Chapter 1 Managerial Accounting study guide

NLU ACC 202 MANAGERIAL ACCOUNTING 

BGHS 65560 COLLEGE MANAGERIAL ACCOUNTING 

CHAPTER 1 MANAGERIAL ACCOUNTING CONCEPTS & PRINCIPLES STUDY GUIDE 

MANAGERIAL ACCOUNTING BASICS 

Managerial Accounting - Provides financial and nonfinancial information to an organization's managers.

Purpose of Managerial Accounting 

1. Determining the costs of an organization's products and services.

2. Planning future activities.

3. Comparing actual results to planned results.

Planning - The process of setting goals and making plans to achieve them.

Control - The process of monitoring planning decisions and evaluating an organization's activities and employees.

Nature of Managerial Accounting 

1. Users and decision makers

2. Purpose of information

3. Flexibility of reporting

4. Timeliness of information

5. Time dimensions

6. Focus of information

7. Nature of information

Internal Control System - A way to monitor and control business activities.

Ethics - Beliefs that distinguish right from wrong.

Institute Of Management Accountants (IMA) - Issued a code of ethics to help accountants solve ethical dilemmas.

MANAGERIAL COST CONCEPTS 

Fixed Costs - Do not change with changes in the volume of activity.

Variable Costs - Change in proportion to change in the volume of activity.

Cost Object - A product, process, department, or customer to which costs are assigned.

Direct Costs - Traceable to a single object.

Indirect Costs - Cannot be easily and cost-beneficially traced to a single cost object.

Product Costs - Those costs necessary to create a product.

Period Costs -  Non Production costs and are usually associated more with activities linked to a time period with complicated products.

MANAGERIAL REPORTING 

Direct Materials - Tangible components of a finished product.

Direct Materials Costs - The expenditures for direct materials that are separately and readily traced through the manufacturing process to finished goods.

Direct Labor - Refers to employees who physically convert materials to finished products.

Direct Labor Costs - The wages and benefits for direct labor that are separately and readily traced through the manufacturing process to finished goods.

Factory Overhead - Consists of all manufacturing costs that are not direct materials or direct labor.

Factory Overhead Costs - Not separately or readily traced to finished goods.

Indirect Materials - Components used in manufacturing the product but they are NOT clearly identified with specific product units.

Indirect Labor - Workers who assist or supervise in manufacturing the product but they are NOT clearly identified with specific product units.

Indirect Labor Costs - The costs of workers who assist in or supervise manufacturing.

Prime Costs - Costs directly associated with the manufacture of finished goods.

Conversion Costs - Costs incurred in the process of converting raw materials to finished goods 

Raw Materials Inventory - The goods a company acquires to use in making products.

Work In Process Inventory - Products in the process of being manufactured but not yet complete.

Finished Goods Inventory - Consists of completed products ready for sale.

COST FLOWS AND COST OF GOODS MANUFACTURED Cost of goods manufactured - The cost of finished products.

Schedule of cost of goods manufactured - A company's manufacturing activities described in a report.

The schedule is divided into four parts: 

1. Compute direct material used

2. Compute direct labor costs used

3. Compute total factory overhead cost used

4. Compute cost of goods manufactured

Key calculations in the schedule of costs of goods manufactured 1. Total Manufacturing Cost = Direct materials used + Direct labor used + Factory overhead used

2. Cost of goods Manufactured = Total manufacturing costs + Beginning work in process inventory - ending work in process inventory

Estimating Cost Per Unit - Using the schedule of cost of goods manufactured to make a rough estimate of per unit costs.

Customer Orientation - Managers and employees understand the changing needs and wants of customers and align management and operating practices accordingly.

Lean Business Model - A principle whose goal is to eliminate waste while “satisfying the customer” and “providing a positive return” to the company.

Continuous Improvement - Rejects the notions of “good enough” or “acceptable” and challenges employees and managers to continually experiment with new and improved business practices.

Total Quality Management - Focused on quality improvement of business activities.

Just-In-Time Manufacturing - A system that acquires inventory and produces only when needed.

Value Chain - The series of activities that add value to a company's product or services.

Corporate Social Responsibility (Csr) - A concept that goes beyond following the law. (A business model in which companies integrate social and environmental concerns in their business operations and interactions with their stakeholders instead of only considering economic profits.)

Triple Bottom Line - Focuses on three measures: Financial (profits), social (people), and environment (planet).

Sustainability Accounting Standards Board (Sasb) - Develop reporting standards for businesses sustainability activities.