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Samenvatting management accounting: cost accounting, decision making and pricing
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- Arteveldehogeschool (Artevelde)
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[Meer zien]Voorbeeld 4 van de 33 pagina's
Voorbeeld 4 van de 33 pagina's
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Voorbeeld van de inhoud
Management accounting: costaccounting
1 Managerial accounting
To succeed, a company needs to determine and control the costs of material, labor
and overhead and understand the relationship between costs and profit. Managers
often make decisions that detemine their company's fate. Managers are often
evaluated on the results of their decisions.
Managerial accounting provides tools to assist management in making decisions and
to evaluate the effectiveness of those decisions.
1.1 Identify the features of managerial accounting and the functions of
management
Managerial accounting:
Provides economic and financial information for internal users such as managers or
officers. No independent audits are required because these internal reports are for
internal use only.
Financial accounting:
Provides information for external users such as stockholders, government, creditors…
They are mainly interested in general information of the company. Because they are
not very familiar with the company, they both must meet generally accepted
accounting principles and for some companies these reports are audited.
Managers’ activities:
- Planning = requires managers to look ahead and to establish objectives.
o These objectives are often diverse: maximizing short-term profits and market
share or maintaining a commitment to environmental protection…
,- Directing
o = involves coordinating a company’s diverse activities and human resources
to produce a smooth-running operation.
o Relates to implementing planned objectives and providing necessary
incentives to motivate employees
- Controlling
o = process of keeping the company’s activities on track.
o In controlling operations, managers determine whether planned goals are
met.
1.2 Describe the classes of manufacturing costs and the differences between
product and period costs.
In order for the manager to plan, direct and control operations correctly and
effectively, they need good information.
Managers should ask questions such as:
- What costs are involved in making a product or performing a service?
- If we decrease production volume, will costs decrease?
- What impact will automation have on total costs?
- How can we best control costs?
First step is to understand the various cost categories that companies use.
Manufacturing costs:
- Consist out of activities and processes that convert raw materials into finished
goods.
- Are classified as:
o Direct materials:
Can be physically and directly associated with the finished products
during the process
F.ex. steel in the making of automobiles, flour in the baking of bread
o Direct labor
= the work of factory employees that can be physically and directly
associated with converting raw materials into finished goods
o Manufacturing overhead
Indirect materials
, Not directly associated with the finished or final products
2 characteristics:
o They do not become part of the finished product
o They are impractical to trace to the finished product
because their physical association with the finished product
is too small in terms of cost.
Indirect labor
= the work of employees that has no physical association with
the finished product or for which is impractical to trace costs to
the goods produced
Other indirect costs
Depreciation on factory buildings and machines, insurances,
taxes and maintenance on factory facilities
Product vs. period costs
Each of the manufacturing costs components are product costs. Products cost are a
necessary and integral part of producing a 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
- Selling and administrative expenses
1.3 Demonstrate how to compute cost of goods manufactured and prepare
financial statement for a manufacturer
- Cost of goods manufactured (COGM)
o The p&l line reflecting the costs to produce the manufactured products
o COGM equals the total costs of manufacturing in essential direct materials,
direct labor and overhead adjusted with the inventories.
o Work in process (January 1)
+ direct materials
Raw materials (January 1)
+raw materials purchases
- raw materials (December 31)
+ direct labor
+ Manufacturing overhead
- Work in process (December 31)
We take into account beginning with the inventories and subtract the ending
inventories because the ending inventories can be sold at this time. Regarding direct
materials we do the same by adjusting the inventories of raw materials
- Cost of goods sold (COGS)
o The p&l line reflecting the costs to produce the sold products
o = adding the beginning inventories and subtracting the inventories of
finished goods by the end of the year because these goods are not sold yet
o Finished goods (January 1)
+ Cost of goods manufactured
+ Finished goods (December 31)
, 1.4 Discuss trends in managerial accounting
- Service industries
- Focus on value chain
o Lean manufacturing
o Just-in time (JIT)
o Total quality management (TQM)
o Theory of constraints
o Enterprise resource planning (SAP)
o Activity-based costing (ABC)
- Balanced scorecard
- Business ethics / Corporate social responsibility
1.5 Exercises
Zie excel
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