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Summary Managerial Accounting VU IBA

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Summary containing all the relevant theory discussed during the course Accounting given in the first year of International Business Administration at the Vrije Universiteit Amsterdam. By learning this summary I personally passed the final exam.

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  • September 21, 2022
  • 19
  • 2021/2022
  • Summary
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CHAPTER 14 MANAGERIAL ACCOUNTING
Introduction to managerial accounting; cost estimation methods

 Economic and financial information
 Managers and other internal actors

Helpful for:
- Planning
o Maximize long-term profit
o Increase market share
o Commit to environmental protection programs
- Directing
o Coordinate how sales and production divisions collaborate
o Provide incentives to motivate employees
o Hire new managers
- Controlling
o Track the performance of some divisions
o Determine whether key goals are being met
o Implement systems to evaluate teams

Financial Managerial

primary external internal
users
frequency quarterly, yearly as needed
purpose general specific
content  business as a whole  business units
 aggregated  detailed
 GAAP  standards considered useful
verification audited no independent audits

Companies account for indirect materials as part of manufacturing overhead.

Assignment of costs to cost categories: Merchandising/ manufacturing balance:




CHAPTER 15 JOB ORDER COSTING

,One key objective: estimate costs




COGS
Cost Of Goods Sold

COGM
Cost Of Goods Manufactured

COGP
Cost Of Goods Purchased

WIP
Work In Progress

TMC
Total Manufacturing Cost

COGS (merchandiser) = beginning inventory + COGP – ending inventory
COGS (manufacturer) = beginning inventory + COGM – ending inventory
COGM = beginning WIP inventory + total manufacturing costs – ending WIP inventory
TMC = direct materials + direct labour + manufacturing overhead




Manufacturer
Period costs are
>> not included in COGS
>> included as selling or administrative expenses.

Merchandiser
They also have inventories.
COGP but not COGM (no WIP inventories, raw materials).

, Same logic.

Service industries
No inventories.
But they do have direct and indirect costs, etc.
Same logic.

Various costing systems:
 Process costing
o Large volumes / continuous
o Time period costs
 Job ordering costing
o Costs per job or batch
o Completed job costs



TMC 
WIP inventory 
finished goods
inventory  COGS




Predetermined overhead rate
(%) = estimated annual overhead costs / estimated annual operating activity

Expressed in terms of common activity or allocation base
>> direct labour costs
>> direct labour hours
>> machine hours

Completed a job?
 Credit WIP inventory
 Debit finished goods inventory

Sold inventory?
 Credit finished goods inventory
 Debit COGS

There are two major steps in the flow of costs: (1) accumulating the manufacturing costs
incurred, and (2) assigning the accumulated costs to the work done.

Purchase of raw materials on account
DR raw materials inventory
CR accounts payable

Record factory labor costs
DR factory labor
CR factory wages payable
CR employer payroll taxes payable

Record overhead costs

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