m3l4 (1) - Spring 2012 Module 3 Accounting & Finance...

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David Robinson © D. Robinson, 2012 Spring 2012 Module 3 Lecture 4: Managerial Accounting
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Module Overview 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) 2. Often contain industry-specific measures (e.g. $ per transaction, total by store ) 3. 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 each soda at a party
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11 Simple T-Shirt Example Screens cost $ 30 each We need 3: 3 X $30 $ 90 Each blank t-shirt & cost of printing it is $ 9 each Variable Cost is $9 per unit If you want to follow along with the calculations, there’s an Excel on the first page of the course website.
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12 Simple T-Shirt Example Make 12 shirts Screens cost $ 90 12 blank shirts & printing $ 108 Total Cost $ 198 Average Cost $198 / 12 $ 16.50 each Fixed Cost Total variable cost
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Definition: Average Cost Average Cost = Fixed Costs + Total Variable Costs Number of Units Produced 13
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This note was uploaded on 04/04/2012 for the course UGBA 10 taught by Professor Xuanmingsu during the Fall '08 term at University of California, Berkeley.

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m3l4 (1) - Spring 2012 Module 3 Accounting & Finance...

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