Introduction to Managerial Accounting

and Cost Concepts

What is
Managerial Accounting
In management accounting or managerial
accounting, managers use the provisions of
accounting information in order to better inform
themselves before they decide matters within their
organizations, which aids their management and
performance of control functions.

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 Comparing Financial and Management Accounting

Feature Financial Accounting Managerial Accounting

External users, stockholders, creditors, and Internal users; officers and
Primary Users of Reports regulators managers

Internal reports.
Type of Frequency Reports Financial Statements, Quarterly and Annually As frequently as needed.

Special-purpose for specific

Purpose of Reports General-purpose decisions.

Pertains to business as a whole. Pertains to subunits of the business.

Content of Reports Highly aggregated (condensed). Very detailed.
  Limited to double entry and cost data. Extends beyond double-entry data.
  Generally accepted and accounting principles Standards are relevant to decisions.

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Management Functions

Planning

Directing

Controlling

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Planning

5
Planning

- What to do in furthering the

objectives?
- Develop strategies

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Directing

Involves managing day-to-day activities

towards achieving company’s objectives

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Controlling

Ensure that plans are being followed

Keeping the company’s

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objective on track
Manufacturing Costs

Direct Labor Manufacturing

Direct Materials Overhead
Labor cost of factory employees that
Cost that are indirectly associated
can be physically and directly
Raw materials that can be integral with the manufacture of the product
associated to the finished products.
part of the product and can be or those that cannot be traced
directly traced to that finished product directly to the products.

Ex: securities and janitors

Ex: wages paid to
Ex: the tire installed assembly workers Ex: electricity,
water, cleaning
supplies

PRODUCT 9
Classification of Cost
Product Cost

Direct Manufacturing
Materials Direct Labor Overhead

Prime Cost Conversion Cost

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Non-manufacturing Cost

Cost necessary in order to get and deliver the product

Selling Expenses
and

Administrative Expenses

All executive, organizational and clerical costs

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Financial Statements

Income Statement
Sales Revenue xxx

Less: Cost of Goods Sold xxx

Gross Profit xxx

Less Operating Expenses xxx

Net Income xxx

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Cost of Goods Sold

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Flow of Manufacturing

Work In Finished
Raw Materials
Process Goods

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 Flow of Manufacturing

Work In Finished
Raw Materials
Process Goods

Beginning Raw Materials Inventory xxx

Beginning Work In Process Inventory xxx Beginning Finished Goods Inventory xxx
Plus: Raw Materials Purchased xxx
Plus: Total Manufacturing Costs xxx Plus: Cost of Goods Manufactured xxx
Raw Materials Available for use in the
production xxx Cost of Goods Available for Sale xxx
Total Cost of Work in Process xxx
Less: Ending Raw Materials Inventory xxx Less: Ending Finished Goods Inventory xxx
Less: Ending Work In Process Inventory xxx
Raw Materials used in the Production xxx Cost Of Goods Sold xxx
Cost of Goods Manufactured xxx

Manufacturing
Costs 15
 Let’s Practice

1. Beginning raw materials inventory was ₱50,000. During the month,

₱150,000 of raw material was purchased. A count at the end of the
month revealed that  ₱5,000 of raw material was still present. What is
the cost of direct material used?

2. Manufacturing cost incurred during the month is ₱150,000. Work in

process at the end of the previous month was ₱85,000. At the end of
the current month, ₱63,000 worth of Finished Goods Inventory was
recorded. What is the cost of goods available for sale during the
month?
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 THANK YOU!

References:
• Slideshare.net
• Youtube.com
• Jerry J. Weygandt, PhD, CPA; Paul D. Kimmel,
PhD, CPA; and Donald E. Kieso, PhD, CPA
Managerial Accounting, Sixth Edition