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Chpt 2 Building Blocks of Managerial Accounting

Chpt 2 Building Blocks of Managerial Accounting - Building...

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Building Blocks of Managerial Accounting Chapter 2 1
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Three Types of Companies Service Merchandisers Manufacturers 2
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Service Companies Provide a service only No inventory Examples Accountants Banks Doctors Lawyers 3
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Merchandisers Resell products purchased from suppliers One inventory account Examples Amazon.com J. C. Penney Sears Retailers vs. Wholesalers 4
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Manufacturers Use labor and other inputs to convert raw materials into finished products Examples Crayola Crayons Dell Computers Craftsman Tools 3 inventory accounts 5
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Manufacturers Three inventory accounts Raw materials Work in process Finished goods 6
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Value Chain Activities that add value to products and services and cost money R&D Design Production/ Purchases Marketing Distribution Customer Service 7
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Cost Object Anything for which managers want a separate measurement of cost Direct cost Indirect cost 8
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Classify following as direct or indirect costs w/respect to a local Blockbuster Store (store is cost object). State whether Blockbuster would trace or allocate these costs to the store. a. Store utilities Direct, Trace b. The CEO’s salary Indirect, Allocate c. The cost of the DVDs Direct, Trace d. The cost of national advertising Indirect, Allocate 9
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e. The wages of store employees Direct, Trace e. The cost of operating the corporate payroll dept Indirect, Allocate e. The cost of Xbox, PlayStation, and Nintendo games Direct, Trace e. The cost of popcorn and candy sold at the store Direct, Trace 10
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Two Definitions of Product Cost Total costs used internally only (will see this in later chapters) Inventoriable product costs used for external reporting 11
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R&D Design Marketing Distribution Customer Service Production/ Purchases Inventoriable Product Costs Inventoriable Product Costs 12
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Period Costs: All Costs Incurred in the Other Stages of the Value Chain Period Costs Marketing Distribution Customer Service R&D Design 13
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Inventoriable Product Costs: Merchandiser + Purchase price from suppliers + Cost to get ready for sale + Freight-in + Import duties or tariffs 14
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Inventoriable Product Costs: Manufacturer Direct materials Direct labor Manufacturing overhead Direct Costs Indirect Costs 15
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Manufacturing Overhead Indirect costs related to manufacturing
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