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Managerial Accounting Concepts and Principles Chapter 16

Learning Objective 1 Describe managerial accounting and the role of managerial accounting in a business.

__________ Accounting and __________ Accounting __________ accounting information is reported at __________ intervals in general-purpose financial statements. These financial statements are prepared according to __________.

__________ Accounting and __________ Accounting __________ accounting statements are used by external users such as the following: _________________

Managerial Accounting ___________ ___________ information is designed to meet the specific needs of a company’s ___________ and includes ___________ data, which provide ___________ measures of ___________ operations, and estimated data, which provide ___________ estimates about ___________ decisions.

Managerial Accounting Managerial accounting reports ___________ ___________ always have to be: Prepared according to ___________. Prepared at ___________ intervals. Prepared for the business as a ___________.

The Management Accountant In most companies, ___________ or similar organizational units are assigned responsibilities for specific ___________ or ___________ . The operating structure of a company can be shown in an ___________ ___________. A partial ___________ ___________ is shown in Exhibit 2.

Line and Staff Departments A _______ department is directly involved in providing ___________ or ___________ to the customers of the ___________ . ___________ department positions: ______________________

Line and Staff Departments A ________ department provides ________ , ________ , and ________ to the departments with ________ or other ________ responsibilities. ________ department positions: ______________________

Line and Staff Departments The ________ ________ ________ (CFO) and the ________ occupy ________ positions. In most companies, the ________ is the chief management ________ .

Line and Staff Departments The ________ staff consists of a variety of other accountants who are responsible for ________ accounting functions such as the following: System and ________ ________ accounting ________ and ________ analysis ________ reports and ________ ________

Planning Management uses ________ in developing the company’s ________ (goals) and ________ these ________ into courses of ________.

Planning Planning may be classified as follows: ________ ________ is developing ________ ________ to achieve the ________ ________ . ________ ________ of ________ , called ________ , often involve periods of ________ to ________ ________ . ________ ________ develops ________ ________ for ________ the ________ ________ of the company.

________ The process by which managers run day-to- day ________ is called ________ . Examples: A production supervisor’s efforts to keep the production line ________ without ________ A credit manager’s development of ________ for assessing the ability of potential ________ to ________ their bills.

Controlling Monitoring ________ ________ and comparing actual results with the ________ results is ________ . This ________ allows management to isolate areas for further ________ and possible ________ action. The philosophy of controlling by comparing actual and expected results is called ________ by ________.

________ Continuous ________ ________ is the philosophy of ________ ________ employees, business processes, and products. The objective of ________ process ________ is to eliminate the ________ of ________ in a process.

________ ________ Inherent in each of the preceding management processes is ________ ________ . Management must ________ decide among ________ ________.

Learning Objective 2 Describe and illustrate the following costs: (1) direct and indirect costs, (2) direct materials, direct labor, and factory overhead costs, (3) product and period costs.

Direct and ________ Costs A ________ is a payment of ________ or the commitment to pay cash in the future for the purpose of ________ ________.

Direct and Indirect Costs Costs are often classified in terms of how they relate to an ________ or segment of ________, called a cost ________. The cost ________ may be a ________ , a sales ________ , a department, or some ________.

Direct and Indirect Costs ________ ________ are identified with and can be traced to a ________ ________ . Wood used to make guitars is a ________ cost.

Direct and Indirect Costs ________ ________ cannot be identified with or traced to a cost object. A production supervisor’s salary is an ________ cost because it ________ be traced to any ________ guitar.

Manufacturing Costs To be classified as a ________ ________ cost, the cost must be both of the following: ___________________________________________

Manufacturing Costs The cost of employee wages that is an integral part of the ________ product is classified as ________ ________ cost. A direct labor cost must be both of the following: ___________________________________________

Manufacturing Costs Costs other than direct materials cost and direct labor cost that are incurred in the manufacturing process are combined and classified as ________ ________ cost (sometimes called manufacturing ________ or factory ________ ).

Manufacturing Costs Some examples of ________ ________ costs include the following: ____________________________________________

Manufacturing Costs Costs that do not enter directly into the ________ product, such as oil used to lubricate the machinery and janitorial and supervisory wages, are considered ________ ________. Some costs that are part of the product, but are considered ________, are treated as ________ ________, such as glue and string.

________ Costs and ________ Costs Prime costs consist of ________ ________ and ________ ________ costs. Conversion costs consist of ________ ________ and ________ ________ costs. ________ costs are the costs of converting the ________ into a finished ________ .

Product Costs and Period Costs ________ costs consist of the ________ elements of manufacturing costs: ________ ________, ________ ________, and ________ ________.

Product Costs and Period Costs ________ costs are generally classified as: ________________________________________ ________________________________________ ________________________________________, or ________________________________________ ________________________________________ ________________________________________.

Learning Objective 3 Describe and illustrate the following statements for a manufacturing business: balance sheet, statement of cost of goods manufactured, income statement

Balance Sheet for a Manufacturing Business __________ inventory (sometimes called __________ __________ inventory) consists of the costs of the ________ and _________ materials that have _____ yet entered the manufacturing process.

Balance Sheet for a Manufacturing Business _______ in _______ inventory consists of _______ material costs, _______ _______ costs, and _______ _______ costs for products that have entered the _______ process, but are not yet _______ (in _______).

Balance Sheet for a Manufacturing Business Finished _______ _______ consists of _______ (or _______) products that have not _______ _______.

Income Statement for a Manufacturing Company Income statements for _______ and _______ businesses differ primarily in the reporting of the _______ of _______ (goods) available _______ _____ and _______ during the period.

Income Statement for a Manufacturing Company The _______ cost of making products that are available for _______ during the period is called the _______ of _______ _______ . The _______ of _______ _______ is often determined by preparing a statement of _______ of _______ manufactured.

Legend’s Cost of Goods Manufactured STEP 1: __________________________________ Materials inventory, January 1, 2014 $ 65,000 Add: Materials purchased 100,000 Cost of materials available for use $165,000 Less: Materials inventory, Dec. 31, 2014 35,000 Cost of direct materials used $130,000 to _______ _______ costs incurred (continued)

Legend’s Cost of Goods Manufactured STEP 2: __________________________________. Cost of direct materials used $130,000 from Step 1 (continued)

Legend’s Cost of Goods Manufactured STEP 2: __________________________________ Cost of direct materials used $130,000 Direct labor 110,000 Factory overhead 44,000 Total manufacturing costs incurred $284,000 to _______ of goods _______ section (continued)

Legend’s Cost of Goods Manufactured STEP 3: __________________________________ Work in process inventory, Jan. 1, 2014 $ 30,000 Add: Total manufacturing costs incurred 284,000 from Step 2

Legend’s Cost of Goods Manufactured STEP 3: __________________________________ Work in process inventory, Jan. 1, 2014 $ 30,000 Add: Total manufacturing costs incurred 284,000 Total manufacturing costs $314,000 Less: Work in process inventory, Dec. 31, 2014 24,000 Cost of goods manufactured $290,000

Learning Objective 4 Describe the uses of managerial accounting information.

Uses of ___________ Accounting ___________ accounting provides the cost of ___________ a product, which can be used to determine its selling ___________.

Uses of Managerial Accounting Managerial accounting allows for ___________ the costs of ___________ and can be used to monitor and ___________ the cost of direct ___________, direct ___________, and factory ___________.

Uses of Managerial Accounting Performance reports allow management to ___________ any large amounts of ___________ materials or ___________ downtime.

Uses of Managerial Accounting A report could analyze the potential ___________ and dollar ___________ of ___________ computerized equipment to speed up the production process.

Uses of Managerial Accounting A report could analyze how many units need to be sold to cover ___________ ___________ and ___________. Such information could be used to set monthly ___________ targets and ___________ for sales personnel.

Managerial Accounting Concepts and Principles The End