Managerial accounting by garrison noreen13th chap002

Schedule of Cost of Goods ManufacturedCalculates the cost of raw material, direct labor, and manufacturing overhead used in production.. Manufacturing Cost FlowsFinished Goods Cost of

Managerial Accounting

and Cost Concepts

Chapter 2

Select alternative that does the best job of furthering organization’s objectives.

Develop budgets to guide

Develop budgets to guide progress toward the

Directing and Motivating

Directing and motivating involves managing

day-to-day activities to keep the organization running

smoothly.

 Employee work assignments.

 Routine problem solving.

 Conflict resolution.

 Effective communications.

Feedback in the form of performance reports

that compare actual results with the budget

are an essential part of the control function.

Feedback in the form of performance reports

that compare actual results with the budget

are an essential part of the control function.

Planning and Control Cycle

Decision Making

Formulating and short-term plans

long-(Planning)

Formulating and short-term plans

long-(Planning)

Measuring performance (Controlling)

Measuring performance (Controlling)

Implementing plans (Directing and Motivating)

Implementing plans (Directing and Motivating)

Comparison of Financial and Managerial

Accounting

Direct Materials

Raw materials that become an integral

part of the product and that can be conveniently traced directly to it.

Example: A radio installed in an automobile Example: A radio installed in an automobile

Manufacturing costs that cannot be traced

directly to specific units produced.

Manufacturing Overhead

Examples: Indirect materials and indirect labor

Examples: Indirect materials and indirect labor

Nonmanufacturing Costs

Administrative

Costs

All executive, organizational, and clerical costs.

Product Costs Versus Period Costs

include direct materials, direct

labor, and manufacturing overhead

Period costs include all selling costs and

Sale

Expense

Income Statement

The Income Statement

Cost of goods sold for manufacturers differs only

slightly from cost of goods sold for merchandisers.

Basic Equation for Inventory Accounts

Schedule of Cost of Goods Manufactured

Calculates the cost of raw

material, direct labor, and

manufacturing overhead used

in production.

Calculates the manufacturing

costs associated with goods

that were finished during the

Manufacturing Cost Flows

Finished Goods

Cost of Goods Sold Selling and

Balance Sheet

Costs Inventories

Income Statement Expenses

Material Purchases Raw Materials

Cost Classifications for Predicting Cost

Behavior

How a cost will react

to changes in the level of activity within the relevant range.

 Total variable costs

change when activity changes.

 Total fixed costs

remain unchanged when activity changes.

How a cost will react

to changes in the level of activity within the relevant range.

 Total variable costs

change when activity changes.

 Total fixed costs

remain unchanged when activity changes.

Variable Cost

Your total texting bill is based on how

many texts you send.

Variable Cost Per Unit

5 cents per text.

Fixed Cost

Your monthly contract fee for your cell phone is fixed for the

number of monthly minutes in your contract The monthly

contract fee does not change based on the number of calls

Fixed Cost Per Unit

Within the monthly contract allotment, the average fixed cost per

cell phone call made decreases as more calls are made.

Cost Classifications for Predicting Cost

Behavior

Behavior of Cost (within the relevant range)

of activity.

activity level changes.

End of Chapter 2