Accounting

Accounting - Managerial Accounting On final: Managerial...

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Managerial Accounting On final: Managerial accounting (35) Debits/credits from chapter 4 (what increases and decreases credits/debits & how to prepare a journal entry; NO AJEs) (5) What is taxable? And what is not?(5) o Gross income and exclusions Managerial Accounting Financial Accounting vs Managerial Financial-past, have to use GAAP, company as a “whole” Managerial-present and future, no GAAP, a sales territory (particular products/location) Cost Terms: Fixed Cost- does not change in total dollars, stays fixed when volume/level of activity changes o Graph of $ vs. Volume: Straight line across at $200 o Example: you pay the same amount of rent no matter how much time you stay there, ect. o In a per unit basis: Changes on a per unit basis as volume changes o Example: paying for a party bus: one fixed cost but the more people you add the less amount each person has to pay even though the total stays the same Variable Cost- changes in total dollars as volume changes o Graphically: $ vs. Volume: Increasing slope from origin o Goes up in total as volume increases o In a per unit basis: Cost remains the same as volume changes o Examples of true variable costs: gas, raw materials for manufacturing products Mixed Cost-part fixed and part variable
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o Example: cell phone: $50 for 500 minutes + $0.25/min for > 500 min. o Graphically: $ vs. Volume: straight-line then increase slope at 500 min. o Another example: utilities have a base-line pay Opportunity Cost o Example: you went to LSU so you gave up going straight into a job. The income foregone by NOT choosing the other alternative o You do not record these costs Sunk Cost o Paid in past and cannot be reversed o Never Relevant! Don’t take into account what you have already sunk into something. Not relevant to the decision making process Differential Cost o Cost that differs between the alternatives o Example: LSU or TAMU LSU Tuition: $4,000/yr TAMU Tuition: $20,000/yr LSU Books: $1,000 TAMU Books: $1,000 o Differential costs are always relevant costs! o The book costs are not differential costs and therefore not relevant Product Costs o “Inventorial Costs” o Asset Costs o Example: raw materials, product ingredients, labor costs (direct-think carpenter; indirect-janitor working in shop), overhead (utilities, supplies, insurance), and any cost associated with MFG. process Period Cost o Expense in period incurred
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o Example: depreciation of furniture and equipment, rent on office, commissions to sales people, etc. Direct Cost o Cost that will disappear if company discontinues a particular product/process o Example: if HP stops making laptops; HP will stop buying intel processors o Raw Materials Indirect Cost o Continue to be incurred despite the discontinuance of a particular product/process o Example: if HP stops making laptops; they still incur insurance costs and
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This note was uploaded on 10/01/2010 for the course ACCT 2000 taught by Professor Holmes during the Spring '08 term at LSU.

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Accounting - Managerial Accounting On final: Managerial...

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