,THE MANAGERIAL CHAPTERS
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1. Introduction to Managerial Accounting
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2. Job Order Costing
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3. Process Costing L
4. Cost-Volume-Profit Analysis L
5. Master Budgets L
6. Flexible Budgets and Standard Cost Systems
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7. Cost Allocation and Responsibility Accounting
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8. Short-Term Business Decisions
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9. Capital Investment Decisions
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,Chapter 1 L
Introduction to Managerial Accounting L L L
Review Questions L
1. The primary purpose of managerial accounting is to provide information to help managers plan,di
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rect, control, and make decisions.
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2. Financial accounting and managerial accounting differ on the following 6 dimensions: (1) primaryuse
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rs, (2) purpose of information, (3) focus and time dimension of the information, (4) rules and restrictio
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ns, (5) scope of information, and (6) behavioral.
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3. Line positions are directly involved in providing goods or services to customers. Staff positionssup
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port line positions.
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4. Planning means choosing goals and deciding how to achieve them. Directing involves running the day-
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to-
day operations of a business. Controlling is the process of monitoring operations and keepingthe comp
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any on track.
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5. The four IMA standards of ethical practice and a description of each follow.
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I. Competence.
Maintain an appropriate level of professional leadership and expertise by enhancingk
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nowledge and skills. L L
Perform professional duties in accordance with relevant laws, regulations, and technicals
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tandards.
Provide decision support information and recommendations that are accurate, clear, concise,
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and timely. L
Recognise and help mange risk. L L L L
II. Confidentiality.
Keep information confidential except when disclosure is authorized or legally required.
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Inform all relevant parties regarding appropriate use of confidential information. Monitor toe
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nsure compliance. L
Refrain from using confidential information for unethical or illegal advantage.
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III. Integrity.
Mitigate actual conflicts of interest. Regularly communicate with business associates to avoidap
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parent conflicts of interest. Advise all parties of any potential conflicts.
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Refrain from engaging in any conduct that would prejudice carrying out duties ethically.
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, Abstain from engaging in or supporting any activity that might discredit the profession.
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Contribute to a positive ethical culture and place integrity of the profession above personalin
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terest.
5, cont.
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IV. Credibility.
Communicate information fairly and objectively. L L L L
Provide all relevant information that could reasonably be expected to influence an intendedu
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ser’s understanding of the reports, analyses, or recommendations.
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Report any delays or deficiencies in information, timeliness, processing, or internal controlsin
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conformance with organization policy and/or applicable law. L L L L L L
Communicate any professional limitations or other constraints that would preclude responsi- L L L L L L L L L L
ble judgment or successful performance of an activity.
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6. Service companies sell time, skills, and knowledge. Examples of service companies include phoneser
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vice companies, banks, cleaning service companies, accounting firms, law firms, medical physicians, a
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nd online auction services.
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7. Merchandising companies resell products they buy from suppliers. Merchandisers keep an inventoryof
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products, and managers are accountable for the purchasing, storage, and sale of the products. Example
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s of merchandising companies include toy stores, grocery stores, and clothing stores.
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8. Merchandising companies resell products they previously bought from suppliers, whereas manufactu
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ring companies use labor, equipment, supplies, and facilities to convert raw materials intonew finished
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products. In contrast to merchandising companies, manufacturing companies have a broad range of p
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roduction activities that require tracking costs on three kinds of inventory.
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9. The three inventory accounts used by manufacturing companies are Raw Materials Inventory, Work-
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in-Process Inventory, and Finished Goods Inventory.
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Raw Materials Inventory includes materials used to manufacture a product. Work-in-
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ProcessInventory includes goods that have been started in the manufacturing process but are not yet c
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omplete. Finished Goods Inventory includes completed goods that have not yet been sold.
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10. A direct cost is a cost that can be easily and cost-
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effectively traced to a cost object (which is anything for which managers want a separate measurem
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ent of cost). An indirect cost is a cost thatcannot be easily or cost-effectively traced to a cost object.
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11. The three manufacturing costs for a manufacturing company are direct materials, direct labor, and ma
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nufacturing overhead. Direct materials are materials that become a physical part of a finished product
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and whose costs are easily traceable to the finished product. Direct labor is the labor cost ofthe employ
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ees who convert materials into finished products. Manufacturing overhead includes all manufacturing
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