1. Welcome Back Atef Abuelaish1

2. Welcome Back Time for Any Question Atef Abuelaish2

3. Welcome to Principle of Accounting II, Managerial Accounting ACCT 2302 Course # 16112 Atef Abuelaish 3

4. Instructor Name : Atef Abuelaish Married with 3 kids, Born in Cairo/Egypt. Like traveling, Reading, and Sports activities. 3.92 GPA Master of Science in Accounting, Kaplan University [3.92 GPA; Highest honor]. 3.85 GPA Bachelor degree in accounting, Cairo/Egypt and diploma in accounting applied science, HCC [3.85 GPA ; highest honor]. Atef Abuelaish 4

5. Instructor Name : Atef Abuelaish Accreditation council for accountancy & Taxation [ATP # 1101038551]. Accountant with long experiences with domestic and international companies. Master Tax Advisor, Enrolled Agent. Working with HR Block for 10 years. CPA Candidate [Passed REG & BEC] Atef Abuelaish 5

6. Contact Me Email address: atef.abuelaish1@hccs.edu Cell # 832-474-1118 Online McGraw – Hill’s Connect McGraw – Hill’s Connect All Course materials under the course name and number. Atef Abuelaish 6

7. Meet NO. Dates Chapte r TopicHomework Assignment 107/121Managerial Accounting Concepts and Principles. Using Connect – 7 Questions for 60 Points. 207/142Job Order Costing and Analysis.Using Connect – 6 Questions for 60 Points. 307/193Process Costing and Analysis.Using Connect – 7 Questions for 60 Points. 307/194 Activity-Based Costing and Analysis. Using Connect – 7 Questions for 60 Points. 7/22-24Chapters 1, 2, and 3Using Connect - EXAM # 1; 3 PARTS FOR 70 POINTS. At Home 407/215 Cost Behavior and Cost-Volume- Profit Analysis. Using Connect – 7 Questions for 60 Points. 407/216Variable Costing and Analysis.Using Connect – 7 Questions for 60 Points. Atef Abuelaish7

8. Meet NO. DatesChapterTopicHomework Assignment 507/267Master Budgets and Performance Planning. Using Connect – 7 Questions for 60 Points. 07/29 Chapters 4, 5, and 6Using Connect - EXAM # 2; 3 PARTS FOR 70 POINTS. At Home 507/268 Flexible Budgets and Standard Costs. Using Connect – 6 Questions for 60 Points. 607/289Performance Measurement and Responsibility Accounting. Using Connect – 8 Questions for 60 Points. 708/0210 Relevant Costing for Managerial Decisions Using Connect – 8 Questions for 60 Points. 08/05 Chapters 7, 8, and 9 Using Connect - EXAM # 3; 3 PARTS FOR 70 POINTS. At Home Atef Abuelaish8

9. Meet NO. DatesChapterTopicHomework Assignment 8 08/0411Capital Budgeting and Investment Analysis. Using Connect – 7 Questions for 60 Points. 9 08/0913 Analysis of Financial StatementUsing Connect – 6 Questions for 60 Points. Atef Abuelaish9 1008/11 FINAL COURSE FINAL EXAM Chapters 10, 11, and 13 Using Connect - FINAL EXAM of 3 PARTS FOR 70 POINTS. in class from 8 to 11 AM

10. Evaluation Requirements Homework – At Home 720 points Homework – At Home 720 points 3 Exams – At Home 210 points 3 Exams – At Home 210 points Final Exam – In Class 70 Points Final Exam – In Class 70 Points Grand Total 1000 points Grand Total 1000 points Atef Abuelaish10

11. HCC Grading Scale 90 – 100% = A 900 –1000 points 90 – 100% = A 900 –1000 points 80 – 89% = B 800 – 899 points 80 – 89% = B 800 – 899 points 70 – 79% = C 700 – 799 points 70 – 79% = C 700 – 799 points 60 – 69% = D 600 – 699 points 60 – 69% = D 600 – 699 points BELOW 60% = F 0 – 599 points BELOW 60% = F 0 – 599 points Atef Abuelaish11

12. COURSE PLAN Syllabus : Service to direct the activities that all of us must undertake to move everyone from where he/she is, to where he/she wants to be. All course materials on “ Connect Website.” Atef Abuelaish12

13. Managerial Accounting Concepts and Principles Chapter 1 PowerPoint Editor: Beth Kane, MBA, CPA Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Wild and Shaw Managerial Accounting 5th Edition Wild and Shaw Managerial Accounting 5th Edition

14. Purpose of Managerial Accounting Purpose of Managerial Accounting 14

15. Managerial accounting provides financial and nonfinancial information for managers of an organization and other decision makers. Managerial Accounting Basics 15 C 1

16. Purpose of Managerial Accounting 16 C 1

17. Nature of Managerial Accounting 17 C 1

18. Fraud and Ethics in Managerial Accounting 18 Fraud affects all business and it is costly: A 2014 Report to the Nation from the Association of Certified Fraud Examiners (ACFE) estimates the average U.S. business loses 5% of its annual revenues to fraud. The Institute of Management Accountants has issued a code of ethics to help accountants involved in solving ethical dilemmas. C 1

19. Cost Classifications Cost Classifications 19

20. Activity Cost Activity Cost Types of Cost Classifications Classification by Behavior 20 Cost behavior refers to how a cost will react to changes in the level of business activity. Total fixed costs do not change when activity changes. Total variable costs change in proportion to activity changes. C 2

21. 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: A maintenance expenditure benefiting two or more departments. Types of Cost Classifications Classification by Traceability 21 C 2

22. Comparing Product and Period Costs Comparing Product and Period Costs 22

23. Product Types of Cost Classifications Classification by Function 23 Direct Labor Direct Material Manufacturing Overhead Period costs are expenses not attached to the product. Administrative costs are non-manufacturing costs of staff support and administrative functions. Selling costs are incurred to obtain orders and to deliver finished goods to customers. C 3

24. Period and Product Costs in Financial Statements 24 C 3

25. Identifications of Cost Classifications 25 C 3

26. Cost Concepts for Service Companies 26 C 3 The cost concepts described are generally applicable to service organizations. For example, the cost of beverages for passengers of Southwest Airlines is a variable cost based on number of passengers.

27. Following are the costs of a company that manufactures computer chips. Classify each as either a product cost or a period cost. Then classify each of the product costs as direct material, direct labor, or factory overhead. 1. Plastic board used to mount the chip5. Real estate taxes paid on the factory 2. Advertising costs6. Factory supervisor salary 3. Factory maintenance workers’ salaries7. Depreciation on factory equipment 4. Real estate taxes paid on the sales office8. Assembly worker hourly pay to make chips Direct Material Direct Labor Factory Overhead Period Cost 1. Plastic board used to mount the chipX 2. Advertising costsX 3. Factory maintenance workers’ salariesX 4. Real estate taxes paid on the sales officeX 5. Real estate taxes paid on the factoryX 6. Factory supervisor salaryX 7. Depreciation on factory equipmentX 8. Assembly worker hourly pay to make chipsX Product Costs All Factory Costs Assets on Balance Sheet Period Costs Non-Factory Costs Expensed on Income Statement as Selling, General and Administrative C2/C 3 27

28. Manufacturer’s Costs 28 C 3

29. Example: Steel used in the frame of a mountain bike. Direct Materials 29 Direct material costs are the expenditures for direct materials that are separately and readily traced through the manufacturing process to finished goods. C 3

30. Example: Wages paid to a mountain bike assembly worker. Direct Labor 30 Direct labor costs are the wages and salaries for direct labor that are separately and readily traced through the manufacturing process to finished goods. C 3

31. Examples: Indirect labor – maintenance. Indirect material – cleaning supplies. Factory utility costs. Supervisory costs. Factory Overhead 31 Factory overhead consists of all manufacturing costs that are not direct materials or direct labor and the costs cannot be separately or readily traced to finished goods. C 3

32. Direct Material Direct Labor Manufacturing Overhead Prime Cost Conversion Cost Manufacturing costs are often combined as follows: Prime and Conversion Costs 32 C 3

33. Balance Sheet Balance Sheet 33

34. Merchandisers...  Buy finished goods.  Sell finished goods. SaleMart Manufacturers...  Buy raw materials.  Produce and sell finished goods. Reporting Manufacturing Activities 34 C 4

35. MERCHANDISER Current Assets  Cash  Receivables  Merchandise Inventory MANUFACTURER Current Assets  Cash  Receivables  Inventories Raw Materials Goods in Process Finished Goods The primary difference is inventory. Manufacturer’s Balance Sheet 35 C 4

36. Manufacturer’s Balance Sheet 36 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. Raw Materials Finished Goods Goods in Process C 4

37. Income Statement Income Statement 37

38. Manufacturer’s Income Statement 38 P 1

39. Cost of Goods Sold for a Merchandiser and Manufacturer 39 P 1 Cost of goods sold for manufacturers differs only slightly from cost of goods sold for merchandisers.

40. NEED-TO-KNOW Indicate whether the following financial statement items apply to a manufacturer, a merchandiser, or a service provider. Some items apply to more than one type of organization. 1. Merchandise inventory4. Operating expenses 2. Finished goods inventory5. Cost of goods manufactured 3. Cost of goods sold6. Supplies inventory ManufacturerMerchandiserService Provider 1. Merchandise inventoryX 2. Finished goods inventoryX 3. Cost of goods soldXX 4. Operating expensesXXX 5. Cost of goods manufacturedX 6. Supplies inventoryXXX Manufacturer Produces units for sale Balance Sheet includes: Raw Materials Inventory Work in Process Inventory Finished Goods Inventory Merchandiser Purchases units for resale Balance Sheet includes: Merchandise Inventory Service Provider Does not provide a product to its customers; no inventories. P 1 40

41. Flow of Manufacturing Activities Flow of Manufacturing Activities 41

42. Activities and Cost Flows in Manufacturing 42 C 5

43. Schedule of Cost of Goods Manufactured Schedule of Cost of Goods Manufactured 43

44. Summarizes the types and amounts of costs incurred in a company’s manufacturing process. Schedule of Cost of Good Manufactured 44 Direct Materials Used +Direct Labor +Factory Overhead =Total Manufacturing Costs +Beginning Work in Process – Ending Work in Process =Cost of Goods Manufactured P 2

45. Manufacturing Statement 45 P 2

46. Manufacturing Statement 46

47. Include all direct labor costs incurred during the current period. Manufacturing Statement 47 P 2

48. Manufacturing Statement 48 P 2

49. Manufacturing Statement 49 P 2

50. Overhead Cost Flows Across Accounting Reports 50 P 2

51. NEED-TO-KNOW Compute the following three measures using the information below. 1. Cost of materials used 2. Cost of goods manufactured 3. Cost of goods sold Beginning raw materials inventory$15,500Ending raw materials inventory$10,600 Beginning work in process inventory29,000Ending work in process inventory44,000 Beginning finished goods inventory24,000Ending finished goods inventory37,400 Raw materials purchased66,000Direct labor used38,000 Total factory overhead used80,000 Beg. Inv.15,500Beg. Inv.29,000Beg. Inv.24,000 Purchases66,000Matls. Used70,900Cost of GM173,900 Direct Labor38,000 Fact. OH80,000 Avail for Use81,500Avail for Mfg.217,900Avail for Sale197,900 Matls. Used70,900Cost of GM173,900Cost of GS160,500 End. Inv.10,600End. Inv.44,000End. Inv.37,400 Finished Goods Inventory Cost of Direct Materials transferred from Raw Materials Inventory to Work in Process Inventory. Cost of goods completed in the current period and transferred from Work in Process Inventory to Finished Goods Inventory. Cost of goods leaving Finished Goods Inventory and going to the customer. Expensed on the income statement. Raw Materials InventoryWork in Process Inventory $70,900 $173,900 $160,500 P1/P 2 51

52. NEED-TO-KNOW Beg. Inv.15,500Beg. Inv.29,000Beg. Inv.24,000 Purchases66,000Matls. Used70,900Cost of GM173,900 Direct Labor38,000 Fact. OH80,000 Avail for Use81,500Avail for Mfg.217,900Avail for Sale197,900 Matls. Used70,900Cost of GM173,900Cost of GS160,500 End. Inv.10,600End. Inv.44,000End. Inv.37,400 Finished Goods InventoryRaw Materials InventoryWork in Process Inventory Balance Sheet Current assets: Raw Materials Inventory$10,600 Work in Process Inventory44,000 Finished Goods Inventory37,400 Income Statement Sales$XXXXX Cost of Goods Sold(160,500) P1/P 2 52

53. Trends in Managerial Accounting Trends in Managerial Accounting 53

54. Trends in Managerial Accounting 54 Customer Orientation E-Commerce Global Economy Service Economy Lean Practices Value Chain C 6

55. Customer Orientation 55 C 6

56. Quality improvement applied to all aspects of business activities. Seek and uncover waste. Employees encouraged to try new methods to improve quality. Company emphasizes value of quality through quality awards. Total Quality Management 56 C 6 Constant Focus on Higher Standards

57. Complete products just-in-time to ship to customers Complete parts just-in-time for assembly into products Schedule Production Receive materials just-in-time for production Receive customer orders Just-In-Time (JIT) Manufacturing 57 C 6

58. Value Chain 58 The value chain refers to the series of activities that add value to a company’s products or services. Companies can use lean practices to increase efficiency and profits. C 6

59. Raw Materials Inventory Turnover and Days’ Sales Raw Materials Inventory Turnover and Days’ Sales 59

60. 1) Raw Materials Inventory Turnover 60 A1 Raw materials Inventory turnover = Raw materials used Average materials inventory

61. Important Stuff  Raw materials Inventory turnover = Raw materials used / Average materials inventory  Manufacturers cost of Goods Sold (COGS) = Beg. Inventory + Purchases Costs – End. Inventory = COGS  Merchandisers Cost of Goods Sold = Beg. Inventory + Cost of Goods Manufactured – End. Inventory = COGS  Cost of Goods Manufactured = Direct Materials + Direct Labors + Factory Overhead = Total Manufacturing Costs + Beg. Work in Progress - End. Work in Progress = Cost of Goods Manufactured Atef Abuelaish61

62. 5 Minutes Break 5 Minutes Break Atef Abuelaish62

63. Process Costing Job Costing  Used for production of large, unique, or high-cost items.  Built to order rather than mass produced.  Many costs can be directly traced to each job.  Used for production of large, unique, or high-cost items.  Built to order rather than mass produced.  Many costs can be directly traced to each job. Cost Accounting Systems 63 Chapter 7 C 1

64. Chapter 02 Job Order Costing and Analysis

65. Job Order Costing Job Order Costing 65

66. Job Order Production 66 C 1

67. Job Order Production Activities Job Order Production Activities 67 C 1

68. Job Cost Sheet Job Cost Sheet 68

69. Job Order Cost Documents 69 job cost sheet The primary document for tracking the costs associated with a given job is the job cost sheet. C 2

70. Job Cost Sheet 70 C 2

71. Materials Cost Flows and Documents 71

72. Materials Ledger Card 72 P 1

73. Materials Requisition 73 P 1

74. Materials Requisition 74 P 1

75. NEED-TO-KNOW A manufacturing company purchased $1,200 of materials (on account) for use in production. The company used $200 of direct materials on Job 1 and $350 of direct materials on Job 2. Prepare journal entries to record the above transactions. DebitCredit PurchaseRaw Materials Inventory1,200 Accounts Payable1,200 Use - DMWork in Process Inventory550 Raw Materials Inventory550 Beg. Inv.XXXBeg. Inv. Purchases1,200Direct Materials550 Direct Material550Direct Labor Factory OH Direct Materials200Direct Materials350 Direct Labor Factory OH Job 1Job 2 General Journal Raw Materials InventoryWork in Process Inventory P 1 75

76. Labor Cost Flows and Documents Labor Cost Flows and Documents 76

77. Labor Cost Flows 77 P 2

78. Labor Time Ticket 78 P 2

79. Labor Time Ticket 79 P 2 Direct labor—traceable to specific jobs Job B15.........................$ 1,000 Job B16.........................800 Job B17.........................1,100 Job B18.........................700 Job B19......................... 600 Total direct labor...............$4,200 Indirect labor...................... 1,100 Total.............................$ 5,300

80. NEED-TO-KNOW A manufacturing company used $5,400 of direct labor in production activities in May. Of this amount, $3,100 of direct labor was used on Job A1 and $2,300 of direct labor was used on Job A2. Prepare the journal entry to record direct labor used. DebitCredit Work in Process Inventory5,400 Factory Wages Payable5,400 Beginning Inv. Direct Materials5,400 Direct Labor5,400 Factory OH Direct Materials Direct Labor3,100Direct Labor2,300 Factory OH Job A1Job A2 General Journal Factory Wages PayableWork in Process Inventory P 2 80

81. Overhead Cost Flows and Documents Overhead Cost Flows and Documents 81

82. Overhead Cost Flows and Predetermined Overhead Rate 82 P 3

83. Road Warriors uses a predetermined overhead rate (POHR) based on direct labor cost to apply overhead to jobs. Predetermined Overhead Rate 83 P 3

84. Predetermined Overhead Rate 84 P 3

85. NEED-TO-KNOW A manufacturing company estimates it will incur $240,000 of overhead costs in the next year. The company allocates overhead using machine hours, and estimates it will use 1,600 machine hours in the next year. During the month of June, the company used 80 machine hours on Job 1 and 70 machine hours on Job 2. 1. Compute the predetermined overhead rate to be used to apply overhead during the year. 2. Determine how much overhead should be applied to Job 1 and to Job 2 for June. 3. Prepare the journal entry to record overhead applied for June. =$150 per machine hour Machine Hours Used Job 1 Job 2 Total DebitCredit Work in Process Inventory22,500 Factory Overhead22,500 150 hoursx $150 per hour General Journal x Predetermined OH rate= OH Applied 80 hours 70 hours x $150 per hour = $12,000 OH applied = $10,500 OH applied = $22,500 OH applied $240,000 1,600 machine hours Predetermined Overhead Rate =Estimated Overhead Costs Estimated Activity Base P 3 85

86. R ECORDING A CTUAL O VERHEAD Indirect Material Indirect Labor Other P 3 86

87. R ECORDING I NDIRECT M ATERIALS U SED P 3 87

88. R ECORDING I NDIRECT L ABOR U SED P 3 88

89. R ECORDING O THER O VERHEAD C OSTS P 3 89

90. NEED-TO-KNOW A manufacturing company used $400 of indirect materials and $2,000 of indirect labor during the month. The company also incurred $1,200 of depreciation on factory equipment, $500 of depreciation on office equipment, and $300 of factory utilities. Prepare the journal entry to record actual factory overhead costs incurred during the month. DebitCredit Factory Overhead3,900 Raw Materials Inventory400 Factory Wages Payable2,000 Accumulated Depreciation - Factory Equipment1,200 Utilities Payable300 General Journal Actual OH IncurredOH Applied to Production Ind. Materials400 Ind. Labor2,000 Fact. Deprec.1,200 Fact. Utilities300 3,900 Factory Overhead P 3 90

91. Summary of Cost Flows P 3 91

92. Summary of Cost Flows P 3 92

93. Summary of Cost Flows P 3 93

94. Schedule of Cost of Goods Manufactured P 3 94

95. Adjusting Factory Overhead 95 P 3

96. Underapplied or Overapplied Overhead Underapplied or Overapplied Overhead 96

97. Underapplied or Overapplied Overhead 97 P 4

98. NEED-TO-KNOW A manufacturing company applied $300,000 of overhead to its jobs during the year. For the independent scenarios below, prepare the journal entry to adjust over- or underapplied overhead. Assume the adjustment amounts are not material. 1. Actual overhead costs incurred during the year equal $305,000. 305,000300,000 Underapplied OH5,000 DebitCredit Cost of Goods Sold5,000 Factory Overhead5,000 Factory Overhead Actual OH IncurredOH Applied to Production General Journal P 4 98

99. NEED-TO-KNOW A manufacturing company applied $300,000 of overhead to its jobs during the year. For the independent scenarios below, prepare the journal entry to adjust over- or underapplied overhead. Assume the adjustment amounts are not material. 2. Actual overhead costs incurred during the year equal $298,500. 298,500300,000 Overapplied1,500 DebitCredit Factory Overhead1,500 Cost of Goods Sold1,500 Factory Overhead Actual OH IncurredOH Applied to Production General Journal P 4 99

100. Homework assignment  Using Connect – 7 Questions for 60 Points for Chapter 1.  Using Connect – 6 Questions for 60 Points for Chapter 2. 3 Process Costing and AnalysisActivity-Based Costing and Analysis  Prepare chapters 3 “ Process Costing and Analysis.” AND 4 “ Activity-Based Costing and Analysis.” Happiness is having all homework up to date Atef Abuelaish100

101. Thank you and See You Next Week at the Same Time, Take Care Thank you and See You Next Week at the Same Time, Take Care Atef Abuelaish101