ACC CHAPTER 10

Three Principles of how management accounting systems are designed

1. Assignment of decision making authority

2. Information support for decision making (based on timely and accurate information)

3. support for performance evaluation and rewards

ASSIGN DECISION MAKING → HELP ALONG DECISION MAKING WITH INFORMATION → INCENTIVIZE WITH SUPPORT (evaluations & rewards)

BASIC MANUFACTURING COSTS

1. direct material

2. direct labor

3. manufacturing overhead

Direct Material

raw materials used in production

• costs are direcly tracable to the products manufactured

what goes into making the desk

Direct Labor

wages and payroll of employees who were directly involved in manufacturing

Manufacturing Overhead

all costs other than the costs of idret matierals and direct labor

examples:

• supervisor salary

• utilities

• rent

• insurance

• NOT the guys in the towers

Product Costs vs Period Costs

PRODUCT COSTS

• costs incurred to manufacture inventory

• included on balance sheet

PERIOD COSTS

• costs not involved in the direct manufacturing of a product

• expensed directly to the income statement

3 STAGES OF PRODUCTION

1. raw materials (rm)

2. work in process (WIP)

3. finished goods (fg)