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ACCT 2000 Exam 3 (highest grade in class)

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Department
Accounting
Course
ACCT 2000
Professor
All Professors
Semester
Fall

Description
ACCT 2000EXAM 2Chapter 14 Managerial Accountingpg 746 ObjectivesExplain the distinguishing features of managerial accountingIdentify the 3 broad functions of managementDefine the 3 classes of manufacturing costsDistinguish between product and period costsExplain the differences between a merchandising and manufacturing income statementIndicate how cost of goods manufactured is determinedExplain the difference between a merchandising and manufacturing balance sheet I Managerial Accounting Basics Managerial accounting also called management accounting field of accounting that provides economic and financial information for managers and other internal users Applies to all types of businesses Service Merchandising and Manufacturing Applies to all forms of business organizations Proprietorships Partnerships and Corporations Applies to notforprofit as well as profit oriented companies Changed role in collecting and reporting costs to management as a result of increasingly automated business environmentNow more responsible for strategic cost management assisting in evaluating how well resources are employed by the company Accountants now serve on teams with people from production marketing engineering etcAid in making critical strategic decisions A Comparing Managerial and Financial Accounting Similarities Both managerial and financial accounting deal with economic events of business interests overlapBoth require that economic events be quantified and communicated to interest partiesdetermine unit cost is part of managerial accountingReporting cost of goods manufactured is part of financial accounting Differences B Management Functions 1 Planning Look ahead and establish objectives such asMaximize shortterm profit and market share Commit to environmental protection and social programsKey objective add VALUE to the business value measured by trading price of stock and by potential selling price of the company 2 Directing Coordinate diverse activities and human resources Implement planned objectivesProvide incentives to motivate employeesHire and train employees including executives managers and supervisors Produce smooth running operation 3 Controlling Process of keeping activities on trackDetermine whether goals are metDecide changes needed to get back on trackMay use an informal or formal system of evaluations 1ACCT 2000EXAM 2Decision making is not a separate management function but the outcome of the exercise of good judgment in planning directing and controlling C Organizational Structure Board of Directors groups of officials elected by the stockholders of a corporation to formulate operating policies select officers and otherwise manage the company Chief Executive Officer CEO corporate officer who have overall responsibility for managing the business and delegates responsibilities to other corporate officers Line positions jobs that are directly involved in a companys primary revenuegenerating operating activities Staff positions jobs that support efforts of line employees Chief financial officer CFO corporate officer who is responsible for all of accounting and financial issues of company Controller financial officer responsible for a companys accounting records system of internal control and preparation of financial statements tax returns and internal reports Treasurer financial officer responsible for custody of companys funds and maintaining cash position The interrelationships of activities and the delegation of authority and responsibility D Business Ethics 1 Creating Proper Incentive s2 Code of Ethical Standards Sarbanes Oxley Act of 2002 law passed by congress in 2002 intended to reduce unethical corporate behavior I Managerial Cost Concepts A Manufacturing Costs Manufacturing consists of activities and processes to convert raw materials into finished goodsIn contrast a merchandising firm sells goods in the form in which they were purchased Manufacturing costs are typically classified as direct materials direct labor and manufacturing overhead 1 Direct Materials Raw materials basic materials and parts used in manufacturing process Direct materials raw materials that can be physically and directly associated with manufacturing the finishing product during process Indirect materials raw materials that do not physically become part of finished product or cannot be traced because their physical association with the finished product is too small Not physically part of finished product or insignificant part of finished product in terms of cost considered part of manufacturing overhead 2 Direct LaborDirect labor work of factory employees that can be physically and directly associated with converting raw materials into finished goods Indirect labor work of factory employees that has no direct or physical association with finished product or for which it is impractical to trace the costs to the goods produced 3 Manufacturing OverheadManufacturing overhead costs that are indirectly associated with the manufacture of finished product Includes all manufacturing costs except direct materials and direct labor Allocation of manufacturing overhead to products can present problemsAlso called factory overhead indirect manufacturing costs or burden B Product vs Period Costs Product costscosts that are necessary and integral part of producing finished product Components direct material cost direct labor cost and manufacturing overhead Costs that are necessary and integral part of producing the productRecorded as inventory when incurred thus may be called inventoriable costs When the finished goods inventory is sold it then becomes an expense called cost of goods sold Period costs costs that are matched with revenue of a specific time period and charged to expense as incurred Matched with revenue of a specific time period and charged to expense as incurred Nonmanufacturing costs Deducted from revenues in period incurred to determine net incomeIncludes all selling and administrative expenses EX Utilities Property taxes depreciation Main Sales office2
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