Fundamental-Accounting-Principles-(18)

ManagerialAccountingConceptsandPrinciplesChapter18PowerPointEditor:BethKane,MBA,CPACopyright©2015McGraw-HillEducation.Allrightsreserved.NoreproductionordistributionwithoutthepriorwrittenconsentofMcGraw-HillEducation.18-C1:PurposeofManagerialAccounting218-3Managerialaccountingprovidesfinancialandnonfinancialinformationformanagersofanorganizationandotherdecisionmakers.ManagerialAccountingBasicsC1318-4PurposeofManagerialAccountingC1418-5NatureofManagerialAccountingC1518-6FraudandEthicsinManagerialAccountingFraudaffectsallbusinessanditiscostly:A2014ReporttotheNationfromtheAssociationofCertifiedFraudExaminers(ACFE)estimatestheaverageU.S.businessloses5%ofitsannualrevenuestofraud.TheInstituteofManagementAccountantshasissuedacodeofethicstohelpaccountantsinvolvedinsolvingethicaldilemmas.C1618-C2:CostClassifications718-8ActivityCostActivityCostTypesofCostClassificationsClassificationbyBehaviorCostbehaviorreferstohowacostwillreacttochangesinthelevelofbusinessactivity.•Totalfixedcostsdonotchangewhenactivitychanges.•Totalvariablecostschangeinproportiontoactivitychanges.C2818-9DirectcostsCoststraceabletoasinglecostobject.Examples:materialandlaborcostforaproduct.IndirectcostsCoststhatcannotbetracedtoasinglecostobject.Example:Amaintenanceexpenditurebenefitingtwoormoredepartments.TypesofCostClassificationsClassificationbyTraceabilityC2918-C3:ComparingProductandPeriodCosts1018-11ProductTypesofCostClassificationsClassificationbyFunctionDirectLaborDirectMaterialManufacturingOverheadPeriodcostsareexpensesnotattachedtotheproduct.Administrativecostsarenon-manufacturingcostsofstaffsupportandadministrativefunctions.Sellingcostsareincurredtoobtainordersandtodeliverfinishedgoodstocustomers.C31118-12PeriodandProductCostsinFinancialStatementsC31218-13IdentificationsofCostClassificationsC31318-14CostConceptsforServiceCompaniesC3Thecostconceptsdescribedaregenerallyapplicabletoserviceorganizations.Forexample,thecostofbeveragesforpassengersofSouthwestAirlinesisavariablecostbasedonnumberofpassengers.14NEED-TO-KNOWFollowingarethecostsofacompanythatmanufacturescomputerchips.Classifyeachaseitheraproductcostoraperiodcost.Thenclassifyeachoftheproductcostsasdirectmaterial,directlabor,orfactoryoverhead.1.Plasticboardusedtomountthechip5.Realestatetaxespaidonthefactory2.Advertisingcosts6.Factorysupervisorsalary3.Factorymaintenanceworkers’salaries7.Depreciationonfactoryequipment4.Realestatetaxespaidonthesalesoffice8.AssemblyworkerhourlypaytomakechipsDirectMaterialDirectLaborFactoryOverheadPeriodCost1.PlasticboardusedtomountthechipX2.AdvertisingcostsX3.Factorymaintenanceworkers’salariesX4.RealestatetaxespaidonthesalesofficeX5.RealestatetaxespaidonthefactoryX6.FactorysupervisorsalaryX7.DepreciationonfactoryequipmentX8.AssemblyworkerhourlypaytomakechipsXProductCostsProductCostsAllFactoryCostsAssetsonBalanceSheetPeriodCostsNon-FactoryCostsExpensedonIncomeStatementasSelling,GeneralandAdministrativeC2/C31518-16Manufacturer’sCostsC31618-17Example:Steelusedintheframeofamountainbike.DirectMaterialsDirectmaterialcostsaretheexpendituresfordirectmaterialsthatareseparatelyandreadilytracedthroughthemanufacturingprocesstofinishedgoods.C31718-18Example:Wagespaidtoamountainbikeassemblyworker.DirectLaborDirectlaborcostsarethewagesandsalariesfordirectlaborthatareseparatelyandreadilytracedthroughthemanufacturingprocesstofinishedgoods.C31818-19Examples:Indirectlabor–maintenance.Indirectmaterial–cleaningsupplies.Factoryutilitycosts.Supervisorycosts.FactoryOverheadFactoryoverheadconsistsofallmanufacturingcoststhatarenotdirectmaterialsordirectlaborandthecostscannotbeseparatelyorreadilytracedtofinishedgoods.C31918-20DirectMaterialDirectLaborManufacturingOverheadPrimeCostConversionCostManufacturingcostsareoftencombinedasfollows:PrimeandConversionCostsC32018-C4:BalanceSheet2118-22Merchandisers...Buyfinishedgoods.Sellfinishedgoods.SaleMartManufacturers...Buyrawmaterials.Produceandsellfinishedgoods.ReportingManufacturingActivitiesC42218-23MERCHANDISERCurrentAssetsCashReceivablesMerchandiseInventoryMANUFACTURERCurrentAssetsCashReceivablesInventoriesRawMaterialsGoodsinProcessFinishedGoodsTheprimarydifferenceisinventory.Manufacturer’sBalanceSheetC42318-24Manufacturer’sBalanceSheetCompletedproductsforsale.Materialswaitingtobeprocessed.Canbedirectorindirect.Partiallycompleteproducts.Materialtowhichsomelaborand/oroverheadhavebeenadded.RawMaterialsFinishedGoodsGoodsinProcessC42418-P1:IncomeStatement2518-26Manufacturer’sIncomeStatementP12618-27CostofGoodsSoldforaMerchandiserandManufacturerP1Costofgoodssoldformanufacturersdiffersonlyslightlyfromcostofgoodssoldformerchandisers.27NEED-TO-KNOWIndicatewhetherthefollowingfinancialstatementitemsapplytoamanufacturer,amerchandiser,oraserviceprovider.Someitemsapplytomorethanonetypeoforganization.1.Merchandiseinventory4.Operatingexpenses2.Finishedgoodsinventory5.Costofgoodsmanufactured3.Costofgoodssold6.SuppliesinventoryManufacturerMerchandiserServiceProvider1.MerchandiseinventoryX2.FinishedgoodsinventoryX3.CostofgoodssoldXX4.Operati