Managerial Accounting Review

Managerial Accounting Exam 1 Flashcards

Financial Accounting

External users, GAAP compliant, historical focus, reports on company as a whole

Managerial Accounting

Internal use, not GAAP, future focus, segmented reporting

Corporate Social Responsibility (CSR)

Awareness of economic, social, and environmental impact

Triple Bottom Line

Profits (economic), People (social), Planet (environmental)

Service Company

Intangible services (e.g., healthcare, consulting)

Merchandising Company

Resell products (e.g., Walmart)

Manufacturing Company

Make products (e.g., Toyota).

Direct Costs

Easily traced (e.g., coach salary)

Indirect Costs

Not easily traced; allocated (e.g., athletic director salary)

Product Costs

DM, DL, MOH → Inventory → COGS

Period Costs

Selling/Admin → Expense when incurred

Prime Costs

DM + DL

Conversion Costs

DL + MOH

Fixed Costs

Total constant, per unit varies

Variable Costs

Total varies, per unit constant

Traditional Income Statement Format

Sales - COGS = Gross Margin - Operating Exp. = Operating Income

Contribution Margin Income Statement Format

Sales - Variable Costs = Contribution Margin - Fixed Costs = Operating Income

Predetermined MOH Rate

Estimated MOH / Estimated Allocation Base

Apply MOH

Rate × Actual base used

Departmental Rates

Allocate MOH based on departmental usage (e.g., machining vs. assembly)

Activity Based Costing (ABC)

Break MOH into activity pools

Steps for ABC Costing

Identify activities and cost drivers. Compute activity rates. Allocate overhead: Activity Rate × Actual usage.

Benefits of ABC Costing

More accurate, reveals cost drivers and inefficiencies

Flow of Costs Through Inventory to COGS

Raw Materials → WIP (add DM, DL, MOH) → Finished Goods → COGS

Overapplied MOH

Applied > Actual → COGS too high

Underapplied MOH

Actual > Applied → COGS too low

Adjusting small amount of over/underallocated MOH

adjust COGS

Adjusting large amount of over/underallocated MOH

prorate between WIP, FG, COGS

DM Used

Beg. RM + Purchases - End RM

COGM

Beg. WIP + DM + DL + MOH - End WIP

COGS

Beg. FG + COGM - End FG