Learning Objectives

1. Power Notes Chapter7 Introduction to Managerial Accounting 1. Differences Between Managerial and Financial Accounting 2. How Management Accounting Supports Planning, Directing, Controlling, Improving and Decision Making 3. Manufacturing Cost Terms 4. Prepare Reports for Manufacturing Business Learning Objectives C7

2. Financial and Managerial Accounting Financial Accounting Managerial Accounting Reports Based Primarily On Usefulness to External Users Usefulness to Management

3. Financial and Managerial Accounting Financial Accounting Managerial Accounting Users of Accounting Information Shareholders Creditors Government General Public Management Management

4. Financial and Managerial Accounting Financial Accounting Managerial Accounting Reporting Characteristics Objective Objective and subjective Standard reporting format according to generally accepted accounting principles Flexible reporting formats according to management needs Reports prepared to provide information about the business as a whole Reports prepared to provide information about business segments, divisions, products, etc.

5. Cost Classifications Direct Materials Product Costs Direct Labor Factory Overhead Selling Expenses Period Costs Administrative Expenses

6. Manufacturing Costs Direct Materials: 1. Enters directly into the product. 2. Is significant amount of total product cost. 1. Enters directly into manufacturing the product. 2. Is significant amount of total product cost. Cost other than direct materials cost and direct labor cost incurred in the manufacturing of product. Direct Labor: Factory Overhead:

7. Manufacturing Cost Flows and Classifications Costs Product Costs Balance Sheet Materials Purchases Direct Labor Factory Overhead Income Statement Period Costs Selling and Administrative

8. Manufacturing Cost Flows and Classifications Costs Product Costs Balance Sheet Materials Inventory Materials Purchases Direct Labor Factory Overhead Income Statement Period Costs Selling and Administrative

9. Manufacturing Cost Flows and Classifications Costs Product Costs Balance Sheet Materials Inventory Materials Purchases Direct Labor Work in Process Inventory Factory Overhead Income Statement Period Costs Selling and Administrative

10. Manufacturing Cost Flows and Classifications Costs Product Costs Balance Sheet Materials Inventory Materials Purchases Cost of Goods Manufactured Direct Labor Work in Process Inventory Factory Overhead Income Statement Finished Goods Inventory Period Costs Selling and Administrative

11. Manufacturing Cost Flows and Classifications Costs Product Costs Balance Sheet Product costs flow through the balance sheet to the income statement Materials Inventory Materials Purchases Direct Labor Work in Process Inventory Factory Overhead Income Statement Finished Goods Inventory Cost of Goods Sold Period Costs Selling and Administrative

12. Manufacturing Cost Flows and Classifications Costs Product Costs Balance Sheet Materials Inventory Materials Purchases Period costs flow directly to the income statement Direct Labor Work in Process Inventory Factory Overhead Income Statement Finished Goods Inventory Cost of Goods Sold Period Costs Selling and Administrative Selling and Administrative

13. DM Direct materials used in production Flow of Costs in Perpetual Inventory Accounts Materials Work in Process Finished Goods DM DM Materials Purchased Cost of Goods Sold Factory Overhead Wages Payable Total Wages

14. Flow of Costs in Perpetual Inventory Accounts Materials Work in Process Finished Goods DM DM Materials Purchased IM Cost of Goods Sold Factory Overhead Wages Payable IM Total Wages IM Indirect materials used in production

15. DL Direct labor used in production Flow of Costs in Perpetual Inventory Accounts Materials Work in Process Finished Goods DM DM Materials Purchased DL IM Cost of Goods Sold Factory Overhead Wages Payable IM DL Total Wages

16. Flow of Costs in Perpetual Inventory Accounts Materials Work in Process Finished Goods DM DM Materials Purchased DL IM Cost of Goods Sold Factory Overhead Wages Payable IM DL Total Wages IL IL IL Indirect labor used in production

17. Flow of Costs in Perpetual Inventory Accounts Materials Work in Process Finished Goods DM DM Materials Purchased DL IM Cost of Goods Sold Factory Overhead Wages Payable IM DL Total Wages IL IL OFOH OFOH Other factory overhead costs incurred during production

18. FOHA Factory overhead applied to work in process Flow of Costs in Perpetual Inventory Accounts Materials Work in Process Finished Goods DM DM Materials Purchased DL IM FOHA Cost of Goods Sold Factory Overhead Wages Payable IM DL FOHA Total Wages Based on predetermined overhead rate IL IL OFOH

19. COGM Cost of goods manufactured and transferred to finished goods Flow of Costs in Perpetual Inventory Accounts Materials Work in Process Finished Goods DM DM Materials Purchased COGM COGM DL IM FOHA Cost of Goods Sold Factory Overhead Wages Payable IM DL FOHA Total Wages IL IL OFOH

20. SOLD Finished goods sold Flow of Costs in Perpetual Inventory Accounts Materials Work in Process Finished Goods DM DM SOLD Materials Purchased COGM COGM DL IM FOHA Cost of Goods Sold Factory Overhead Wages Payable SOLD IM DL FOHA Total Wages IL IL OFOH

21. Flow of Costs in Perpetual Inventory Accounts Materials Work in Process Finished Goods DM DM SOLD Materials Purchased COGM COGM DL IM FOHA Cost of Goods Sold Factory Overhead Wages Payable SOLD IM DL FOHA Total Wages Based on predetermined overhead rate IL IL OFOH Summary of cost flows

22. Goodwell Printers Income Statement For the Month Ended December 31, 2003 Sales $28,000 Cost of goods sold 20,150 Gross profit $ 7,850 Selling and admin. expenses: Sales salaries expense $2,000 Office salaries expense 1,500 Total selling and admin. expenses 3,500 Income from operations $ 4,350

23. Power Notes Chapter7 Introduction to Managerial Accounting This is the last slide in Chapter 7.