INTRO MANAGERIAL ACC
INTRO MANAGERIAL ACC ACCT 2101
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This 9 page Class Notes was uploaded by Arturo Hilll IV on Tuesday October 13, 2015. The Class Notes belongs to ACCT 2101 at Louisiana State University taught by Andrew Christie in Fall. Since its upload, it has received 21 views. For similar materials see /class/223049/acct-2101-louisiana-state-university in Accounting at Louisiana State University.
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Date Created: 10/13/15
quot quot g 2101 39 quot quot Andrew Christie Test 2 Notes Chapter 4 Cost Allocations Justification and Properties Tasks Price intermediate goods and services within firm Allocate apply factory overhead products Track costs through factory to finished goods and cost of goods sold Other Uses Solving scarce resource problems Evaluate product line profitability periodic Evaluating special orders Evaluating performance cost and profit centers ewwe Summary Provide economic justification for allocations Understand the effects of allocations on managers decisions Benchmark for evaluations of allocations 01 01 Q3 In equilibrium SD no excess demand no excess supply If price doesn t change we have an excess demand QT PT Qi Pi P and Q have a positive relation ie P and Q move in the same direction Contrast Communism rationing by waiting Price system Rationing by pricepeople who value something the most are willing to pay the most for it Hurricanes Water chainsaws plywood Justify Using Allocations ac as a Price Marginal revenue MR Revenue from g unit produced Slopes gradients of revenue and cost curves Profit Max Choose volume where MRMC Distinguish SRMC from LRMC Fig 41 Pro t Revenue TC Need to approximate marginal cost BE Break even zero pro t Fig 42 LR cost curve is an envelope of SR cost curves LR Long run SR Short run Returns to Scale Output 0 two inputs X1 X2 Constant When we double both inputs we double output Increasing When we double both inputs we more than double output As NT firm is more ef cient LRMCl as NT Decreasing When we double both inputs get legthan double output LRMCT as NT Fig 43 AC will be a good approximation over wide ranges ofoutput Fig 44 Summary AC F N v Used to approximate LRMC Capacity and Volume Measures Capacity Maximum we can produce given our current technology Continuous Flow Processes Capacity is well de ned Most chemical processes can my be operated at capacity Discount Manufacturing 1 Design capacity of machines a Never want to operate at capacity 2 Labor capacity direct 3 Materials handling conveyors forklifts 4 Storage How far below capacity 75 90 Volume TC F vN AC F N v A actual B budget 2 versions 1 Actual volume Na 2 Budgeted forecast volume a One year ahead forecast of sales volume 3 Normal volume long run technology based forecast a 75 90 of capacity around pro t max volume 35 years Fig 45 Actual Costing 5 de ciencies all serious ACa FaNa va 1 Not known until end of the year a Flying blind messes up decision making because consequences of decisions are not known 2 ACa varies inversely with volume heads to death spiral a NT aci NT aci NT b Ni acT Ni acT Ni Kodak Death Spiral Engineering and users were captive Changed decision rights of users Single price for engineering services 3 Performance evaluation in pro t centers a Managers look better in bad times and worse in good times 4 Does not isolate inef ciencies at their source 5 No effective way evaluate cost center mgrs Four and ve are caused by lack of a benchmark for what things may cost Budgeted Costing ACb FbNb vb Nb is always one period ahead of sales forecast 1 Known in advance 2 Death spiral remains inverse relation between ACb Nb 3 Performance evaluation centers still de cient caused by inverse relation between N and ACT Four and ve now have a benchmark Budgeted variance TCa TCb Normal Costing ACb FbNb vb Nb longer term technology based forecast 1 ACT known in advance 2 Death spiral gone broken ST link between AC and N 3 Performance evaluation in pro t centers is improved Four and ve are still xed Fig 47 Decision Making Price known in advance B N Death Spiral A B Isolate inef ciencies B N m PE in cost centers N B PE in pro t centers N Corporate Jet Firm Characteristics Seasonal demand for products and travel Demand high in summer and low in winter Decision Rights Execs decide when and how to travel PE Based on budget variances Accounting Cost per mile was actual average monthly cost A03 A03 FaNa va AC is low in summer and high in winter Excess demand for seats in summer excess supply for seats in winter Worse in winter some execs chose to y commercial cash outflow ACb FbNb vb Nb annual forecast ACt ACb x w Wt gt 1 summer Wt lt 1 winter Zt1 Wt 12 Chapter 5 Cost Allocations Using a Single Base Price intermediate goods and services Allocate apply factory overhead to nished products Calculate PC product costs Solve scarce resource problems Evaluate product line pro tability single products line of products or whole division a EX Got rid of Camaro amp Firebird lines b EX GM got rid of Oldsmobile line 6 Special orders a Have certain product and someone comes along and wants variation 7 Evaluate performance in both pro t and cost centers Tlhook Limits in prior chapters 0 Assumed N was measurable 0 Good for a single product line 0 Allocations are based on inputs Q 0 Learn how to allocate using N 0 Switch from N to Q 0 Change terminology r allocation rate Using N rac Using Q r does not ac RFQv acFNv OOOO Inputs Resources Activities Budgets Forecasts Predetermined Rate Budgeted Rate rb acb only for allocations ra aca Cost Pool Factory costs and split into departments say 5 departments Chapter 6 Cost Flows for Product Costing Next test will be on March 23 VWI cover Chapters 16 with emphasis on 46 Fig 61 Interpreting Flows in Different Industries 1 Continuous ow a RM warehouse barges pipelines trains storage tanks b Factory pipes pumps compressors catalysts c FGDS warehouse barges pipelines Shipbuilding I a Warehouse dry dock b Factory shipdry dock 3 Commercial building a Building site warehouse and factory A Agriculture a Warehouse barnsilo b Factory farm 01 Meat Production a RM warehouse stockyard b Factory slaughterhouse c FGDS warehouse freezer Service Industries Some don t have raw materials Computer networking Hardwaresoftware Hospitals Double Entry Assets L OE AssetsT debit Assetsl credit L OET credit L CE debit ExpensesT debit reduces OE Fig 64 Raw Materials OB 112 800 DM 1 725 938 Purchases 1 744 400 IM 12 500 Tota 1 857 200 Tota 1 857 200 Labor Cash Payroll 565000 DL 470000 L 95 000 Total 565 000 Total 5565 000 Factory Overhead OB 0 IM 12500 OHA 500000 IL 95000 Other 367500 if ll Total 500 000 Total we 500 000 Work In Progess OB 0 COGM 2695938 DM 1725938 DL 470000 OHA 500 000 Total 2 695 938 Total 2 695 938 Finished Goods OB 530000 COGS 3010478 COGM from WIP 2 695 938 Total 3 225 938 3 225 938 Labor Cash Payroll 35000 DL 20000 ll quot Total 35 000 Total 35 000
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