Mod 3 L2 - Spring 2011Module 3 Accounting Finance Lecture 2...

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David Robinson © D. Robinson, 2010 Spring 2011Module 3 Accounting & Finance Lecture 2: Managerial Accounting
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Module Overview Accounting & Finance Accounting Finance Managerial Financial Auditing How investors use their money How firms raise money Three financial statements Forms of business
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3 Lecture Overview: Managerial Accounting Overview of Terms Managerial Accounting: Concerns t he question of costs Cost/volume/profit relationships Achieving “Break-even” Costs relevant and not-relevant Opportunity cost
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The Importance of Accounting Good records reassure everyone that no one is “scamming” the business Proper accounting is important when you have distant investors and remote firms 4
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5 Accounting Accounting versus Bookkeeping Accounting involves analysis Bookkeeping is just recording Accounting involves keeping track of: How much we have (money, inventory) How well we are doing What is owed to us, and what we owe
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6 Accounting:  The Language of Business Two different styles of accounting: Managerial Accounting for internal users Financial Accounting for external constituencies Shareholders Regulators
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7 Managerial Accounting 1. Reports are usually more frequent than those required for Financial Accounting ( weekly is not unusual) 1. Often contain industry-specific measures (e.g. $ per transaction, total by store ) 2. Managerial Accounting is about measuring costs
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Accounting for Costs Costs are:  Fixed or Variable, and Relevant or Sunk
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9 Costs are  Fixed   or  Variable 1 Fixed Cost:   A cost that doesn’t change over a period of time Doesn’t matter how much we sell, or How many we make Examples: Screen charge for printing t-shirts (one-time charge) Cost to hire a D-J for a party
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10 Costs are  Fixed   or  Variable 2.  Variable Cost: A cost that changes depending on the level of production or sales Depends on how much we sell, or How many we make Examples: Cost of blank t-shirts, & cost of printing each one Cost of each soda at a party
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