Kế toán, kiểm toán - Chapter 18: Managerial accounting concepts and principles

Chapter 18MANAGERIAL ACCOUNTING CONCEPTS AND PRINCIPLESManagerial accountingprovides financial and nonfinancial informationfor managers of anorganization and otherdecision makers.Financial accountingprovides generalpurpose financialinformation to thosewho are outsidethe organization.MANAGERIAL ACCOUNTING BASICSC 1NATURE OF MANAGERIAL ACCOUNTINGC 1ActivityCostActivityCostTYPES OF COST CLASSIFICATIONSCLASSIFICATION BY BEHAVIOR Cost behavior refers to how a cost will react to changes in the level of business activity.Total fixed costs donot change when activity changes.Total variable costs change in proportionto activity changes.Mixed costs are combinations of fixed and variable costs.ActivityCostC 2Direct costsCosts traceable to a single cost object.Examples: material and labor cost for a product.Indirect costsCosts that cannotbe traced to asingle cost object.Example: A maintenance expenditurebenefiting two ormore departments.TYPES OF COST CLASSIFICATIONS CLASSIFICATION BY TRACEABILITYC 2TYPES OF COST CLASSIFICATIONS CLASSIFICATION BY RELEVANCESunk costs have already been incurred and cannot be avoided or changed. Sunk costs should not be considered in decisions. Example: An automobile purchased two years ago cost $15,000. The $15,000 cost is sunk because whether the car is driven, sold, traded, or abandoned, the cost will not change.Out-of-pocket costs require future outlays of cash and should be considered in decisions. Example: You plan on buying a new car for $25,000 next month. The cost of the new car is an out-of-pocket cost because you can choose to spend or not to spend the $25,000 next month.C 2TYPES OF COST CLASSIFICATIONS CLASSIFICATION BY RELEVANCE An opportunity cost is the potential benefit lost by choosing a specific action from two or more alternatives C 2Example: If you were not attending college, you could be earning $20,000 per year. Your opportunity cost of attending college for one year is $20,000.ProductTYPES OF COST CLASSIFICATIONS CLASSIFICATION BY FUNCTIONDirectLaborDirectMaterialManufacturing OverheadPeriod costs are expensesnot attached to the product.Administrative costs are non-manufacturing costsof staff support andadministrative functions.Selling costs are incurred toobtain orders and to deliverfinished goods to customers.C 3PERIOD AND PRODUCT COSTSIN FINANCIAL STATEMENTSC 3MANUFACTURER’S BALANCE SHEETCompletedproductsfor sale.Materialswaiting to beprocessed.Can be director indirect.Partially completeproducts.Material to whichsome labor and/oroverhead havebeen added.RawMaterialsFinishedGoodsGoods inProcessC 4Example:Steel used in theframe of amountain bike.DIRECT MATERIALSP 1Direct material costs are the expenditures for direct materials that are separately and readily traced through the manufacturing process to finished goods.Example:Wages paid to amountain bike assembly worker.DIRECT LABORP 1Direct labor costs are the wages and salaries for direct labor that are separately and readily traced through the manufacturing process to finished goods. Examples:Indirect labor – maintenanceIndirect material – cleaning suppliesFactory utility costsSupervisory costsFACTORY OVERHEADP 1Factory overhead consists of all manufacturing costs that are not direct materials or direct labor and the costs cannot be separately or readily traced to finished goods. Summarizes the types and amounts of costsincurred in a company’s manufacturing process.MANUFACTURING STATEMENT Direct Materials Used + Direct Labor + Factory Overhead = Total Manufacturing Costs + Beginning Work in Process – Ending Work in Process = Cost of Goods ManufacturedP 2MANUFACTURING STATEMENTP 2OVERHEAD COST FLOWS ACROSS ACCOUNTING REPORTSP 2END OF CHAPTER 18