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Chapter 1 Managerial Accounting Concepts and Principles.

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Presentation on theme: "Chapter 1 Managerial Accounting Concepts and Principles."— Presentation transcript:

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 8 Financial Accounting and Managerial Accounting 1-1

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 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 2._______________Coolants for machines that sew baseball gloves 3._______________Wages of assembly line employees 4._______________Ink used to print a player’s autograph on the baseball glove

9 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 2._______________Coolants for machines that sew baseball gloves 3._______________Wages of assembly line employees 4._______________Ink used to print a player’s autograph on the baseball glove Follow My Example 1-2 For Practice: PE 1-2A, PE 1-2B (a) Direct materials (c) Factory overhead (b) Direct labor (c) Factory overhead Left click mouse for answers.

10 Example Exercise 1-4 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 2._______________Cost of endorsement from a professional baseball player 3._______________Office supplies used at the company headquarters 4._______________Ink used to print a player’s autograph on the baseball glove

11 For Practice: PE 1-5A, PE 1-5B 4040 Follow My Example Identify the following costs as a (a) product cost, or (b) period cost for a baseball glove manufacturer. (a) Product cost (b) Period cost (a) Product cost 1._______________ Leather used to make a baseball glove 2._______________Cost of endorsement from a professional baseball player 3._______________Office supplies used at the company headquarters 4._______________Ink used to print a player’s autograph on the baseball glove Left click the mouse to reveal answers.

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 46 Flow of Manufacturing Costs 1-3

14 47 Determining the Cost of Goods Manufactured 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, ,000 Cost of materials placed in production$130,000 to total manu- facturing cost STEP 1: 1-3

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

16 Determining the Cost of Goods Manufactured Cost of materials placed in production$130,000 Direct labor110,000 to cost of goods manufactured section Factory overhead 44,000 Total manufacturing costs added$284,000 STEP 2:

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

18 51 Determining the Cost of Goods Manufactured 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 STEP 3: 1-3

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

20 Manufacturing Company— Income Statement with Statement of Cost of Goods Manufactured from statement of cost of goods manufactured


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