Managerial Accounting Essay

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Principles of Managerial Accounting—Fall 2013 Competencies
Competency Description
1
(Ch. 1-2)
Q 1-6 Know difference between managerial and financial accounting.
• Managerial accounting – provision of accounting info for a company’s internal users. It is the firms internal accounting system and is designed to support information needs for managers. (provide planning, controlling, and decision making info) Internal accounting
• Financial accounting – producing info for external users, including investors, creditors, customers, suppliers, government agencies, and labor unions. External accounting
Identify cost classifications—Direct Materials, Direct Labor, Manufacturing Overhead, Nonmanufacturing costs.
• Direct materials – materials that are part of the final product and can be directly traced to the goods being produced. (tires on cars, wood in dining room table, alcohol in cologne, denim in jeans)
• Direct labor – labor that can be directly traced to the goods being produced. (workers on an assembly line)
• Manufacturing overhead – factory burden or indirect manufacturing costs. (depreciation on plant buildings and equipment, janitorial and maintenance labor, plant supervision, materials handling, power for plant utilities, plant property taxes.)
• Nonmanufacturing costs – period costs (office supplies, research and development, ceo salary, advertising), Selling cost (salaries and commissions of sales personnel, advertising, warehousing, shipping, and customer service), Administrative costs (executive salaries, legal fees, printing the annual report, and general accounting).
Know difference between Direct and Indirect costs.
• Direct costs – costs that can be easily and accurately traced to a cost object.
• Indirect costs – costs that cannot be easily and accurately traced to a cost object.
Know difference between Product and Period costs.
• Product costs – total product cost equals the sum of direct materials, direct labor, and manufacturing overhead.
• Period costs - office supplies, research and development, ceo salary, advertising
Prepare and analyze Schedule of Cost of Goods Manufactured.
• Direct materials + direct labor + manufacturing overhead = Total manufacturing cost
• Total manufacturing cost + WIP 1st of month – WIP 31st of month = cost of goods manufactured
2
(Ch. 5)
Q 7-11 Know job-order costing cost flows. Determine which costs are included on a job cost sheet.

Calculate predetermined overhead rate.
• Overhead / direct labor cost
Calculate applied overhead and know how to dispose of over/under-applied overhead.
• Predetermined overhead rate X direct labor cost
• Over applied subtracted form cost of goods sold
• Under applied added to cost of goods sold
3
(Ch. 3)
Q 12-16 Determine cost behavior—Variable and Fixed.
• Fixed cost – cost that in total are constant within the relevant range as the level of output increases or decreases. (cost of airplanes to an airline,
• Variable cost – costs that in total vary in direct proportion to changes in output within the relevant range. (producing and assembling the propeller on each boat manufactured, certain supplies in a dentist office such as disposable bib, floss, x-ray)
Identify mixed costs.
• Mixed costs – costs that have both a fixed and a variable component. (sales rep that is paid salary plus commission)
Calculate cost formula using high-low method.
• Total cost = fixed cost + (variable rate X Number of xxx)
• Variable rate =(high point cost – Low point cost) / (High point output – low point output)
• Fixed cost = total cost high point – (variable rate X output at high point)
• Fixed cost = total cost low point – (variable rate X output at low point)
4
(Ch. 4)
Q 17-22 Know difference between traditional and contribution format income statement.
• Contribution – difference between sales and variable expense.
Prepare contribution format income statement.
• Variable cost per unit = direct materials + direct
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