Ch 2 Notes - Accounting 2301 Chapter 2 Chapter 2...

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Accounting 2301 Chapter 2 Chapter 2 Information needs of managers include using accounting information to: Identify problems Identify solutions to problems Evaluate the effectiveness of decisions, such as continuous improvement efforts Managers need management accounting information for: planning controlling decision making Cost is the cash (or cash equivalent) sacrificed for goods or services that are expected to produce current or future benefits. Expenses are expired costs. A cost object is any item such as products, departments, customers, and activities for which costs are measured and assigned. Direct costs can be easily and accurately traced to a cost object. The more costs that can be traced to a cost object, the more accurate are the cost assignments. Indirect costs cannot be easily and accurately traced to a cost object. Allocation is used to assign indirect costs to a cost object, such as a product or department, using a reasonable and convenient method. Variable cost increase as product output increases. For example, the number and cost of bicycle tires will increase as the number of bicycles produced increases. Fixed cost does not increase as output increases. For example, the cost of insurance for the factory will not increase as the number of bicycles produced increases, but stays the same. Opportunity costs represent the benefit given up or sacrificed when one alternative is chosen over another. Product costs , for external financial reports, are manufacturing costs : direct materials, direct labor, and manufacturing overhead Product costs are first added to an inventory account and remain in inventory until sold. The costs are expensed when the product is sold. Period Costs
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This note was uploaded on 02/28/2012 for the course ACCT 2361 taught by Professor Severance during the Spring '08 term at Texas State.

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Ch 2 Notes - Accounting 2301 Chapter 2 Chapter 2...

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