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Samenvatting Accounting for managers KU Leuven
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Samenvatting Accounting for managers KU Leuven
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Summary Accounting for ManagersCourse: Accounting for Managers (B-KUL-D0N83a-1920)
Prof. Amin Salimi Sofla
2019-2020
Summary written by Robin Kelchtermans
1
,Preface
This is a summary of the slides for the course Accounting for Managers at KU Leuven. Sometimes I follow the book,
instead of the slides or I add information from the book. The chapter numbers are the same as the lecture numbers
until chapter 9, then it messes up because of the quizzes (not included).
Book: Managerial Accounting, Sixth Edition (ISBN: 978-1-118-09689-5).
Be aware that this is a student writing. Typos, wrong conclusions, bad structure… will happen. If you see any (real)
mistakes, please let me know on robin.kelchtermans@student.kuleuven.be.
Dear future reader, this has been written in 2019-2020. So, please do not send me an email after 2020.
If you fail your exam: blame yourself. If you succeed: flowers and gifts are always welcome!
Good luck with this!
Definition = this is a definition (or something important).
2
,Table of Contents
Preface ............................................................................................................................................................ 2
Table of Contents ............................................................................................................................................ 3
1. Accounting Basics ..................................................................................................................................... 6
1.1. The Basics ..................................................................................................................................................... 6
1.2. Debit, Credit and Transactions ..................................................................................................................... 6
1.3. Trial Balance and Financial Statements ........................................................................................................ 7
2. Cost Concepts and Classifications .............................................................................................................. 9
2.1. Managerial Accounting ................................................................................................................................. 9
2.2. Cost Concepts and Classification .................................................................................................................. 9
2.2.1. Cost and Cost Object ............................................................................................................................ 9
2.2.2. Direct vs. Indirect costs.......................................................................................................................10
2.2.3. Variable vs. Fixed costs .......................................................................................................................10
2.2.4. Period vs. Product costs......................................................................................................................10
2.2.5. Prime Cost and Conversion Cost.........................................................................................................11
2.2.6. Flow of Costs .......................................................................................................................................11
2.2.7. Presentation of Costs..........................................................................................................................12
3. Job Order Costing ................................................................................................................................... 14
3.1. Types of Cost Accounting Systems .............................................................................................................14
3.2. Job Order Cost Flow....................................................................................................................................15
3.2.1. Accumulating Manufacturing Costs....................................................................................................15
3.2.2. Assigning Manufacturing Costs to Work in Process ...........................................................................15
3.2.3. Manufacturing Overhead Costs ..........................................................................................................16
3.2.4. Assigning Costs to Finished Goods .....................................................................................................17
3.2.5. Assigning Costs to Cost of Goods Sold ................................................................................................17
3.2.6. Summary of Job Order Cost Flows......................................................................................................17
3.3. Under- and Overapplied Overhead ............................................................................................................18
4. Process Costing ...................................................................................................................................... 20
4.1. Process Cost Flow .......................................................................................................................................20
4.2. Equivalent Units ..........................................................................................................................................20
4.2.1. Conversion costs .................................................................................................................................21
4.2.2. Refinements on the Weighted-Average Method ...............................................................................21
4.3. Production Cost Report ..............................................................................................................................21
4.4. Operation Costing .......................................................................................................................................22
5. Activity-Based Costing ............................................................................................................................ 24
5.1. Activity Based Costing versus Traditional Costing Methods ......................................................................24
5.2. How Costs are Treated Under Activity–Based Costing ...............................................................................24
5.2.1. Hierarchy of Activity Levels ................................................................................................................25
5.2.2. Allocation of costs...............................................................................................................................25
5.2.3. ABC in service industry .......................................................................................................................25
5.2.4. Costly Customer..................................................................................................................................26
5.2.5. General notes .....................................................................................................................................26
5.2.6. Example of ABC ...................................................................................................................................26
5.3. Product Margins .........................................................................................................................................26
3
, 5.3.1. The traditional way .............................................................................................................................26
5.3.2. The ABC way .......................................................................................................................................26
5.3.3. Differences ..........................................................................................................................................26
5.4. External Reporting & ABC Limitations ........................................................................................................27
6. Activity Based Management (ABM)......................................................................................................... 28
6.1. Activity Analysis ..........................................................................................................................................28
6.1.1. The Importance of Customer-Perceived Value ..................................................................................28
6.1.2. Eliminating Non-Value-Added Activities.............................................................................................29
6.1.3. Identifying Value-Added Activities .....................................................................................................29
6.2. Activity Management .................................................................................................................................29
6.2.1. Tools for Determining Root Cause......................................................................................................29
6.2.2. Implementation of Activity Based Costing & Management ...............................................................29
7. Cost-Volume-Profit Relationships ........................................................................................................... 31
7.1. Contribution Margin ...................................................................................................................................31
7.1.1. Basics of Cost-Volume-Profit Analysis ................................................................................................31
7.1.2. The Contribution Approach ................................................................................................................31
7.1.3. CVP Relationships in Equation Form ..................................................................................................31
7.1.4. Cost-Volume-Profit Graph ..................................................................................................................31
7.1.5. Contribution Margin Ratio (CM Ratio)................................................................................................32
7.1.6. Changes on Net Operating Income.....................................................................................................32
7.2. The Break-even Point & Target Profit.........................................................................................................32
7.2.1. Break-even Analysis ............................................................................................................................32
7.2.2. Computing the Break-even Point for a Multiproduct Company ........................................................33
7.2.3. Target Profit Analysis ..........................................................................................................................33
7.3. The Margin of Safety and its Significance ...................................................................................................34
7.3.1. Cost Structure and Profit Stability ......................................................................................................34
7.3.2. Operating Leverage ............................................................................................................................34
7.3.3. Structuring Sales Commissions ...........................................................................................................34
7.4. Formula Review ..........................................................................................................................................35
8. Relevant Information and Decision Making ............................................................................................. 36
8.1. Relevant and Irrelevant Costs .....................................................................................................................36
8.2. Adding and Dropping Segments .................................................................................................................36
8.3. Make or Buy Analysis ..................................................................................................................................36
8.3.1. Vertical Integration and Value Chain Economies ...............................................................................37
8.3.2. The Make or Buy Decision ..................................................................................................................37
8.4. Special Orders .............................................................................................................................................37
8.5. Constrained Resources ...............................................................................................................................37
8.6. Joint Costs and Products.............................................................................................................................37
9. Financial Statement Analysis .................................................................................................................. 39
9.1. Horizontal Analysis .....................................................................................................................................39
9.2. Vertical Analysis ..........................................................................................................................................40
9.3. Ratio Analysis ..............................................................................................................................................41
9.3.1. Liquidity Ratios ...................................................................................................................................42
9.3.2. Profitability Ratios ..............................................................................................................................43
9.3.3. Solvency Ratios ...................................................................................................................................44
9.3.4. Remarks and Limitations ....................................................................................................................45
9.3.5. Summary of Ratios ..............................................................................................................................46
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