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Chapter 2

Chapter 2 - Basic Managerial Accounting Concepts

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ACC 406
Vincent Cappelli

thWednesday January 18 2012 Chapter 2 Basic Managerial Accounting Concepts The Meaning and Uses of Cost most important task of managerial accounting is to determine the cost of product service customers and other items of interest to managersEX a small gourmet restaurant the owner needs to understand the breakdown of the restaurants costs into various categories cost categories include direct costs food and beverages and indirect costs includes laundry of linensCosts amount of cash or cash equivalent sacrificed for goods and or services that are expected to bring a current or future benefit to the organizationEX if a furniture manufacturer buys lumber for 10000 then the cost of lumber is 10000EX if the manufacturer trades office equipment at a value of 8000 for a forklift then the cost of the forklift is 8000 which is the value of the office equipment cost is a dollarmeasure of the resources used to achieve a given benefitas costs are used up in the production of revenues they are sold to expire Expired costs are called expenses on the income statement expenses are deducted from revenues to determine income aka profit revenue per unit is called pricePrice must be greater than cost in order for the firm to earn incomeAccumulating and Assigning Costs accumulating costs is the way costs are measured and recordedEX when a telephone bill comes into the company the bookkeeper records an addition to the telephone expense account and an addition to the liability account account payable that is how cost is accumulated accumulating costs tell the company what was spent assigning costs is the way that a cost is linked to some cost objectCost object is something for which a company wants to know the costEX of the total telephone expense how much was for sales department and how much was for manufacturing assigning costs tells the company why the money was spentCost Objects cost objects is any item such as a product customer department project geographic region plant etc for which costs are measured and assigned EX is the RBC wants to determine the cost of a platinum credit card then the cost of object is the platinum credit card all costs related to the credit card are added in such as cost of mailing to potential customers cost of telephone lines dedicated to the card computer department that processes the card and bill etc
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