Test 1 Review

Test 1 Review - Chapter 1 Managerial accounting provides...

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Chapter 1 Managerial accounting provides information for planning (set goal, identify alternatives to them, and then ask what do I need if I choose that alternative), controlling (making sure staying on track or company expectations to actual), and decision-making (make the decision, choosing one of the alternatives). It is different from financial accounting because it is meant for internal users, has no rules, objective and subjective information, focuses on the future, and is broad and multidisciplinary. Types of companies that use managerial accounting are merchandising, manufacturing, and service. The Financial accounting system accumulates costs. The managerial accounting system assigns costs. What determines a company’s profit? Earnings = rev. – exp. Revenue is value we provide to our customer. Expense is a cost that expires when you generate revenue. How do we assign costs? Determine our Cost Object – the thing you want to assign costs to, categorize costs as product costs or period costs. Product Costs – costs incurred in the factory, initially inventoried. Period Costs – costs incurred in the “office”, never inventoried (initially expensed). Two main product costs: direct and indirect costs. Direct is a cost easily traceable to your cost object. Indirect is a cost that is not easily traceable. Direct: direct material and direct labor (goes into your finished product; wages for touch labor). Indirect: overhead (any costs that are incurred but are indirect). Direct material (DM), direct labor (DL), manufacturing overhead (MOH). Period costs: selling, general and administrative expenses (SGA). Examples: salary of factory supervisor: MOH. Factory utilities: MOH. Cocoa beans: DM. Salary of CEO: SGA. Paying shipping costs for the beans becomes part of the cost of DM. Depreciation
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Test 1 Review - Chapter 1 Managerial accounting provides...

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