1. Managerial Accounting Concepts and Principles
Chapter 1
Managerial Accounting
Concepts and Principles

2. Financial Accounting External GAAP Direct current operations
Shareholders
Creditors
Government Agencies
General Public
GAAP
Direct current operations
Plan future operations
Evaluate past activities
LET’S START FROM WHAT WE DO KNOW.

3. Managerial Accounting
Meets the specific needs of a company’s management
Historical data (objective)
Estimated data (subjective)
Prepared as needed for management needs
IMA ALSO
NEXT SLIDE BREAKS THIS DOWN VISUALLY.

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

5. Management Process Planning (strategic/operational) Directing
Controlling
Improving
Decision Making
Planning – Develop company objectives and develop course of action. Strategic – where do you want to be in 5 years – Operational (day to day)
Directing – run day-to day operations – increase production, run smoothly, reduce defects, new machines, etc.
Controlling –compare actual with expected results – monitor reason for changes
Improving – Continuous process improvement – REAL EXAMPLE!
Decision Making – part of all previous steps ( hire new workers to meet new targets, new equip, change suppliers)

6. Operations of a Business
Service
Merchandising
Manufacturing
Service industry – consulting companies, accounting firms
Merchandising – stores that just sell products
Manufacturing – create products

7. Costs Cost object Direct vs Indirect Cost Prime Cost/Conversion Cost
Direct Materials Cost (D)
Direct Labor Cost (D)
Factory Overhead Cost (I)
Prime Cost/Conversion Cost
Product/Period Costs
Cost object – costs are classified in terms of how they relate to an object or a segment of operations, those costs are either direct/indirect costs. Only way to really understand this is with an example – jungle gym direct costs associated – nails, wood, rope, salary of the person assembling the pieces. Indirect cost – salary of employee in charge of production. If the cost object was the gym, then the employee’s salary is an indirect cost, but if the cost object was the overall production process, then the salary is a direct cost.
Prime/Conversion – DM, DL, FO grouped for analysis – prime Dm&Dl, Conversion converting matls to product DL/FO
Product/Period – Fincl statmt - Prdct DM, DL, FO –
period selling, admin (marketing, running the bus)
Product – inventory assets, and flow to the Inc St as COGS, period costs go directly to the Inc St.

8. _______________ Leather used to make a baseball glove
1-2
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
_______________ 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. _______________ Leather used to make a baseball glove
1-2
Follow My Example 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. _______________ Leather used to make a baseball glove
1-2
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
_______________ 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. _______________ Leather used to make a baseball glove
1-2
Follow My Example 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
_______________ 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
Matl – Direct/Indirect matls that have not entered the manfct process
WIP costs of DM, DL, FO not completed FG – done, not been sold
Cost of Goods Manufactured – Statement of COGM
TENNIS BALLS

13. Flow of Manufacturing Costs 1-3
Flow of Manufacturing Costs
1-3 46

14. Materials inventory, December 1, 2008 $ 65,000
Determining the Cost of Goods Manufactured
1-3
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, ,000
Cost of materials placed in production $130,000
to total manu- facturing cost 47

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

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

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

18. Work in process inventory, Dec. 1, 2008 $ 30,000
Determining the Cost of Goods Manufactured
1-3
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 ,000
Cost of goods manufactured $290,000 51

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

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