1. Student Version
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2. Managerial Accounting Concepts and Principles
Chapter 16

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

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

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

6. 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.

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

8. 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.

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

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

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

12. 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 ________
________

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

14. 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.

15. ________
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.

16. 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 ________.

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

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

19. 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.

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

21. 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 ________.

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

23. 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.

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

25. 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:
___________________________________________

26. 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 ________ ).

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

28. 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.

29. ________ 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 ________ .

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

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

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

33. 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.

34. 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 _______).

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

36. 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.

37. 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.

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

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

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

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

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

43. Learning Objective 4
Describe the uses of managerial accounting information.

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

45. 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 ___________.

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

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

48. 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.

49. Managerial Accounting Concepts and Principles
The End