ACC 212 Chapter 14 - Managerial Accounting Concepts and Principles

How could traceability of costs improve managerial decisions?

By being able to trace costs to cost objects (say, to products and departments), managers better understand the total costs associated with a cost object. This is useful when managers consider making changes to the cost object (such as when dropping the product or expanding the department).

What is the difference between the intended users of financial and managerial accounting?

Financial accounting information is intended for users external to an organization such as investors, creditors, and government authorities. Managerial accounting focuses on providing information to managers, officers, and other decision makers within the organization.

Do generally accepted accounting principles (GAAP) control and dictate managerial accounting?

No, GAAP do not control the practice of managerial accounting. Unlike external users, the internal users need managerial accounting information for planning and controlling business activities rather than for external comparison. Different types of information are required, depending on the activity. Therefore it is difficult to standardize managerial accounting.

Are companies required to report a schedule of cost of goods manufactured?

No; companies are not required to report a schedule of cost of goods manufactured.

What are the three types of inventory on a manufacturing company's balance sheet?

Raw materials inventory, work in process inventory, and finished goods inventory.

How does cost of goods sold differ for merchandising versus manufacturing companies?

The cost of goods sold for merchandising companies includes all costs of acquiring the merchandise; the cost of goods sold for manufacturing companies includes the three costs of manufacturing: direct materials, direct labor, and overhead.

Which type of cost behavior increases total costs when volume of activity increases?

Variable costs increase when volume of activity increases.

A schedule of cost of goods manufactured (a) computes cost of goods manufactured for the period, (b) computes cost of goods sold for the period, or (c) reports operating expenses incurred for the period.

a

Managerial accounting produces information (a) to meet internal users' needs, (b) to meet a user's specific needs, (c) often focusing on the future, or (d) all of these.

d