Acc550-ch_1_and_2 - ACC550 CHAPTERS 1 & 2 ACCOUNTANT'S...

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ACC550 Cost accounting 1) A cost accounting system provides a basis for determining total and per unit product costs to assist in analyzing product profitability 2) It provides USEFUL reports to plan and control operations a) To establish overall mfg objectives b) To establish desired quantities of finished units c) To establish a desired cost per unit d) To establish quality goals e) To establish desired overall inventory levels Discussion point: Inventory levels are typically expressed in terms of "days sales outstanding" (DSO). For example, a desired DSO of 30 days means that the business should not carry more than a 30 day supply of inventory on hand at any one time. 3) It helps us establish detailed plans to meet objectives a) Work center / machine center schedules b) Personnel schedules c) Raw material purchase schedules 4) It helps us assign responsibility to managers a) It establishes cost centers that capture controllable costs b) It establishes budgets for each cost center c) It allows us to compare actual results to objectives and budgets d) It allows us to take corrective action i) The information provided by the system must be timely ii) Sufficient detail must be provided to allows action to be taken Cost versus financial accounting 1) Financial accounting a) Financial accounting must follow GAAP b) Such information is primarily for external users (investors, creditors, etc.) c) Financial statements represent large periods of time (quarters, years, etc.) d) The information looks at the company as a whole at a very top level 2) Cost accounting a) Cost accounting need not follow GAAP or any predetermined rules. i) Information that does not comply with GAAP cannot be published to outside parties. b) Such information is primarily for internal users (management) c) The information is used for day to day management of operations d) The information looks at detail reporting levels such as individual products, cost centers, departments, etc. Inventory general ledger accounts 1) A merchandiser has the following inventory accounts on its balance sheet: a) Merchandise inventory i) This represents the cost of inventory purchased from vendors ready for sale ii) Merchandise inventory is a current asset 2) A manufacturer has the following inventory accounts on its balance sheet: a) Raw materials i) This represents the cost of materials purchased from vendors for use in manufacturing b) Work in process i) This represents the cost of inventory that is partially processed but not yet finished
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This note was uploaded on 02/21/2009 for the course ACC 100 taught by Professor Smith during the Spring '09 term at University of Phoenix.

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Acc550-ch_1_and_2 - ACC550 CHAPTERS 1 & 2 ACCOUNTANT'S...

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