Chapter 10 - Chapter 10: Accounting Systems for...

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Chapter 10: Accounting Systems for Manufacturing Businesses
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Definition of Managerial Accounting A field of accounting that provides A field of accounting that provides economic and financial information for economic and financial information for managers managers and and other internal users other internal users . .
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Similarities between Financial and Managerial Accounting Both managerial and financial accounting deal with economic events of a business Both require that economic events be quantified and communicated to interested parties
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Differences between Financial and Managerial Accounting Differences
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Manufacturing Cost Terms Managers rely on managerial accountants to provide cost information. A cost is a payment of cash or its equivalent or the commitment to pay cash in the future for purposes of generating revenues. Manufacturing costs: direct materials, direct labor, and manufacturing overhead.
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Manufacturing Cost Terms Costs can provide an immediate benefit or a benefit that is deferred to future periods.
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Manufacturing Costs Illustration A manufacturing business converts materials into a finished product through the use of machinery and labor. We’ll look at Legend Guitars, a guitar manufacturer.
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Direct Materials Cost The cost of materials that are an integral part of the product. For Legend Guitars: wood, guitar strings, and guitar bridges. The cost of materials that are not an integral part of the product are called indirect materials and are part of factory overhead.
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Direct Labor Cost The cost of wages of employees who are directly involved in converting materials into the manufactured product. For Legend Guitars: wages of the
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Chapter 10 - Chapter 10: Accounting Systems for...

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