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Chap002 Student
Chap002 Student
Chapter 2
FB2101 (10/11 Sem B)
Planning
Planning
Directing
Directing and
and
Motivating
Motivating
Controlling
Controlling
McGraw-Hill/Irwin Slide 2
Planning
Identify
Identify
alternatives.
alternatives.
Select
Select alternative
alternative that
that does
does
the
the best
best job
job of
of furthering
furthering
organizations
organizations objectives.
objectives.
Develop
Develop budgets
budgets to
to guide
guide
progress
progress toward
toward the
the
selected
selected alternative.
alternative.
McGraw-Hill/Irwin Slide 3
Directing and Motivating
McGraw-Hill/Irwin Slide 4
Controlling
The
The control
control function
function ensures
ensures
that
that plans
plans are
are being
being followed.
followed.
Feedback
Feedback inin the
the form
form ofof performance
performance reports
reports
that
that compare
compare actual
actual results
results with
with the
the budget
budget
are
are an
an essential
essential part
part of
of the
the control
control function.
function.
McGraw-Hill/Irwin Slide 5
Planning and Control Cycle
Formulating
Formulatinglong-
long- Begin
and
andshort-term
short-termplans
plans
(Planning)
(Planning)
Comparing
Comparingactual
actual Implementing
Implementing
to
toplanned
planned Decision plans
performance Making plans(Directing
(Directing
performance and
(Controlling) andMotivating)
Motivating)
(Controlling)
Measuring
Measuring
performance
performance
(Controlling)
(Controlling)
McGraw-Hill/Irwin Slide 6
Learning Objective 1
McGraw-Hill/Irwin Slide 7
Comparison of Financial and Managerial
Accounting
McGraw-Hill/Irwin Slide 8
Learning Objective 2
McGraw-Hill/Irwin Slide 9
Manufacturing Costs
Direct
Direct Direct
Direct Manufacturing
Manufacturing
Materials
Materials Labor
Labor Overhead
Overhead
The Product
McGraw-Hill/Irwin Slide 10
Direct Materials
Example:
Example: A
A radio
radio installed
installed in
in an
an automobile
automobile
McGraw-Hill/Irwin Slide 11
Direct Labor
Example:
Example: Wages
Wages paid
paid to
to automobile
automobile assembly
assembly workers
workers
McGraw-Hill/Irwin Slide 12
Manufacturing Overhead
Examples:
Examples: Indirect
Indirect materials
materials and
and indirect
indirect labor
labor
McGraw-Hill/Irwin Slide 13
Nonmanufacturing Costs
Administrative
Costs
All executive,
organizational, and
clerical costs.
McGraw-Hill/Irwin Slide 14
Learning Objective 3
Distinguish between
product costs and period
costs and give examples
of each.
McGraw-Hill/Irwin Slide 15
Product Costs Versus Period Costs
Sale
McGraw-Hill/Irwin Slide 17
Classifications of Costs
Prime Conversion
Cost Cost
McGraw-Hill/Irwin Slide 18
Comparing Merchandising and
Manufacturing Companies
Merchandisers . Manufacturers .
.. ..
Buy finished Buy raw
goods. materials.
Sell finished Produce and
goods. sell finished
MegaLoMart goods.
McGraw-Hill/Irwin
Balance Sheet
Merchandiser Manufacturer
Current assets Current Assets
Cash Cash
Receivables Receivables
Merchandise Inventory Inventories
Raw Materials
Work in Process
Finished Goods
McGraw-Hill/Irwin Slide 20
Balance Sheet
Merchandiser Manufacturer
Current assets Current Assets
Cash Cash
Receivables Receivables
Merchandise Inventory Inventories
Raw Materials
Work in Process
Finished Goods
McGraw-Hill/Irwin Slide 21
Learning Objective 4
Prepare an income
statement including
calculation of the cost of
goods sold.
McGraw-Hill/Irwin Slide 22
The Income Statement
Cost of goods sold for manufacturers differs only
slightly from cost of goods sold for merchandisers.
Merchandising Company
Cost of goods sold:
Beg. merchandise
inventory $ 14,200
+ Purchases 234,150
Goods available
for sale $ 248,350
- Ending
merchandise
inventory (12,100)
= Cost of goods
sold $ 236,250
McGraw-Hill/Irwin Slide 23
Basic Equation for Inventory Accounts
Withdrawals
Withdrawals
Beginning
Beginning Additions
Additions Ending
Ending
balance
balance
+ to
to inventory
inventory
= balance
balance
+ from
from
inventory
inventory
McGraw-Hill/Irwin Slide 24
Quick Check
McGraw-Hill/Irwin Slide 25
Learning Objective 5
McGraw-Hill/Irwin Slide 26
Schedule of Cost of Goods Manufactured
Manufacturing Work
Raw Materials Costs In Process
Manufacturing Work
Raw Materials Costs In Process
McGraw-Hill/Irwin Slide 29
Product Cost Flows
Manufacturing Work
Raw Materials Costs In Process
McGraw-Hill/Irwin Slide 30
Product Cost Flows
Manufacturing Work
Raw Materials Costs In Process
McGraw-Hill/Irwin Slide 31
Product Cost Flows
McGraw-Hill/Irwin Slide 32
Manufacturing Cost Flows
Balance Sheet Income
Costs Inventories Statement
Expenses
Material Purchases Raw Materials
McGraw-Hill/Irwin Slide 35
Quick Check
McGraw-Hill/Irwin Slide 36
Quick Check
McGraw-Hill/Irwin Slide 37
Learning Objective 6
Understand the
differences between
variable costs and fixed
costs.
McGraw-Hill/Irwin Slide 38
Cost Classifications for Predicting Cost
Behavior
How
How aa cost
cost will
will react
react
to
to changes
changes in in the
the
level
level ofof activity
activity within
within
the
the relevant
relevant range.
range.
Total variable costs
Total variable costs
change
change when
when activity
activity
changes.
changes.
Total fixed costs
Total fixed costs
remain
remain unchanged
unchanged
when
when activity
activity changes.
changes.
McGraw-Hill/Irwin Slide 39
Variable Cost
McGraw-Hill/Irwin Slide 40
Variable Cost Per Unit
McGraw-Hill/Irwin Slide 41
Fixed Cost
Your monthly contract fee for your cell phone is fixed for the
number of monthly minutes in your contract. The monthly
contract fee does not change based on the number of calls
you make.
Monthly Cell Phone
Contract Fee
Variable Total variable cost changes Variable cost per unit remains
as activity level changes. the same over wide ranges
of activity.
Fixed Total fixed cost remains Average fixed cost per unit goes
the same even when the down as activity level goes up.
activity level changes.
McGraw-Hill/Irwin Slide 44
Quick Check
McGraw-Hill/Irwin Slide 45
Learning Objective 7
Understand the
differences between direct
and indirect costs.
McGraw-Hill/Irwin Slide 46
Assigning Costs to Cost Objects
Direct costs Indirect costs
Costs that can be Costs that cannot
easily and be easily and
conveniently conveniently
traced to a unit traced to a unit
of product or of product or
other cost object. other cost object.
Examples: direct Example:
material and manufacturing
direct labor overhead
McGraw-Hill/Irwin
Learning Objective 8
Define and give examples
of cost classifications used
in making decisions:
differential costs,
opportunity costs, and
sunk costs.
McGraw-Hill/Irwin Slide 48
Cost Classifications for Decision Making
McGraw-Hill/Irwin Slide 49
Differential Cost and Revenue
McGraw-Hill/Irwin Slide 50
Opportunity Cost
The potential benefit that is given
up when one alternative is selected
over another.
McGraw-Hill/Irwin Slide 51
Sunk Costs
McGraw-Hill/Irwin Slide 52
Quick Check
McGraw-Hill/Irwin Slide 53
Quick Check
McGraw-Hill/Irwin Slide 54
Quick Check
McGraw-Hill/Irwin Slide 55
End of Chapter 2
McGraw-Hill/Irwin Slide 56