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ACCT 2301 (30)
Ed Dinan (13)

Managerial Accounting Ch 1.docx

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ACCT 2301
Ed Dinan

Anna Wang Managerial Accounting 1 Chapter 1 ManagementAccounting and Corporate Governance Difference Between Managerial and FinancialAccounting Users and Type of Information Managerial – internal – executives, managers, employees - Info to plan, direct, and control busn operation - Info is related to employees’job level - Lower level – nonfinancial info such as work schedules, store hours, customer service policies, etc - Midlevel managers get a mix of nonfinancial and financial info - Executives focus on financial data Financial – external - creditors, investors Level of Aggregation Managerial – detailed info on specific subunits of a company Financial – global info that reflects performance of a company as a whole Regulation Financial - need to protect public interest - SEC delegates authority to FASB, which creates GAAP Managerial - No need to protect public interest (except for financial data, info generated by manag acct is not available to public), therefore less regulation - Only restricted by the value-added principle – gather and report info if value added is greater than the cost Info Characteristics Financial – objectivity, reliability, consistency, and historic in nature - What happened Managerial – relevance, timeliness; more estimates, fewer facts - What will happen Time Horizon and Reporting Frequency Financial – periodically (end of year) Managerial – can’t wait until end of year to discover problems; continuous basis 1 Anna Wang Managerial Accounting 1 Product Costing in Manufacturing Companies Components of Product Cost - Material - Labor - Overhead (utilities, rent on manufacturing facilities, supervisors, depreciation, etc) * If products are stored, these costs are part of inventory until sold * Depreciation of manufacturing assets  product cost  inventory  expensed when sold Depreciation of non-manufact assets  depreciation expense Costs Can beAssets or Expense Costs Assets Expense (Inventory) (When sold) - Non-product costs are expensed in the period they are incurred (general, selling, and administrative expenses, etc) - Indirect costs - costs that cannot be traced to a product/service in a cost-effective manner (aka manufacturing overhead) - Ex – amount of glue used on each table - Assigned to products using cost allocation – divide total cost into parts and assigning the parts to relevant cost objects - Ex – worker spends 8hr making a chair and a table Chair  2 hr Table  6hr $120 utilities costs consumed ($15/hr) Chair 2 x $15 = $30 Table  6 x $15 = $90 - Upstream costs –b/f manufact process begins (R&D) - Downstream costs – after manufac process ends (transportation, advertising, sales commission) * Neither are considered part of product cost Product Costing in Service and Merchandising Companies - Also incur material, labor, and overhead costs Ernst & Young Material – office supplies 2 Anna Wang Managerial Accounting 1 Labor - employees Overhead – utilities - Diff: products of service companies are consumed immediately rather than held in inventory - Labor and overhead costs are incurred by merchandising companies when assisting customers, therefore treated general, selling, and admin expenses rather than accumulated in inventory accounts. - Merchandising companies are often viewed as a service com
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