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Acct 202 Ch1
Acct 202 Ch1
Chapter 1
Managerial Accounting
08/28/2021
Learning Objectives
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Key Features of Managerial Accounting
• Managerial accounting provides economic and financial information
for managers and other internal users.
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Key Features of Managerial Accounting (cont’d)
▫ Differences:
Financial Accounting Managerial Accounting
Users
External users: stockers, Internal users: officers
Frequency
creditors, and regulators. and managers.
Purpose
Financial statements. Internal reports. As
Contents Quarterly and Annually. frequently as needed.
General-purpose. Special-purpose for
special decisions.
Pertains to business as Pertains to subunits of
a whole. the business.
Highly aggregated. Very detailed.
Limited to double-entry Extended beyond
accounting and cost double-entry accounting
Verification process data. to relevant data.
Follow GAAP Standard is relevance to
decisions.
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Management Functions
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Exercise 1
• Indicate whether the following statements are true or false.
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Exercise 2
• Indicate whether the following statements are true or false.
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Exercise 3
Classification of Manufacturing Costs
• Manufacturing consists of activities and processes that convert raw
materials into finished goods.
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Classification of Manufacturing Costs (cont’d)
• Direct materials (DM)
▫ Raw materials: basic materials and parts used in manufacturing process.
▫ Raw materials that can be physically and directly associated with the
finished product during the manufacturing process are classified as
direct materials.
▫ Example: seats installed in a car made by Toyota.
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Classification of Manufacturing Costs (cont’d)
• Direct labor (DL)
▫ Work of factory employees that can be physically and directly associated
with converting raw materials into finished goods.
▫ Example: wages paid to automobile assembly workers at Toyota.
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Classification of Manufacturing Costs (cont’d)
• Manufacturing overhead (MOH)
▫ Costs that are indirectly associated with manufacturing the finished
product.
▫ Includes all manufacturing costs except direct materials and direct labor.
▫ Example: indirect materials, indirect labor, depreciation and insurance on
manufacturing facilities.
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Product versus Period Costs (cont’d)
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Exercise 4
• Your Boat, Inc., is a small company that assembles custom sailboats
from components supplied by various manufacturers. Its assembly
shop and retail sales store are housed in a small boathouse
Cost Classification
(DM, DL, MOH, selling, admin.)
Wages of employees who build sailboats.
Advertising in newspaper.
Aluminum mast installed in sailboat.
Wages of company’s bookkeeper.
Depreciation on power tools.
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Exercise 5
• Your company manufactures radar sets for commercial aircraft. You
want to borrow money from a bank and the bank requests financial
data. This requires you to classify costs as either product or period
costs.
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Financial Statements for a Manufacturer
• Difference in balance sheet
▫ The balance sheets of a merchandiser and a manufacturer differ in the
inventory section.
• The balance sheet for a manufacturing company shows three
categories of inventory:
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Financial Statements for a Manufacturer (cont’d)
• Difference in income statement
▫ The income statements of a merchandiser and a manufacturer differ in
the cost of goods sold section.
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Financial Statements for a Manufacturer (cont’d)
• Calculation of cost of goods manufactured (COGM)
▫ Total manufacturing costs - Total DM/DL/MOH added in production line.
▫ Total work in process - (1) cost of beginning work in process and (2) total
manufacturing costs for the current period.
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Financial Statements for a Manufacturer (cont’d)
• Cost of goods manufactured schedule
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Exercise 6
• Black Company has the following cost data. Compute cost of goods
manufactured:
Manufacturing overhead:
Property taxes, factory $3,000
Utilities, factory 5,000
Indirect labor 10,000
Depreciation, factory 24,000
Insurance, factory 8,000
Total MOH $50,000
Other costs:
Purchase of raw materials $32,000
Direct labor cost 40,000
Inventories:
Raw materials, beginning $8,000
Raw materials, ending 7,000
Work in process, beginning 6,000
Work in process, ending 7,500
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Trends in Managerial Accounting
Focus on the Value Chain
• Refers to all business processes associated with providing a product
or service
• For a manufacturing firm these include the following:
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Trends in Managerial Accounting (cont’d)
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Trends in Managerial Accounting (cont’d)
• Balanced Scorecard
• Evaluates operation in an integrated fashion
• Uses both financial and non-financial measures
• Links performance to overall company objectives
• All employees are expected to act ethically.
▫ Many organizations have codes of business ethics.
• Corporate social responsibility (CSR)
▫ Extend beyond legal compliance to include voluntary actions that satisfy
stakeholder expectations.
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