Chapter 1 Managerial Accounting Concepts and Principles Financial Accounting External Shareholders Creditors Government Agencies General Public GAAP Direct current operations Plan future operations Evaluate past activities Managerial Accounting Meets the specific needs of a company’s management Historical data (objective) Estimated data (subjective) Prepared as needed for management needs Financial Accounting and Managerial Accounting 1-1 8 Management Process Planning (strategic/operational) Directing Controlling Improving Decision Making Operations of a Business Service Merchandising Manufacturing Costs Cost object Direct vs Indirect Cost Direct Materials Cost (D) Direct Labor Cost (D) Factory Overhead Cost (I) Prime Cost/Conversion Cost Product/Period Costs 1-2 Example Exercise 1-2 Identify the following costs as (a) direct materials, (b) direct labor, or (c) factory overhead for a baseball glove manufacturer. 1. _______________ Leather used to make a baseball glove 2. _______________ Coolants for machines that sew baseball gloves 3. _______________ Wages of assembly line employees 4. _______________ Ink used to print a player’s autograph on the baseball glove 2 7 1-2 Follow My Example 1-2 Identify the following costs as (a) direct materials, (b) direct labor, or (c) factory overhead for a baseball glove manufacturer.ss 1. _______________ Leather used to make a baseball (a) Direct materials glove (c) Factory overheadCoolants for machines that sew 2. _______________ baseball gloves (b) Direct labor 3. _______________ Wages of assembly line employees 4. _______________ (c) Factory overheadInk used to print a player’s autograph on the baseball glove Left click mouse for answers. For Practice: PE 1-2A, PE 1-2B 2 8 1-2 Example Exercise 1-4 Identify the following costs as a (a) product cost, or for a baseball glove manufacturer. (b) period cost 1. _______________ Leather used to make a baseball glove 2. _______________ Cost of endorsement from a professional baseball player 3. _______________ Office supplies used at the company headquarters 4. _______________ Ink used to print a player’s autograph on the baseball glove 3 9 1-2 Follow My Example 1-4 Identify the following costs as a (a) product cost, or (b) period cost for a baseball glove manufacturer. (a) Product cost 1. _______________ Leather used to make a baseball glove (b) Period cost 2. _______________ Cost of endorsement from a professional baseball player (b) Period cost 3. _______________ Office supplies used at the company headquarters (a) Product cost 4. _______________ Ink used to print a player’s autograph on the baseball glove 4 Left click the mouse to reveal answers. For Practice: PE 1-5A, PE 1-5B 0 Financial Statements (Manufacturing Company) Balance Sheet Materials (Raw) Inventory Work in Process (WIP) Inventory Finished Goods Inventory Income Statement Cost of Goods Manufactured Flow of Manufacturing Costs 1-3 46 1-3 Determining the Cost of Goods Manufactured STEP 1: Materials inventory, December 1, 2008 $ 65,000 Add: materials purchased during December 100,000 Cost of materials available for use $165,000 Less: materials inventory, Dec. 31, 2008 35,000 Cost of materials placed in production $130,000 to total manufacturing cost 47 1-3 Determining the Cost of Goods Manufactured STEP 2: Cost of materials placed in production $130,000 from Step 1 48 Determining the Cost of Goods Manufactured 1-3 STEP 2: Cost of materials placed in production Direct labor Factory overhead Total manufacturing costs added $130,000 110,000 44,000 $284,000 to cost of goods manufactured section 49 1-3 Determining the Cost of Goods Manufactured STEP 3: Work in process inventory, Dec. 1, 2008 Add: total manufacturing costs added $ 30,000 284,000 from Step 2 50 1-3 Determining the Cost of Goods Manufactured STEP 3: Work in process inventory, Dec. 1, 2008 Add: total manufacturing costs added Total manufacturing costs Less: work in process inventory Cost of goods manufactured $ 30,000 284,000 $314,000 24,000 $290,000 51 Manufacturing Company— Income Statement with Statement of Cost of Goods Manufactured (cont’d) 1-3 to income statement 52 Manufacturing Company— Income Statement with Statement of Cost of Goods Manufactured 1-3 from statement of cost of goods manufactured 53