CHAPTER 1 MANAGERIAL ACCOUNTING. Explain the distinguishing features of managerial accounting. Identify the 3 broad functions of management. Define the 3 classes of manufacturing costs. Distinguish between product and period costs. Study Objectives. Study Objectives: Continued
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Explain the difference between a merchandising and a manufacturing income statement.
Indicate how cost of goods manufactured is determined.
Explain the difference between a merchandising and a manufacturing balance sheet.
Identify trends in managerial accounting.
Definition of Managerial Accounting
A field of accounting that provides
economic and financial information
for managers and other internal users
Also called Management Accounting
service, merchandising, and manufacturing
Management’s activities and responsibilities can be classified into the following three broad functions:
Good decision making is the outcome of good judgment in planning, directing, and controlling.
Typical Classification of Manufacturing Costs
Flour in the baking of bread
Syrup in the bottling of soft drinks
Steel used in making automobiles
Bottlers at Coca-Cola
Bakers at Sara Lee
Typesetters at a newspaper
Wages of maintenance workers
Depreciation on factory buildings
Insurance, taxes, maintenance on factory facilities
The income statement for a manufacturer is similar to that of a merchandiser except for the cost of goods sold section.
Work in Process – partially completed units of product
Total Manufacturing Costs – sum of direct material costs, direct labor costs, and manufacturing overhead; all incurred in the current year
One category of inventory:
May have three inventory accounts:
Work in Process
Finished GoodsBALANCE SHEET - InventoriesStudy Objective 7
In large companies an ERP system might replace as many as 200 individual software packages
Total Quality Management (TQM) - a philosophy of zero defects
Uses both financial and non-financial measures