[ACCT 210] - Midterm Exam Guide - Ultimate 14 pages long Study Guide!

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ACCT 210
MIDTERM EXAM
STUDY GUIDE
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ACCT 210: Chapter 1: Managerial Accounting
-Managerial accounting provides economic and financial information for managers and other internal
users
Comparing Managerial and Financial Accounting
Feature
Financial Accounting
Managerial Accounting
-Primary Users of Report
-External Users: Stockholders,
creditors, and regulations
-Internal users: Officers and
managers
-Types and Frequency of
Reports
-Financial statements. Quarterly
and annually
-Internal reports. As frequently
as needed
-Purpose of Reports
-General purpose
-Special purpose
-Content of Reports
-Pertains to business as a
whole. Highly aggregated.
Limited to double-entry account
and cost data. GAAP
-Pertains to subunits of the
business. Very detailed. Extends
beyond double-entry account to
any relevant data. Standard is
relevance to decisions
-Verification Process
Audited by CPA
-No independent audits
Management Functions
Planning
Directing
Controlling
-Maximize short-term profit and
market share
-Commit to environmental
protection and social programs
-Add value to the business
-Coordinate diverse activities
and HR
-Implement planned objectives
-Provide incentives to motivate
employees
-Hire and train employees
-Provide a smooth-running
operation
-Keeping activities on track
-Determine whether goals are
met
-Decide changes needed to get
back on track
-May use an informal or formal
system of evaluation
Learning Objective 2
-Managers should ask questions such as the following:
1. What costs are involved in making a product or providing a service?
2. If we decrease production volume, will costs decrease?
3. What impact will automation have on total costs?
4. How can we best control costs?
Manufacturing Costs
-Manufacturing consists of activities and processes that convert raw materials into finished goods
-Direct materials
-Direct labor
-Manufacturing Overhead
-Direct Materials
-Raw materials: are the basic materials and parts used in the manufacturing process
-Direct materials: Raw materials that can be physically and directly associated with the finished
product during the manufacturing process
-Indirect Materials
1. Not physically part of the finished product or
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2. They are impractical to trace to the finished product because their physical association with
the finished product is too small in terms of cost
-Considered part of manufacturing overhead
-Direct 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 physical association with the finished product or for
which it is impractical to trace costs to the goods produced
-Manufacturing Overhead
-Costs that are indirectly associated with manufacturing the finished product
-Includes all manufacturing costs except direct materials and direct labor
-Also called factory overhead, indirect manufacturing costs, or burden
Product Versus Period Costs
-Product Costs
-Components: 1. Direct Materials 2. Direct Labor 3. Manufacturing Overhead
-Costs that are an integral part of producing the product
-Recorded in inventory account
-Not an expense (COGS) until the company sells the finished goods inventory
-Period Costs
-Charged to expense as incurred
-Non-manufacturing costs
-Includes all selling and administrative expenses
Income Statement
-Under a periodic inventory system, the income statements of a merchandiser and a manufacturer differ
in the COGS section
Merchandiser
Beginning Inventory + COG Purchased Ending Inventory = COGS
Manufacturer
Beginning Finished Goods Inventory + COG Manufactured Ending Finished Goods Inventory = COGS
Cost of Goods Manufactured (COGM)
-Total Manufacturing Costs sum of direct material costs, direct labor costs, and manufacturing
overhead in the current year
-Total Work in Process 1) Cost of beginning work in process and
2) Total manufacturing costs for the current period
Beginning Work in Process Inventory + Total Manufacturing Costs = Total Cost of Work in Process ->
Total Cost of Work in Process Ending Work in Process Inventory = COGM
Current Designs
Cost of Goods Manufactured Schedule
For the Year Ended December 31, 2017
Work in process, January 1 $18,400
Direct materials
Raw materials inventory, January 1 $16,700
Raw materials purchases 152,500
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