C1102s - ACCT2200: ManagerialAccountingandCostConcepts...

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1 ACCT 2200: Managerial Accounting and Cost Concepts (Chapters 1 and 2) Class 2, Week 2
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2 Last time: Introduction to Managerial Accounting Reminder: index cards Professional certifications: Certified Management Accountant (CMA) from the Institute of Management Accountants (U.S.): www.imanet.org Chartered Management Accountant from the Chartered Institute of Management Accountants (U.K.): www.cimaglobal.com
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3 Learning Objectives: Identify the major differences and similarities between financial and managerial accounting. State the three major managerial activities. Distinguish among the following cost classifications: Manufacturing vs. non-manufacturing costs; Product vs. period costs; Fixed vs. variable costs; Direct vs. indirect costs. Prepare a schedule of cost of goods manufactured. Define and give examples of the following costs: differential costs, opportunity costs, and sunk costs.
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4 Functions of Management and the Need for  Accounting Information Three major activities, or functions, of managers: Planning : identify alternatives and select the best Directing and motivating : oversee day-to-day operation Controlling : ensure that the plan is carried out, obtain feedback or performance report. Can you think of decisions that correspond to each of the above functions? How does information required for planning differ from information required for controlling?
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5 Costs: The Main Idea Different costs for different purposes Example 1: we need forward-looking cost information for planning – and historical cost information for controlling Example 2: we need average product costs for external reporting – and marginal costs to run the company The problem is that costs are usually not reported under their full names, so we have to decide what type of cost we are working with and label it – i.e., classify it. This is the main goal of Chapter 2.
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6 An Overview of Cost Terms   Why should we spend so much time studying costs? What is the difference between costs and expenses? What do we mean when we talk about cost flows? Why do we classify costs into various categories? Because costs represents resources used in production, and we need to know how efficient we are at using these resources Expenses are costs that have been matched with revenues and have flown through the Income Statement Ideally, cost flows through various accounts should reflect the physical movement of goods or services To facilitate decision making: it’s easier to deal with two or three categories than with hundreds of individual costs
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7 An Overview of Cost Terms   Purpose of classification Classification Preparing an income state- • Manufacturing costs (Product costs) ment and balance sheet • Direct materials • Direct labor • Manufacturing overhead • Nonmanufacturing costs (Period costs) Marketing and selling costs Administrative costs Predicting changes in cost
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This note was uploaded on 01/10/2012 for the course ACCT 220 taught by Professor Kirillnovoselov during the Fall '08 term at HKUST.

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C1102s - ACCT2200: ManagerialAccountingandCostConcepts...

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