Summary Accounting IBA (Managerial part, E_IBA1_ACC)
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Course
Accounting (E_IBA1_ACC)
Institution
Vrije Universiteit Amsterdam (VU)
Book
Financial and Managerial Accounting
This summary covers the second part of the course Accounting for the BSc International Business Administration at VU Amsterdam.
It involves - inter alia - budgetary planning, pricing, job order costing, ABC, incremental analysis, sales mix, break-even analysis, cost-volume-profit, and other mana...
Paragraph 4.3 – Budgetary Planning ....................................................................................... 18
4.3.1: Effective Budgeting and the Master Budget (LO1) ............................................................................ 18
4.3.2: Sales, Production, and Direct Materials Budgets (LO2) ..................................................................... 19
4.3.3: Preparing Budgets for Direct Labor, Manufacturing Overhead, etcetera (LO3) ............................... 20
4.3.4: Cash Budget and Budgeted Balance Sheet (LO4)............................................................................... 21
Paragraph 4.4 – Budgetary Control and Responsibility Accounting ........................................... 21
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4.4.1: Budgetary Control and Static Budget Reports (LO1) ......................................................................... 21
4.4.2: Flexible Budget Reports (LO2) ............................................................................................................ 22
Paragraph 4.5 – Standard Costs and Balanced Scorecard ......................................................... 23
4.5.1: Overview of Standard Costs (LO1) ..................................................................................................... 23
4.5.2: Direct Materials Variances (LO2) ....................................................................................................... 24
4.5.3: Direct Labor and Manufacturing Overhead (LO3) ............................................................................. 25
4.5.4: Variance Reports and Balanced Scorecards (LO4) ............................................................................. 26
Managerial Accounting 1/2
Paragraph 3.1 – Managerial Accounting
Key topics: types of costs
(Chapter 14 | Lecture 6 | LO 2 & 3 | P14.5A)
One of the key objectives of managerial
accounting is to estimate costs. Although
estimating cost might look easy, you will
however, discover that estimating costs is
not always simple as it can involve more
elaborate procedures.
There are various ways to estimate costs:
- Job Order Costing
- Activity Based Costing
- Cost Volume Profit
Managerial accounting focuses on internal issues that allow company leaders to define
objectives, assess progress, and to make corrections. Broadly speaking, managerial accounting
refers to the communication of economic and financial information to managers and other
internal actors. Critical business tools: helpful for planning, directing, and controlling.
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3.1.1: Managerial Cost Concepts (LO2)
Manufacturing: consists of all activities and processes that convert raw materials into finished
goods.
Manufacturing costs: incurred to produce a
product are classified as direct materials, direct
labor, and manufacturing overhead.
• Direct materials: raw materials that can
be physically and directly associated with
the finished product during the
manufacturing process
• Direct labor: work of factory employees
that can be physically and directly associated with converting raw materials into
finished goods
• Manufacturing overhead: costs that are indirectly associated with the manufacture
of the finished product
o Indirect materials: cannot be easily associated with the finished product
o Indirect labor: work of employees that has no physical association with the
finished product
Product costs: costs that are a necessary and integral part of producing the finished product.
Period costs: costs that are matched with the revenue of a specific time period rather than
included as part of the cost of a salable product (non-manufacturing costs).
3.1.2: Manufacturing Costs in Financial Statements (LO3)
Under a periodic inventory system, the income statements of a merchandiser and a
manufacturer differ in the cost of goods
sold section. Merchandisers compute
cost of goods sold by adding the
beginning inventory to the cost of
goods purchased and subtracting the
ending inventory. Manufacturers
compute cost of goods sold by adding
the beginning finished goods inventory
to the cost of goods manufactured and
subtracting the ending finished goods inventory.
Costs of Goods Manufactured Schedule
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