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Review. Ch 1 2. Review Ch.1. What are the basic differences in orientation between financial and managerial Accounting ?

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Ch 1 2

review ch 1
Review Ch.1

What are the basic differences in orientation between financial and managerial Accounting ?

Managerial accounting is concerned with providing information to managers for use within the organization. Financial accounting is con­cerned with providing information to stockholders, creditors, and others outside of the organization.

What are the major differences between financial and managerial accounting?

review ch 11
Review Ch.1
  • Distinguish between line and staff positions in an organization.
  • A line position is directly related to the achievement of the basic objectives of the organization. A staff position is not directly related to the achievement of those objectives; rather, it is supportive, providing services and assistance to other parts of the organization.
review ch 12
Review Ch.1
  • What are the major benefits of JIT System?
  • The main benefits of a successful JIT sys­tem are reductions in:

(1) funds tied up in inven­tories;

(2) space requirements;

(3) throughput time; and

(4) defects.

benefits of a jit system

Higher qualityproducts

Increased throughput

Benefits of a JIT System


Freed-up funds


More rapidresponse tocustomer orders

review ch 13
Review Ch.1
  • Why is Process reengineering a more radical approach to improvement than total quality management?
  • TQM generally approaches improvement in a series of small steps that are planned and im­plemented by teams of front-line workers. Process Reengineering involves completely redesigning business processes from the ground up—often with the use of outside consultants.
review ch 14
Review Ch.1
  • See your book P.30
  • Exercise 1-1
Exercise 1-1

1. Line

2.Directing and motivating





7.Precision; Nonmonetary data

8.Managerial accounting; Financial accounting



11.Performance report

12.Chief Financial Officer

review ch 2
Review Ch.2
  • What are the three major elements of product costs in a manufacturing company ?
  • The three major elements of product costs in a manufacturing company are direct materials, direct labor, and manufacturing overhead.
  • Distinguish between the following :
    • Direct material
    • Indirect material
    • Direct labor
    • Indirect labor
    • Manufacturing overhead
review ch 21
Review Ch.2

a. Direct materials are an integral part of a finished product and their costs can be conveniently traced to it.

b. Indirect materials are generally small items of material such as glue and nails. They may be an integral part of a finished product but their costs can be traced to the product only at great cost or inconvenience. Indirect materials are ordinarily classified as manufacturing overhead.

c. Direct labor includes those labor costs that can be easily traced to particular products. Direct labor is also called “touch labor.”

d. Indirect labor includes the labor costs of janitors, supervisors, materials handlers, and other factory workers that cannot be conveniently traced to particular products. These labor costs are incurred to support production, but the workers involved do not directly work on the product.

e. Manufacturing overhead includes all manufacturing costs except direct materials and direct labor.

review ch 22
Review Ch.2
  • Explain the differences between a product cost and a period cost
    • A product cost is any cost involved in purchasing or manufacturing goods. In the case of manufactured goods, these costs consist of direct materials, direct labor, and manufacturing overhead.
    • A period cost is a cost that is taken directly to the income statement as an expense in the period in which it is incurred
review ch 23
Review Ch.2
  • What is meant by the term cost behavior ?
    • Cost behavior refers to how a cost will react or respond to changes in the level of activity.
review ch 24
Review Ch.2
  • Define the following terms : differential cost, opportunity cost, and sunk cost.
    • A differential cost is a cost that differs between alternatives in a decision.
    • An opportunity cost is the potential benefit that is given up when one alternative is selected over another.
    • A sunk cost is a cost that has already been incurred and cannot be altered by any decision taken now or in the future.
review ch 25
Review Ch.2
  • Lompac products manufactures a variety of products in its factory. Data for the most recent month's operations appear below :

Beginning raw material Inventory $60000

Purchase for raw material $690000

Ending raw material Inventory $45000

Direct Labor $135000

Manufacturing overhead $370000

Beginning work in process Inventory $120000

Ending work in process Inventory $130000


Prepare a schedule of cost of goods Manufactured for the company for the month


Messinger Manufacturing Company had the following account balances for the quarter ending March 31, unless otherwise noted:

Work-in-process inventory (January 1) $ 140,400

Work-in-process inventory (March 31) 171,000

Finished goods inventory (January 1) 540,000

Finished goods inventory (March 31) 510,000

Direct materials used 378,000

Indirect materials used 84,000

Direct manufacturing labor 480,000

Indirect manufacturing labor 186,000

Property taxes on manufacturing plant building 28,800

Salespersons' company vehicle costs 12,000

Depreciation of manufacturing equipment 264,000

Depreciation of office equipment 123,600

Miscellaneous plant overhead 135,000

Plant utilities 92,400

General office expenses 305,400

Marketing distribution costs 30,000


a. Prepare a cost of goods manufactured schedule for the quarter.

b. Prepare a cost of goods sold schedule for the quarter.


a. Messinger Manufacturing Company Cost of Goods Manufactured Schedule for quarter ending March 31

Direct materials used$ 378,000

Direct manufacturing labor480,000

Manufacturing overhead

Depreciation of manufacturing equipment $264,000

Indirect manufacturing labor186,000

Indirect materials84,000

Miscellaneous plant overhead135,000

Plant utilities92,400

Property taxes on building28,800

Total Manufacturing overhead 790,200

Total Manufacturing costs incurred $1,648,200

work in process statement
Work-in-process Statement

Beginning work-in-process inventory 140,400

Add Total Manufacturing costs incurred $1,648,200

= Total work-in-process for the period $1,788,600

Less ending work-in-process inventory 171,000

= Cost of goods manufactured $1,617,600


finished goods statement
Finished goods Statement

b. Messinger Manufacturing Company

Cost of Goods Sold Schedule For the quarter ending March 31

Beginning finished goods inventory $ 540,000

Cost of goods manufactured 1,617,600

Cost of goods available for sale 2,157,600

Ending finished goods inventory (510,000)

Cost of goods sold $1,647,600