Management 201

Job-Order costing

- Used for production of large, unique, high-cost items - Built to order rather than mass produced - many costs can be directly traced to each job

Define other manufacturing costs

- all other manufacturing-related costs that're not material or labor

Define indirect materials

- materials required for the production process that don't become part of the finished product (ex. drill bits used for fabricating metal) - materials that do become part of the finished product but are insignificant in cost (ex. glue, nails, screws)

Examples of decision making

- price setting - product offerings - renovation of facilities

What does managerial accounting do?

- provides info for planning and decision making - assists managers in directing & controlling activities - motivates employees towards organization's goals - measures performance of subunits, activities, managers, and other employees - Helps assess the organization's competitive position

Define direct materials

- raw materials added to the production process - easily traced to the finished product

Planning

- setting goals and objectives for the company and determining how to achieve them - managerial accounting translates plans into budgets - the quantitative expression of a plan

What are the four steps in the manufacturing cost flows?

1. DM + DL + MOH 2. WIP 3. FG 4. COGS

What are the 3 basic types of manufacturing costs?

1. Direct material 2. Direct labor 3. Manufacturing overhead

What are the different kinds of costs?

1. Expenses 2. Product costs 3. Period costs

What are the two types of job-order costing?

1. Job-shop operations 2. Batch-production operations

Fixed cost per unit goes ___1___ [up, down] as activity level goes ___2___ [up, down].

1. down 2. up (cost down when activity up)

Product costs appear on the ___1___ [income statement, balance sheet] as ___2___ [COGM, COGS], in the period in which they were ___3___ [incurred, sold].

1. income statement 2. COGS 3. sold

Period costs appear on the ___1___ [income statement, balance sheet] as ___2___ [operating expense, COGS], in the period in which they were ___3___ [incurred, sold].

1. income statement 2. operating expense 3. incurred

What are the 3 types of manufacturing overhead?

1. indirect materials 2. indirect labor 3. other manufacturing costs

Managerial accounting is ___1___ [not required, required] and ___2___ [regulated, not regulated].

1. not required 2. unregulated

Financial accounting is ___1___ [not required, required] and ___2___ [regulated, not regulated].

1. required (by GAAP) 2. regulated (by FASB & SEC)

The wages of employees who assemble computers from components. A. Direct labor cost B. Direct materials cost C. Manufacturing overhead cost D. Selling cost E. Administrative cost

A

Which of the following is NOT an objective of managerial accounting? A. Maximizing profits and minimizing costs B. Assisting in directing and controlling operations C. Motivating managers toward the organization's goals D. Measuring the performance of managers and subunits E. Providing information for decision making and planning

A

Which of the following managerial functions involves a detailed financial and operational description of anticipated operations? A. Planning B. Measuring C. Controlling D. Decision making E. Directing operational activities

A

What is a product costing system?

Accumulate the costs incurred in a production process and assign those costs to the final products - inputs (product costs: DM,DL,MO) to production process to outputs (finished goods)

What is manufacturing overhead?

All manufacturing costs other than direct materials and direct labor

The cost of a hard drive installed in a computer. A. Direct labor cost B. Direct materials cost C. Manufacturing overhead cost D. Selling cost E. Administrative cost

B

What is the equation for COGS?

Beg FG + COGM - End FG

Depreciation on equipment used to test assembled computers before release to customers. A. Direct labor cost B. Direct materials cost C. Manufacturing overhead cost D. Selling cost E. Administrative cost

C

The day-to-day work of management teams will typically comprise all of the following activities except: A. Planning B. Controlling C. Cost minimizing D. Decision making E. Directing operational activities

C

The salary of the assembly shop's supervisor. A. Direct labor cost B. Direct materials cost C. Manufacturing overhead cost D. Selling cost E. Administrative cost

C

Wembley Company has set various goals, and management is now taking appropriate action to ensure that the firm achieves those goals. One such action is to reduce outlays for overhead, which have exceeded budgeted amounts. Which of the following functions best describes this process? A. Planning B. Organizing C. Controlling D. Coordinating E. Decision making

C

Sales commissions paid to the company's salespeople. A. Direct labor cost B. Direct materials cost C. Manufacturing overhead cost D. Selling cost E. Administrative cost

D

The cost of advertising in the Puget Sound Computer User newspaper. A. Direct labor cost B. Direct materials cost C. Manufacturing overhead cost D. Selling cost E. Administrative cost

D

Which of the following functions is best described as choosing among available alternatives? A. Planning B. Budgeting C. Controlling D. Decision making E. Directing operational activities

D

The fixed cost PER UNIT [does, does not] change.

DOES

The variable cost PER UNIT [does, does not] change.

DOES NOT

Define conversion costs

Direct labor + Manufacturing overhead (aka Transform raw materials into finished goods)

Define prime costs

Direct material + Direct Labor (aka Direct Production Costs)

Managerial accountants: A. Often work with regulators like the SEC B. Are responsible for issuing a company's annual financial statements C. Are found primarily at lower levels of the organizational hierarchy D. Are found primarily at higher levels of the organizational hierarchy E. Often work on cross-functional teams and are located throughout an organization

E

Managerial accounting: A. Is governed by GAAP B. Focuses only on historical data C. Focuses on financial statements and other financial reports D. Provides information for parties external to the organization E. Focuses primarily on the needs of personnel within the organization

E

The salary of the company's accountant. A. Direct labor cost B. Direct materials cost C. Manufacturing overhead cost D. Selling cost E. Administrative cost

E

Which of the following characteristics relates more to managerial accounting than to financial accounting? A. A focus on reporting to external parties B. An area of accounting that is heavily regulated C. A focus on reporting to personnel within an organization D. A focus on providing information that is relevant for planning, directing, controlling, and decision making E. A focus on reporting to personnel within an organization and a focus on providing information that is relevant for planning, directing, controlling, and decision making

E

Which of the following involves the coordination of daily business functions within an organization? A. Planning B. Controlling C. Motivating D. Decision making E. Directing operational activities

E

Controlling

Evaluating results of business operations against the business plan and making adjustments to keep the company pressing toward its goals

*Period or Product Cost?* Advertising costs

Period

*Period or Product Cost?* Cost of leasing the corporate jet used by the company's executives

Period

*Period or Product Cost?* Materials used for boxing products for shipment overseas (units are not normally boxed)

Period

*Period or Product Cost?* Salaries of personnel who work in the finished goods warehouse

Period

*Period or Product Cost?* The cost of renting rooms at a Florida resort for the annual sales conference

Period

*Period or Product Cost?* The wages of the receptionists in the admin offices

Period

*Period or Product Cost?* Depreciation on salespersons' cars

Period

What are the 4 basic activities managers do everyday?

Planning Directing Controlling Decision Making

*Period or Product Cost?* Depreciation on chairs & tables in the factory lunchroom

Product

*Period or Product Cost?* Factory supervisors' salaries

Product

*Period or Product Cost?* Heat, water, and power consumed in the factory

Product

*Period or Product Cost?* Lubricants used for machine maintenance

Product

*Period or Product Cost?* Rent on equipment used in the factory

Product

*Period or Product Cost?* Soap & paper towels used by factory workers at the end of a shift

Product

*Period or Product Cost?* The cost of packaging the company's product

Product

*Period or Product Cost?* Worker's Comp insurance for factory employees

Product

Examples of Other Manufacturing Costs

Production facility - utilities - insurance - property taxes Depreciation on - production plant - factory equiptment

Examples of period costs

Selling Expenses: - marketing - sales personnel salaries - sales commissions Administrative Expenses - office supplies - office personnel salaries - office depreciation

What is the equation for COGM?

Total Manufacturing Costs (DM+DL+MOH) + Beg WIP - End WIP

*True or False:* Cost info accumulated by the cost accounting system is used for both managerial accounting and financial accounting purposes.

True

Define variable costs

a variable cost changes in TOTAL in direct proportion to a change in the level of activity

Are WIP inventory and FG inventory a part of the income statement or the balance sheet?

balance sheet

The TOTAL variable cost [remains the same, changes] as activity level changes.

changes

Define expenses

consumption of assets for the purpose of generating revenue (the matching principle)

Define product costs

costs associated with goods for sale until the time period during which the products are sold, at which time the costs become an expense (cost of goods sold)

Define indirect labor

costs of personnel that don't work directly on the product but whose services are necessary for the manufacturing process (i.e. at the production facility) - ex. factory maintenance workers and janitors

Define fixed costs

costs that do NOT change in TOTAL as the level of activity changes within the relevant range - so if activity increase by 20%, TOTAL fixed costs still remain the same = NO CHANGE

Define period costs

costs that're expensed during the time period when they're incurred (the electric bill)

Financial accounting deals with ___________ users. (internal or external)

external users

*Variable or Fixed:* Advertising by a dental office

fixed

*Variable or Fixed:* Depreciation of factory lunchroom facilities at a GE Plant

fixed

*Variable or Fixed:* Insurance on a Bausch & Lomb factory producing contact lenses

fixed

*Variable or Fixed:* Insurance on a IBM's corporate HQ

fixed

*Variable or Fixed:* Salary of a supervisor overseeing production of printers at HP

fixed

Managerial accounting deals with _____________ users. (internal or external)

internal users

Decision Making

management is continually making decisions while it plans, directs and controls operations

Directing

overseeing the company's day-to-day operations

Job-shop operations

products manufactured on at a time or in very low volumes

The TOTAL fixed cost [remains the same, changes] when the activity level changes.

remains the same

Define direct labor

salaries, wages, and fringe benefits for personnel that work directly on the manufactured product

Define product costing

the assignment of production costs to a company's output, whether a manufacturer, merchandiser, or a service organization

What is a cost?

the measure of resources given up to achieve a particular purpose

What is the COGM?

the transfer of costs between WIP and FG

Define managerial accounting

uses the data for planning, directing, controlling, and decision making within an organization's operations

Define financial accounting

uses the data to publish financial statements and other financial reports

*Variable or Fixed:* Apples processed & canned by Del Monte

variable

*Variable or Fixed:* Commissions paid to car salesmen

variable

*Variable or Fixed:* Hamburger buns in a Wendy's restaurant

variable

*Variable or Fixed:* Shipping canned apples from a Del Monte plant to customers

variable

*Variable or Fixed:* Steering wheels installed in BMWs

variable