Acc212 Chapter 14

Managers use an internal control system to

Ensure reliable accounting, protect assets, uphold company policies, promote efficiency

Managerial accounting has the following characteristics

Internal users: Managerial and executive employees inside the company; help managers make planning and control decisions; relatively flexible (no GAAP rules); available quickly without an audit; Current performance and future projections using mostly real-time information; a company's projects, processes, and divisions; mostly monetary, some nonmonetary

Consider a company that manufactures picture frames. Which of the following costs would e considered direct costs?

Oak wood used for frame, glass used in frame, wage of an assembly line worker

The main purpose of managerial accounting is

providing financial and nonfinancial information to an organization's members

Financial accounting provides information to external users following required time periods (such as annual and quarterly). Many financial statements are delayed until an audit is done. Managerial accounting provides information to internal users ____

As they request it. This can be as immediate and frequent as demanded

The Institute of Management Accountants requires members to

Be competent, maintain confidentiality, act with integrity, and communicate information in a fair and credible manner

Conversion costs consist of

Direct labor and factory overhead. They are costs incurred in converting raw materials to finished goods

Which of the following are product costs for a manufacturer?

Direct materials, depreciation on the factory equipment

Example of direct material costs

bumpers, tires, and steering wheels

Managerial accounting reports also have nonmonetary information, which includes

customer and employee satisfaction data, percentage of on-time deliveries, product defect rates, energy from renewable sources, and employee diversity

Prime costs consist of

direct materials costs and direct labor costs

Inventory which is completed but not yet sold by a manufacturer is known as

finished goods inventory- consists of the costs of direct materials, direct labor, and overhead of completed products ready for sale

Straight-line depreciation is a

fixed, indirect cost

Managerial reporting systems are

flexible

Factory or manufacturing overhead

includes all manufacturing costs that are not direct materials or direct labor

What are examples of factory overhead?

indirect materials, indirect labor

Period costs

period costs are nonproduction costs linked to a time period. They are expensed in the period when incurred and reported on teh income statement as either selling expenses or general and administrative expenses. Common examples of selling expenses are advertising, delivery, and salesperson salaries, commissions, and travel expenses. Common examples of general and administrative expenses are office accounting expenses, office employee wages, office rent, depreciation on office equipment, and office manager salaries. For a manufacturer, period costs are also called nonmanufacturing costs`

Product costs

product costs are production costs necessary to create a product and consist of direct materials, direct labor, and factory overhead. Product costs are added to inventory, or capitalized, during manufacturing of products. When products are sold, these costs are expensed as cost of goods sold

Raw materials inventory

the cost of materials a company acquires to use in making products. Raw materials that can be cost-effectively traced to a product are called direct materials and are included in raw materials inventory