Managerial Accounting: focuses on identifying, interpreting, analyzing, and implementing financial info
internal management needs to run a company efficiently, effectively, and profitability. Provides info via
internal reports that are developed by needs. No authoritive rules. Focuses on segments.
Managers 3 Primary Responsibilities: Planning, directing, and controlling
Ethics: maintain professional competence, preserve confidentiality, uphold integrity, and perform
credible duties
Lean thinking: philosophy and business strategy of operating w/o waste
Triple Bottom Line: Evaluating a company’s performance by its ability to generate economic profits and
impact on people & planet
Planning: Top level: managers determine the overall course for the company. Mid level: specifies how
objectives will be accomplished. Ex Creates a budget, analyzes to move to Mexico or not, deciding to
increase sales by _%.
Controlling: act of using feedback to ensure plans are being followed and achieved making adjustments
if needed. Determine whether company’s are operating to plan. Ex determines whether company’s
actual sales location are operating according to plan, conducts various analysis.
Directing: Running a company on a day to day basis. Assignment of tasks/ resp and allocating resources
to accomplish goal. Ex uses info on product costs to determine sales prices, reviews hourly sales reports
for staffing, review actual data to determine best sellers and targets them in campaign
Decision Making: Identify alternative course of action.
Who Needs Financial Info: Reporter, investors, bookkeeping, Wall Street analyst, tax auditor, SEC
examiner, Stockholders, Loan Officer
Who Needs Financial & Managerial Info: Division controller, board of directors, internal auditor
Credibility: Disclose and communicate info
Competence: Provides decision report that are accurate, recognize and communicate professional
limitations that would prelude successful performance
Integrity: abstain from activities that discredit, mitigate conflicts of interest
Controller: Responsible for general financial accounting, managerial accounting and tax reporting
* Board of Directors hire a CEO
CHAPTER 2
Value Chain: activities that add value to the company’s products and services. Research and
Development (payment for consultation advice) , Design, Production/ Purchases (merchandising, freight
in), Marketing (advertisements, salaries), Distribution (depreciation exp), Customer Service
ACC 241 Exam 1 Study Guide
Chapter 1
Life Cycle Assessment: company analyzes the environmental impact of a product in an attempt to
minimize negative environmental consequences throughout the entire lifespan of product
Biomimicry: company tries to mimic natural biological features and processes creates a cradle to cradle
product life cycle
Greenwashing: overstating a company’s commitment to sustainability
Cost Object: anything for which managers want to know the cost. It includes individual units, different
models, alternative marketing strategies, geographic segments, departments, sustainability measures
Direct cost: cost that can be traced to the cost object
Indirect cost: cost that is jointly used or shared by several cost objects. Ex utilities, property tax, salary
Product Cost: incurred by manufacturers to produce their products or by merchandisers to purchase
their products. Relates to obtaining inventory. Manufacturing expense. Ex dep on equipment, Ins for
building, assembly line wages
Period cost: cost incurred by company that to not get treated as inventory but are expensed immediately
in the period in which they are incurred. Operating expenses. Ex dep on salespeople automobiles,
marketing manger salary, shipping
Merchandising Product cost: cost of purchasing inventory, freight in, tariffs
Manufacturing Overhead: Indirect manufacturing costs
-Indirect Materials: inexpensive supplies/ components used for finished products. Ex glue, lubricants
-Indirect labor: employees working in plant but not putting together raw materials. EX plant
supervisor salaries, Plant janitor salary
-other indirect costs: depreciation, property tax, insurance
Operating income: company’s earnings before interest and income tax
Controllable cost: management is able to influence or change them
Uncontrollable cost: can’t be changed by management in the short run
* inventoriable costs are the only costs incurred during the production or purchase phase of the value
chain
* Companies want to run at full capacity to better utilize the resources they spend on fixed costs. The
more they produce, the lower the avg fixed cost per unit
Equations:
Prime costs = Direct Materials + Direct Labor
Total Product Costs (Purchases)= Total Fixed cost + Total Variable Costs (cost per unit x # of units)
Average Product cost = Total cost/ Number of units
COGS available = Beg Inventory + Purchases , freight in, and import duties
COGS = COGS available – Ending inventory
Current cost per unit = Total Product cost/ current years produced units
Current fixed cost per unit = Total fixed cost/ current years produces units
Forecasted Total Product cost = Forcasted total variable costs + Total fixed costs
Forecasted product cost per unit = Forecasted total Product cost/ Next yrs forecasted units
CHAPTER 3
Process Costing: Used by companies that produce extremely large numbers of identical units. Averages
manufacturing costs so ech unit is the same used to determine the cost of each unit. Ex cereal, nails,
lightbulbs
Job Costing: used by companies that produce unique custom ordered products. Used to determine the
cost of serving each client
Production Schedule: Quantity and types of inventory that are schedules to be manufactured during the
period
Bill of Materials: list of all the materials needed to complete each job. Like an ingredient list
Raw materials record: shows detailed info about each item in stock and the cost of each unit purchased
Job cost record: keeps track of direct materials, direct labor, and manufacturing overhead allocated costs
to the jo. Identifies per unit cost, reports units transferred to finished goods
Materials Requisition: document itemizing the materials currently needed from the storeroom
Steps To Allocate Manufacturing Overhead:
1. Estimate total overhead costs for the coming yr
2. Select allocation base and est total amt used during yr
3. Calculate Predetermined MOH rate
(Steps taken before yr begins)
4. Allocate some MOH to each individual job
Equations:
Predetermined MOH (AKA Plantwide Overhead Rate) =
Total Est MOH Cost
Total Est amt of allocation base
MOH Allocated to a job = Predetermined MOH rate x Actual amt of allocation used by job
Cost Plus Price = Cost + Markup on cost
Total cost of serving = Direct costs + indirect costs
Chapter 4
Cost Distortion: occurs when some products are overcosted while others are undercosted by the cost
allocation system
Activity Based Costing: focuses on activities rather than departments as the fundamental cost object.
Reduces cost distortion to a minimum
Activity Cost Hierarchy Categories:
- Unit Level Activities: activites/ costs for each unit. Electricity use, inspecting/ packaging each
unit
- Batch Level activities: activities/ costs for every batch. Arranging shipments, machine setup,
preparing production orders
- Product Level activites: activities/ costs for every product. Maintain inventory, lease payments
on equipment, staffing, designing product
- Facility Level activities: facility upkeep such as depreciation, ins, property tax, cleaning,
computer networking, preparing finances
Activity based management: using activity based cost info to make decisions that increase profits while
satisfying customer needs
Value added activities; activities for which the customer is willing to pay because they add value to final
product/ service
Waste activities: neither enhance the customers image of the product or service nor provide a
competitive advantage. Can be removed without ill effect on end product or service
Lean thinking: focused on creating value for customers by eliminating waste
Customer response time: time that elapses between receipt of customer order and the delivery of
product/ service
Eight Wastes (DOWNTIME): Defects, overproduction, waiting, not utilizing people to full potential,
transportation, inventory, movement, excess processing
5S Workplace Organization: sort (infrequent supplies are removed), set in order (color coding used to
create logical layout), sustain (daily upkeep)
TAKT Time: rate of production needed to meet customer demand yet avoid overproduction
Point of use strategy: storage system used to reduce waste of transportation and movement
Six sigma: goal of producing less than 3.4 defects per million opportunities
