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
