied to each cup it can be concluded that in order to increase sales the store must sell more cups however it must be taken into consideration how many more cups the store could sell to potential customers it s not making a pro t if it s just sitting around in inventory


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