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Chapter 1

Chapter 1. Managerial Accounting Concepts and Principles. Financial Accounting. External Shareholders Creditors Government Agencies General Public GAAP Direct current operations Plan future operations Evaluate past activities. Managerial Accounting.

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Chapter 1

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  1. Chapter 1 Managerial Accounting Concepts and Principles

  2. Financial Accounting • External • Shareholders • Creditors • Government Agencies • General Public • GAAP • Direct current operations • Plan future operations • Evaluate past activities

  3. Managerial Accounting • Meets the specific needs of a company’s management • Historical data (objective) • Estimated data (subjective) • Prepared as needed for management needs

  4. 0 1-1 Financial Accounting and Managerial Accounting 8

  5. Management Process • Planning (strategic/operational) • Directing • Controlling • Improving • Decision Making

  6. Operations of a Business • Service • Merchandising • Manufacturing

  7. Costs • Cost object • Direct vs Indirect Cost • Direct Materials Cost (D) • Direct Labor Cost (D) • Factory Overhead Cost (I) • Prime Cost/Conversion Cost • Product/Period Costs

  8. Example Exercise 1-2 0 1-2 Identify the following costs as (a) direct materials, (b) direct labor, or (c) factory overhead for a baseball glove manufacturer. • _______________ Leather used to make a baseball glove • _______________ Coolants for machines that sew baseball gloves • _______________ Wages of assembly line employees • _______________ Ink used to print a player’s autograph on the baseball glove 27

  9. Follow My Example 1-2 0 1-2 Identify the following costs as (a) direct materials, (b) direct labor, or (c) factory overhead for a baseball glove manufacturer.ss • _______________ Leather used to make a baseball glove • _______________ Coolants for machines that sew baseball gloves • _______________ Wages of assembly line employees • _______________ Ink used to print a player’s autograph on the baseball glove (a) Direct materials (c) Factory overhead (b) Direct labor (c) Factory overhead Left click mouse for answers. 28 For Practice: PE 1-2A, PE 1-2B

  10. Example Exercise 1-4 0 1-2 Identify the following costs as a (a) product cost, or (b) period cost for a baseball glove manufacturer. • _______________ Leather used to make a baseball glove • _______________ Cost of endorsement from a • professional baseball player • _______________ Office supplies used at the company • headquarters • _______________ Ink used to print a player’s autograph on the baseball glove 39

  11. Follow My Example 1-4 0 1-2 Identify the following costs as a (a) product cost, or (b) period cost for a baseball glove manufacturer. • _______________ Leather used to make a baseball glove • _______________ Cost of endorsement from a • professional baseball player • _______________ Office supplies used at the company • headquarters • _______________ Ink used to print a player’s autograph on the baseball glove (a) Product cost (b) Period cost (b) Period cost (a) Product cost 40 Left click the mouse to reveal answers. For Practice: PE 1-5A, PE 1-5B

  12. Financial Statements (Manufacturing Company) • Balance Sheet • Materials (Raw) Inventory • Work in Process (WIP) Inventory • Finished Goods Inventory • Income Statement • Cost of Goods Manufactured

  13. 0 1-3 Flow of Manufacturing Costs 46

  14. to total manu- facturing cost 0 1-3 Determining the Cost of Goods Manufactured STEP 1: Materials inventory, December 1, 2008 $ 65,000 Add: materials purchased during December 100,000 Cost of materials available for use $165,000 Less: materials inventory, Dec. 31, 2008 35,000 Cost of materials placed in production $130,000 47

  15. 0 1-3 Determining the Cost of Goods Manufactured STEP 2: Cost of materials placed in production $130,000 from Step 1 48

  16. to cost of goods manufactured section 0 1-3 Determining the Cost of Goods Manufactured STEP 2: Cost of materials placed in production $130,000 Direct labor 110,000 Factory overhead 44,000 Total manufacturing costs added $284,000 49

  17. from Step 2 0 1-3 Determining the Cost of Goods Manufactured STEP 3: Work in process inventory, Dec. 1, 2008 $ 30,000 Add: total manufacturing costs added 284,000 50

  18. 0 1-3 Determining the Cost of Goods Manufactured STEP 3: Work in process inventory, Dec. 1, 2008 $ 30,000 Add: total manufacturing costs added 284,000 Total manufacturing costs $314,000 Less: work in process inventory 24,000 Cost of goods manufactured $290,000 51

  19. 0 1-3 Manufacturing Company— Income Statement with Statement of Cost of Goods Manufactured (cont’d) to income statement 52

  20. 0 1-3 Manufacturing Company— Income Statement with Statement of Cost of Goods Manufactured from statement of cost of goods manufactured 53

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