Managerial Accounting Notes

Managerial Accounting Notes
Chapter 1
Allocate resources properly. Raw materials and labor.

What is the actual cost of this particular item?
Internal users: officers and managers.
Internal reports: as frequently as needed.

Managerial accounting creates more specific reports and specific decisions in comparison to
financial accounting.
Public firm = every quarter or yearly reports.
Managerial firm = daily, weekly, monthly, yearly reports.
Purpose of reports:
Managerial acct = more specific = ex. Level of inventory.
Car Dealership = huge amount of inventory.
Japanese = strict 10 cars a day. (no output = stop producing)
USA manufactures = make immense amounts of cars without taking output in consideration.
Content of reports:
Managerial acct = very detailed. (can pertain to subunits of the business) / you can make your
own reports for better decisions.
Financial acct= business as a whole
Management Functions: Planning, Directing Controlling

Cannot measure = cannot control.
Managerial functions will allow for better decisions.
Ex.)
Maximize the short-term profit and market share.
Pricing is related to the competition out there.
Ex.)
Provide incentives to motivate employees:
Tesla moving to Texas because there was no labor in California. They provided stocks and
incentives to motivate employees.
Ex.)
Keeping activities on track:
Inventory going up, sooner than later profit control is going to be affected. (more expenditure
in inventory).
Controller in the business – the person that controls the resources of the firm.
Do it! Questions
1. Marketing and R&D departments will also be involved in the collecting and reporting
costs to management. Not just the managerial accountant.
5. Managerial accounting does not have to follow GAAP regulations. Usually these
accountant go with traditional accounting principles the business usually use. The most efficient
way of reporting and to create profits.
What is Product Costs and Period Costs?

-What costs are involved in making a product?
Three differences resources to produce a product:

Direct materials, Direct labor, and Manufacturing OH
Product Costs
Direct Materials:
Raw materials can be basically physical and direct materials used for the product.
Tires, handlebars.
Indirect Materials:
Materials that are too small / not physically part of finished product *considered part of
Manufacturing Overhead
Ex.) oil, plastic coatings, stickers, etc
Direct Labor:
Work of factory employees that physically and directly assemble the finished good.
Salaries of employees who put tires on the wheels.
Indirect Labor:
Administrative expenses / labor not associated with the finished product.
Also Overhead.
Manufacturing Costs:
Overhead costs are indirectly associated with the manufacturing of the product.
Ex. Factory depreciation, factory lubricants, factory manager salary, factory maintenance.
Investments in machinery, plants, factory equipment are considered overhead.
Depreciation will be higher if you invest in these types of assets / investment will last longer.
Gas companies like Valero have to think twice as sooner or later all cars will become electric.
Salary of plant manager is considered overhead.
Maintenance for factory or office is overhead.
Period Costs:
Incurred expenses / non-manufacturing costs / selling and admin expenses
Advertising costs
Commissions expense
Shipping and postage
Learning Objective 3:
COGS in financial statements (income statement)
Revenue is a drive due by competitors.

Revenues are outside perspective (see what is going on in the market outside)
Skills are very different from controlling people inside the firm.
Inside the firm…. (where we can control what type of raw materials are going to use, what
labor, etc) the perspective is completely different. You have to look at your own materials,
resources, and labor to maximize and produce profit.
Merchandiser Company COGS:

Beg. Inv + COG purchased – ending inventory = COGS
Manufacturer Company COGS:

Beg finished Goods Inventory + COG manufactured – Ending Finished goods = COGS
TOTAL WIP costs:

Cost of beginning work in process + total manufacturing costs for the current period.
Cost of goods manufactured = total WIP = WIP dec 31 (end of year)
Balance sheet:
We only see one inventory in the balance sheet.
As a merchandiser, If they are increasing ending inventory means they are not selling.
Raw materials march 1, 12,000 + materials purchased 90,000 -raw materials march 31 10,000 =
Direct materials used 92,000 + 75,000 direct labor +
Learning Objective 4:
Discuss trends in managerial accounting
Much US economy has shifted to provided services rather than goods.
To increase the size of Laredo: increase capital, skill labor, manufacturing.

But in Laredo we move inventory, that is our main operation (services).
Value Chain:
Value chain processes are all related to the output of the company. Also, the value chain
processes are needed for obtaining new clients.
Just in Time (JIT) Inventory method – goods are manufactured or purchased just in time for
sale.
TQM (total quality management) – focus on quality of production, reduce defects in finished
products.
Activity Based Costing (ABC) – how we can divide the labor in different activites. How are they
producing the goods and measure the time spent on producing the cost of goods. This
alloscates overhead based on the use of activities.
Balance scorecard –
Business ethics – all employees are expected to act ethically.

Many organization have a code of business ethics.
Sarbanes-oxley act (SOX) –
Chapter 2 Job Order Costing
Job order cost system
The objective is to calculate cost per job, or the unit per job.
The company has the resources and will invest in a
Job Order Cost Flow:
Work In Process (WIP) inventory account – manufacturing costs

Finished Goods Inventory – cost of completed jobs
COGS – when units are sold the cost transfers to COGS
The economic cycle – how are they going to accumulate the cost through the years, and
eventually they are going to get the revenue.
Chapter 3 Process Costing
Output is homogenous.
Job-order cost system – tailed to more customized jobs.

Movies, advertising, health care prouducts, accounting or lawyer jobs and packages
Costs are assigned to individual jobs.
Products are simply unique!
Process cost sytem

Soft drinks, oil, computer chips, chemicals, (typically a product produced in mass)
Costs are tracked through big processes in manufacturing.
Products are produced in mass volumes. “uniformed” like toilet paper, where a product is very
stable and has been manufacted for many decades.
Job order cost system:

WIP inventory is by job numbers and unit
Process cost flow system:

WIP inventory cost is by department (factory plant) accumulated into one cost.
Similarities:
1. Still have materials labor and overhead in costs.
2. Accumulation of the costs are the same.
3. Flow of costs.
Differences:
1. Documents to track costs are different.
2. The number of WIP accounts used.
3. Unit cost computations.
Assigning manufacturing costs

Material costs:
WI

Managerial Accounting Notes

Uploaded by

Copyright:

Available Formats

Managerial Accounting Notes

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Managerial Accounting Notes

Uploaded by

Copyright:

Available Formats

Managerial Accounting Notes

Allocate resources properly. Raw materials and labor.

Internal users: officers and managers.

Internal reports: as frequently as needed.

Management Functions: Planning, Directing Controlling

What is Product Costs and Period Costs?

Three differences resources to produce a product:

Revenue is a drive due by competitors.

Merchandiser Company COGS:

Manufacturer Company COGS:

TOTAL WIP costs:

Cost of goods manufactured = total WIP = WIP dec 31 (end of year)

Much US economy has shifted to provided services rather than goods.

To increase the size of Laredo: increase capital, skill labor, manufacturing.

Business ethics – all employees are expected to act ethically.

Job order cost system

The company has the resources and will invest in a

Job Order Cost Flow:

Work In Process (WIP) inventory account – manufacturing costs

Job-order cost system – tailed to more customized jobs.

Process cost sytem

Job order cost system:

Process cost flow system:

Assigning manufacturing costs

You might also like