Managerial accounting review

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Unformatted text preview: Managerial Accounting Review Cost Concepts Product Costing Systems Activity Based Costing (ABC) CostVolumeProfit Analysis (CVP) Budgeting Standard Costing Nonroutine Decisionmaking Cost Concepts Functional Types of Companies Service sells a (special) talent; product sales (if any) are incidental to labor provided; e.g. a medical doctor. Merchandising resells a product others have made; e.g. Target, Big K, etc. Manufacturing makes a product for resale; e.g. Compaq Service and merchandising firms were the focus of your first accounting course. The concepts in managerial accounting are generally ok for these companies too, but managerial accounting will focus on the (more difficult) manufacturing company. More Cost Concepts Benchmarking: a study of organizations who are so good, they set the industry standards. Justintime: materials (inventory) is purchased & units are produced only as needed to meet actual customer demand. Goal is zero raw and finished goods inventory. Cost Concepts Total Quality Management: a continuous improvement approach that uses frontline workers to identify & solve problems. Process Reengineering: a complete redesign of processes to make production leaner & more efficient Theory of Constraints: approach to managing problems around the "weakest link" or constraint. Cost Concepts Manufacturing (Product) Costs: Costs assigned to inventory units. Direct materials (raw materials directly traceable to each unit made) Direct labor (frontline worker effort directly traceable to each unit made) Manufacturing overhead (indirect costs + rent, utilities, insurance, etc.) Conversion cost = direct labor + manufacturing overhead. It is the cost to convert raw materials into finished goods. Prime cost = direct materials + direct labor. Typically, these are the 2 biggest costs of a product. Selling, general & administrative expenses Nonmanufacturing (Period) Costs: Costs expensed as incurred each period Cost Concepts Variable vs. Fixed Costs Variable costs increase (by a fixed amount) in total with each new unit produced Fixed costs stay the same in total for the whole period. If you're making sandwiches: the bread is variable (because the more sandwiches you make, the more bread you use); the cost of the knife is fixed (because it doesn't change if you make more sandwiches). Cost Concepts Differential Cost: a difference in costs between two alternatives. Opportunity Cost: a benefit given up by choosing one altern...
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This note was uploaded on 03/27/2012 for the course ACCT 2302 taught by Professor Shall during the Spring '08 term at Texas A&M University, Corpus Christi.

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