Presentation is loading. Please wait.

Presentation is loading. Please wait.

Managerial Accounting Wild and Shaw Fourth Edition Wild and Shaw Fourth Edition Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.

Similar presentations


Presentation on theme: "Managerial Accounting Wild and Shaw Fourth Edition Wild and Shaw Fourth Edition Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin."— Presentation transcript:

1 Managerial Accounting Wild and Shaw Fourth Edition Wild and Shaw Fourth Edition Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

2 Chapter 1 Managerial Accounting Concepts and Principles

3 Conceptual Learning Objectives C1: Explain the purpose and nature of, and the role of ethics in, managerial accounting. C2: Describe accounting concepts useful in classifying costs. C3: Define product and period costs and explain how they impact financial statements. C4: Explain how the balance sheets and income statements for manufacturing and merchandising companies differ. C5: Explain manufacturing activities and the flow of manufacturing costs. C6: Identify trends in managerial accounting. 1-3

4 A1: Assess raw materials inventory management using raw materials inventory turnover and days sales in raw materials inventory. Analytical Learning Objectives 1-4

5 P1: Compute cost of goods sold for a manufacturer. P2: Prepare a manufacturing statement and explain its purpose and links to financial statements. Procedural Learning Objectives 1-5

6 Managerial accounting provides financial and nonfinancial information to an organizations managers and other internal decision makers Financial accounting provides general purpose financial information to those who are outside the organization. Managerial and Financial Accounting C1 1-6

7 Nature of Managerial Accounting C1 1-7

8 Behavior Traceability Controllability Relevance Function Managerial Cost Concepts C2 1-8

9 Cost behavior refers to a costs reaction to changes in the level of business activity. Classification by Behavior C2 A fixed cost does not change with changes in the volume of activity. A variable cost changes in proportion to changes in the volume of activity. A mixed cost refers to a combination of fixed and variable costs. 1-9

10 Direct costs Costs traceable to a single cost object. Examples: material and labor cost for a product. Indirect costs Costs that cannot be traced to a single cost object. Example: maintenance expenditures benefiting two or more departments. Classification by Traceability C2 1-10

11 The degree of control depends on the level of management in the organization. More control Very little control Classification by Controllability C2 1-11

12 All costs incurred in the past that cannot be avoided or changed. Sunk costs should not be considered in decisions. Out-of-pocket costs require a future outlay of cash and should be considered in decisions. Opportunity costs are the potential benefits lost by choosing a specific action from two or more alternatives Classification by Relevance: C2 1-12

13 The Product Classification by Function: Product Costs Direct Material Direct Labor Manufacturing Overhead C3 1-13

14 Period costs (expenses) Product costs (inventory) Inventory not sold until 2014 Operating expenses Cost of goods sold Raw Materials Goods in Process Finished Goods Cost of goods sold 2013 Costs incurred 2013 Income Statement 2014 Income Statement 2013 Balance Sheet inventory – (3 accounts) Inventory sold in 2013 Period and Product Costs in Financial Statements C3 1-14 Inventory sold in 2014

15 Completed products for sale. Materials waiting to be processed. Can be direct or indirect. Partially complete products. Material to which some labor and/or overhead have been added. Balance Sheet of a Manufacturer Three Inventory Accounts Raw Materials Inventory Finished Goods Inventory Goods in Process Inventory C4 1-15

16 Beginning Merchandise Inventory Beginning Finished Goods Inventory Cost of Goods Purchased Cost of Goods Manufactured Ending Merchandise Inventory Ending Finished Goods Inventory Cost of Goods Sold Merchandiser Manufacturer + _ + == _ The major difference Income Statement of a Manufacturer C4 1-16

17 Finished Goods Beginning Inventory Cost of Goods Manufactured Finished Goods Ending Inventory Raw Materials Beginning Inventory Raw Materials Purchases Raw Materials Ending Inventory Cost of Goods Sold Goods in Process Beginning Inventory Direct Labor Used Factory Overhead Used Raw Materials Used Sales ActivityProduction Activity Materials Activity Flow of Manufacturing Activities Goods in Process Ending Inventory C5 1-17

18 Summarizes the types and amounts of costs Incurred in a companys manufacturing process. Direct Materials Used +Direct Labor +Factory Overhead =Total Manufacturing Costs +Beginning Goods in Process – Ending Goods in Process =Cost of Goods Manufactured Manufacturing Statement P2 1-18

19 End of Chapter 1


Download ppt "Managerial Accounting Wild and Shaw Fourth Edition Wild and Shaw Fourth Edition Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin."

Similar presentations


Ads by Google