Loading...

Messages

Proposals

Stuck in your homework and missing deadline? Get urgent help in $10/Page with 24 hours deadline

Get Urgent Writing Help In Your Essays, Assignments, Homeworks, Dissertation, Thesis Or Coursework & Achieve A+ Grades.

Privacy Guaranteed - 100% Plagiarism Free Writing - Free Turnitin Report - Professional And Experienced Writers - 24/7 Online Support

A manufacturer's operating budgets consists of the

16/10/2021 Client: muhammad11 Deadline: 2 Day

CLA 2 Paper & CLA 2 PPT - Managerial Accounting

Question for CLA 2 Paper:

Provide general discussion on predetermined variable overhead criterion and its possible dependence on the activity for which it is used. Provide a variable costing income statement in which variable overhead is divided among different activities, and that each activity has its own predetermined variable overhead criterion. Explain your example in detail and provide in-text citations.
The following is a partially completed lower section of a departmental expense allocation for Cozy Bookstore. It reports the total amounts of direct and indirect expenses allocated to its five departments. Allocate the expenses of the two service departments (advertising and purchasing) to the three operating departments and provide the complete income statement.

Advertising and purchasing department expenses are allocated to operating departments on the basis of dollar sales and purchase orders, respectively. Information about the allocation bases for the three operating departments follows.

Phoenix Company’s 2019 master budget included the following fixed budget report. It is based on an expected production and sales volume of 15,000 units.

Classify all items listed in the fixed budget as variable or fixed. Also determine their amounts per unit or their amounts for the year, as appropriate.
Identify the unit variable costs in the format of variable costing, according to your findings in part a
Organize a template for variable costing income statements in which the sales volume is a variable. Test your template for 15,000 units sales volume to see if you get the same income as stated above
Find the breakeven point and provide the income statement at break even
Provide income statement at sales volume 12,000, 14,000, 16,000, and 18,000
Please explain your work in detail and provide in-text citations. Include the initial situation and the initial assumptions in your answers. At least 6 references are required among which one should be the textbook as source of the data.

*Please refer to the Grading Criteria for Comprehensive Learning Assessments (CLAs) in the University Policies for specific guidelines and expectations.

Question for CLA 2 PPT:

In addition to your CLA2 report, please prepare a professional PowerPoint presentation summarizing your findings for CLA2. The presentation will consist of your major findings, analysis, and recommendations in a concise presentation of 15 slides (minimum). You should use content from your CLA2 report as material for your PowerPoint presentation. In addition, you should include learning outcomes from all your major assignments. This would include PA1, CLA1, PA2, and of course, CLA2 (unless otherwise specified by your Professor). An agenda, executive summary, and references slides should also be included.

Requirement for CLA 2 Paper:

1. At least 6 pages of the written part. (Excluding the calculations and hypothetical examples)

2. Paper needs to be formatted in APA 7th edition

3. Include the initial situation and the initial assumptions in your answers

4. At least 6 references are required among which one should be the textbook as source of data. (Recommend to find the articles from proquest.)

5. Needs to do the calculations on excel first, and then copy the data to the word as the part of paper.

6. Need to include introduction and conclusion.

7. Please find the guide of first question for CLA 2 paper in the attached.

8. Please find the class PPTs and Textbook in the attachment.

Requirement for PPT:

1. Create 15 slides PPT based on the material you write on the CLA2 paper.

2. Please add the scripts of the presentation in the speaker note section of PPT.

3.Time Length: 8 minuets

4. Need to include in-text citations and reference page.

5. Include calculations and tables with the explanation.

6. Do not put too much words on the slides. The slides should looks simple and clear with main points. (Please write the script of the presentation on the speaker's note section)

Managerial Accounting Concepts and Principles

Chapter 14

Wild and Shaw

Financial and Managerial Accounting

8th Edition

Copyright ©2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 14: Managerial Accounting Concepts and Principles

‹#›

Chapter 14 Learning Objectives

CONCEPTUAL

C1 Explain the purpose and nature of, and the role of ethics in, managerial accounting.

C2 Describe accounting concepts useful in classifying costs.

C3 Define product and period costs and explain how they impact financial statements.

C4 Explain how balance sheets and income statements for manufacturing, merchandising, and service companies differ.

C5 Explain manufacturing activities and the flow of manufacturing costs.

C6 Describe trends in managerial accounting.

ANALYTICAL

A1 Assess raw materials inventory management using raw materials inventory turnover and days’ sales in raw materials inventory.

PROCEDURAL

P1 Compute cost of goods sold for a manufacturer and for a merchandiser.

P2 Prepare a schedule of cost of goods manufactured and explain its purpose and links to financial statements.

© McGraw-Hill Education

2

11 - ‹#›

‹#›

C1: Explain the purpose and nature of, and the role of ethics in, managerial accounting.

Learning Objective

© McGraw-Hill Education

3

‹#›

Managerial accounting provides financial and

nonfinancial information

for managers of an organization and other

decision makers.

Managerial Accounting Basics

Learning Objective C1: Explain the purpose and nature of, and the role of ethics in, managerial accounting.

© McGraw-Hill Education

4

18 - ‹#›

Managerial accounting provides financial and nonfinancial information to an organization’s managers. Managers include, for example, employees in charge of a company’s divisions; the heads of marketing, information technology, and human resources; and top-level managers such as the chief executive officer (CEO) and chief financial officer (CFO). This section explains the purpose of managerial accounting (also called management accounting) and compares it with financial accounting.

‹#›

Purpose of Managerial Accounting

Learning Objective C1: Explain the purpose and nature of, and the role of ethics in, managerial accounting.

Planning

Develop new products?

Expand into new markets?

Build a new factory?

Control

Are costs too high?

Are services profitable?

Are customers satisfied?

Exhibit 14.1

© McGraw-Hill Education

5

18 - ‹#›

The purpose of managerial accounting is to provide useful information to aid in three key managerial tasks:

determining the costs of an organization’s products and services

planning future activities

comparing actual results to planned results

Planning is the process of setting goals and making plans to achieve them. Long-term strategic plans usually span a 5-10 year horizon.

Control is the process of monitoring planning decisions and evaluating an organization’s activities and employees. Feedback provided by the control function allows managers to revise their plans.

‹#›

Nature of Managerial Accounting

Learning Objective C1: Explain the purpose and nature of, and the role of ethics in, managerial accounting.

Exhibit 14.2

© McGraw-Hill Education

6

18 - ‹#›

Managerial accounting differs from financial accounting. We discuss seven key differences in this section, as summarized in this slide.

‹#›

Fraud and Ethics in Managerial Accounting

Fraud affects all business and it is costly: The 2016 Report to the Nations from the Association of Certified Fraud Examiners (ACFE) estimates the average U.S. business loses 5% of its annual revenues to fraud.

An internal control system is the policies and procedures used to:

Ensure reliable accounting

Protect assets

Uphold company policies

Promote efficient operations.

The Institute of Management Accountants has issued a code of ethics to help accountants involved in solving ethical dilemmas.

Learning Objective C1: Explain the purpose and nature of, and the role of ethics in, managerial accounting.

© McGraw-Hill Education

7

18 - ‹#›

Fraud, and the role of ethics in reducing fraud, are important factors in running business operations. Fraud involves the use of one’s job for personal gain through the deliberate misuse of the employer’s assets. Examples include theft of the employer’s cash or other assets, overstating reimbursable expenses, payroll schemes, and financial statement fraud. Three factors must exist for a person to commit fraud: opportunity, financial pressure, and rationalization. This is known as the fraud triangle. Fraud affects all business and it is costly: The 2016 Report to the Nations from the Association of Certified Fraud Examiners (ACFE) estimates the average U.S. business loses 5% of its annual revenues to fraud.

Combating fraud requires ethics in accounting. Ethics are beliefs that distinguish right from wrong. They are accepted standards of good and bad behavior. Identifying the ethical path can be difficult. The Institute of Management Accountants (IMA), the professional association for management accountants, has issued a code of ethics to help accountants in solve ethical dilemmas. The IMA’s Statement of Ethical Professional Practice requires that management accountants be competent, maintain confidentiality, act with integrity, and communicate information in a fair and credible manner.

‹#›

Career Paths

Managerial accounting information is used in many careers:

Marketing staff need sales and cost data to decide which products to promote.

Management needs sales force details to evaluate performance.

Entrepreneurs use costs, budgets, and financial statements.

Nonbusiness majors use accounting information as their careers advance.

Learning Objective C1: Explain the purpose and nature of, and the role of ethics in, managerial accounting.

Exhibit 14.4

© McGraw-Hill Education

8

18 - ‹#›

Managerial accountants are highly regarded and in high demand. Managerial accountants must have strong communication skills, understand how businesses work, and be team players. They must also possess skills to analyze information and think critically, and they are often considered to be important business advisors. Exhibit 14.4 shows estimated annual salaries from recent surveys.

‹#›

C2: Describe accounting concepts useful in classifying costs.

Learning Objective

© McGraw-Hill Education

9

‹#›

Activity

Cost

Activity

Cost

Types of Cost Classifications Fixed versus Variable

Cost behavior refers to how a cost will changes, in total, with changes in the volume of activity.

Total fixed costs do not change when activity changes.

Total variable costs change in proportion to activity changes.

Learning Objective C2: Describe accounting concepts useful in classifying costs.

© McGraw-Hill Education

10

18 - ‹#›

Fixed versus Variable – A cost can be classified by how it changes, in total, with changes in the volume of activity. Fixed costs do not change with changes in the volume of activity (within a range of activity known as an activity’s relevant range). For example, straight-line depreciation on equipment is a fixed cost. Variable costs change in proportion to changes in the volume of activity. Sales commissions computed as a percent of sales revenue are variable costs.

‹#›

Direct costs

Costs traceable to a single cost object.

Examples: material and labor cost for a product.

Indirect costs

Costs that cannot be traced to a single cost object.

Example: maintenance expenditure benefiting two or more departments.

Types of Cost Classifications Direct versus Indirect

Learning Objective C2: Describe accounting concepts useful in classifying costs.

© McGraw-Hill Education

11

18 - ‹#›

A cost is often traced to a cost object, which is a product, process, department, or customer to which costs are assigned. Direct costs are traceable to a single cost object. Indirect costs cannot be easily and cost-beneficially traced to a single cost object.

‹#›

C3: Define product and period costs and explain how they impact financial statements.

Learning Objective

© McGraw-Hill Education

12

‹#›

Product

Types of Cost Classifications Product versus Period Costs

Direct Labor

Direct Material

Manufacturing Overhead

Period costs are expenses not attached to the product.

Administrative costs are non-manufacturing costs of staff support and administrative functions.

Selling costs are incurred to obtain orders and to deliver finished goods to customers.

Learning Objective C3: Define product and period costs and explain how they impact financial statements.

© McGraw-Hill Education

13

18 - ‹#›

All production (or factory) costs are product costs. Product costs are those production costs necessary to create a product and consist of: direct materials, direct labor, and factory overhead. Overhead refers to production costs other than direct materials and direct labor. Product costs are capitalized as inventory during and after completion of the products; they become cost of goods sold when those products are sold.

Period costs are non-production costs and are usually more associated with activities linked to a time period than with completed products. Common examples of period costs include salaries of the sales staff, wages of maintenance workers, advertising expenses, and depreciation on office furniture and equipment. Period costs and are expensed in the period when incurred either as selling expenses or as general and administrative expenses.

‹#›

Period and Product Costs in Financial Statements

Learning Objective C3: Define product and period costs and explain how they impact financial statements.

Exhibit 14.7

© McGraw-Hill Education

14

18 - ‹#›

This slide shows the different effects of product and period costs. Period costs flow directly to the current income statement as expenses. They are not reported as assets. Product costs are first assigned to inventory. Their final treatment depends on when inventory is sold or disposed of. Product costs assigned to finished goods that are sold in year 2019 are reported on the 2019 income statement as cost of goods sold. Product costs assigned to unsold inventory are carried forward on the balance sheet at the end of year 2019. If this inventory is sold in year 2020, product costs assigned to it are reported as cost of goods sold in that year’s income statement.

‹#›

Identifications of Cost Classifications

Learning Objective C3: Define product and period costs and explain how they impact financial statements.

Exhibit 14.9

© McGraw-Hill Education

15

18 - ‹#›

Costs can be classified using any one (or combination) of the three different means described here. Understanding how to classify costs in several different ways enables managers to use cost information for a variety of decisions. Factory rent, for instance, is classified as a product cost; it is fixed with respect to the number of units produced, and it is indirect with respect to the product. Potential multiple classifications are shown in this slide using different cost items incurred in manufacturing mountain bikes. The finished bike is the cost object. Managerial decisions based on cost data depend on correct cost classifications.

‹#›

Cost Concepts for Service Companies

The cost concepts described are generally applicable to service organizations.

For example, the cost of beverages for passengers of Southwest Airlines is a variable cost based on number of passengers.

Learning Objective C3: Define product and period costs and explain how they impact financial statements.

© McGraw-Hill Education

16

18 - ‹#›

The cost concepts also apply to service organizations. For example, consider Southwest Airlines, and assume the cost object is a flight. The airline’s cost of beverages for passengers is a variable cost based on number of flights. The monthly cost of leasing an aircraft is fixed with respect to number of flights. We can also trace a flight crew’s salary to a specific flight whereas we likely cannot trace wages for the ground crew to a specific flight. Classification as product versus period costs is not relevant to service companies because services are not inventoried. Instead, costs incurred by a service firm are expensed in the reporting period when incurred.

Managers in service companies must understand and apply cost concepts. For example, an airline manager must often decide between canceling or rerouting flights. The manager must be able to estimate costs saved by canceling a flight versus rerouting. Knowledge of fixed costs is equally important.

‹#›

Managerial Reporting

Learning Objective C3: Define product and period costs and explain how they impact financial statements.

© McGraw-Hill Education

17

18 - ‹#›

Companies with manufacturing activities differ from both merchandising and service companies. The main difference between merchandising and manufacturing companies is that merchandisers buy goods ready for sale while manufacturers produce goods from materials and labor. Amazon is a merchandiser. It buys and sells goods without physically changing them. Adidas is a manufacturer of shoes, apparel, and accessories. It purchases materials such as leather, cloth, dye, plastic, rubber, glue, and laces and then uses employees’ labor to convert these materials to products. Southwest is a service company that transports people and items.

‹#›

Example:

Steel used in the frame of a mountain bike.

Direct Materials

Direct materials costs are the expenditures for direct materials that are separately and readily traced through the manufacturing process to finished goods.

Learning Objective C3: Define product and period costs and explain how they impact financial statements.

© McGraw-Hill Education

18

18 - ‹#›

Direct materials are tangible components of a finished product. Direct material costs are the expenditures for direct materials that are separately and readily traced through the manufacturing process to finished goods. Examples of direct materials in manufacturing a mountain bike include its tires, seat, frame, pedals, brakes, cables, gears, and handlebars.

‹#›

Example:

Wages paid to a mountain bike assembly worker.

Direct Labor

Direct labor costs are the wages and salaries for direct labor that are separately and readily traced through the manufacturing process to finished goods.

Learning Objective C3: Define product and period costs and explain how they impact financial statements.

© McGraw-Hill Education

19

18 - ‹#›

Direct labor refers to the employees who physically convert materials to finished product. Direct labor costs are the wages and benefits for direct labor that are separately and readily traced through the manufacturing process to finished goods. Examples of direct labor in manufacturing a mountain bike include operators directly involved in converting raw materials into finished products (welding, painting, forming) and assembly workers who attach materials such as tires, seats, pedals, and brakes.

‹#›

Examples:

Indirect labor – maintenance.

Indirect material – cleaning supplies. Factory utility costs. Supervisory costs.

Factory Overhead

Factory overhead consists of all manufacturing costs that are not direct materials or direct labor and are not separately traced to finished goods.

Learning Objective C3: Define product and period costs and explain how they impact financial statements.

© McGraw-Hill Education

20

18 - ‹#›

Factory overhead, also called manufacturing overhead, consists of all manufacturing costs that are not direct materials or direct labor. Factory overhead costs are not separately or readily traced to finished goods. Factory overhead costs are indirect costs that include indirect materials, indirect labor, and other indirect costs not directly traceable to the product.

Indirect materials are components used in manufacturing the product, but they are not clearly identified with specific product units. Direct materials are often classified as indirect materials when their costs are low. Examples include screws and nuts used in assembling mountain bikes, and staples and glue used in manufacturing shoes. Applying the materiality principle, it does not make economic sense to individually trace costs of each of these materials to individual products. For example, keeping detailed records of the amount of glue used to manufacture one shoe is not cost-beneficial.

Indirect labor costs refer to the costs of workers who assist in or supervise the manufacturing. Indirect labor are workers who assist or supervise in manufacturing the product, but they are not clearly identified with specific product units. Examples include costs for employees who maintain the manufacturing equipment and salaries of production supervisors.

Indirect other costs include factory utilities (water, gas, electricity), factory rent, depreciation on factory buildings and equipment, factory insurance, property taxes on factory buildings and equipment, and factory accounting and legal services.

Nonmanufacturing Costs –Factory overhead does not include selling and administrative expenses because they are not incurred in manufacturing products. These expenses are period costs, and they are recorded as expenses on the income statement when incurred. For a manufacturing company, such costs are also called nonmanufacturing costs. Examples include office employee salaries, depreciation on office equipment, and advertising expenses.

‹#›

Direct Material

Direct Labor

Manufacturing Overhead

Prime Cost

Conversion Cost

Manufacturing costs are often combined as follows:

Prime and Conversion Costs

Learning Objective C3: Define product and period costs and explain how they impact financial statements.

© McGraw-Hill Education

21

18 - ‹#›

We can classify product costs into prime or conversion costs. Prime costs are costs directly associated with the manufacture of finished goods, which includes both direct material and direct labor costs. Conversion costs are costs incurred in the process of converting raw materials to finished goods, which includes both direct labor costs and manufacturing overhead costs. Notice that direct labor costs are considered both prime costs and conversion costs. Classification into conversion costs is useful for process costing.

‹#›

Nonmanufacturing Costs

Recorded as expenses on the income statement when incurred.

Expenses are period cost.

Selling and administrative expenses.

Not part of Factory Overhead because they are not incurred in manufacturing products.

Learning Objective C3: Define product and period costs and explain how they impact financial statements.

© McGraw-Hill Education

22

18 - ‹#›

Factory overhead does not include selling and administrative expenses because they are not incurred in manufacturing products. These expenses are period costs, and they are recorded as expenses in the income statement when incurred. For a manufacturing company, such costs are also called nonmanufacturing costs.

‹#›

C4: Explain how balance sheets and income statements for manufacturing, merchandising, and service companies differ.

Learning Objective

© McGraw-Hill Education

23

‹#›

Merchandisers . . .

Buy finished goods.

Sell finished goods.

Manufacturers . . .

Buy raw materials.

Produce and sell finished goods.

Reporting Manufacturing Activities

Learning Objective C4: Explain how balance sheets and income statements for manufacturing, merchandising, and service companies differ.

© McGraw-Hill Education

24

18 - ‹#›

Companies with manufacturing activities differ from both merchandising and service companies. The main difference between merchandising and manufacturing companies is that merchandisers buy goods ready for sale while manufacturers produce goods from materials and labor.

‹#›

Manufacturer’s Balance Sheet

Completed products for sale.

Materials waiting to be processed.

Can be direct

or indirect.

Partially complete products.

Material to which some labor and/or overhead have been added.

Raw Materials

Inventory

Finished Goods

Inventory

Work in Process

Inventory

Learning Objective C4: Explain how balance sheets and income statements for manufacturing, merchandising, and service companies differ.

© McGraw-Hill Education

25

18 - ‹#›

Manufacturers carry several unique assets and usually have three inventories instead of the single inventory that merchandisers carry. The three inventories are raw materials, work in process, and finished goods.

Raw materials inventory is the goods a company acquires to use in making products. Companies use raw materials in two ways: directly and indirectly. Raw materials that are possible and practical to trace to product are called direct materials; they are included in raw materials inventory.

Work in process inventory, also called goods in process inventory consists of products in the process of being manufactured but not yet complete. The amount of work in process inventory depends on the type of production process.

Finished goods inventory consists of completed products ready for sale. It is similar to merchandise inventory owned by a merchandising company.

‹#›

The primary difference is inventory.

Balance Sheets for Manufacturers, Merchandisers and Servicers

Learning Objective C4: Explain how balance sheets and income statements for manufacturing, merchandising, and service companies differ.

Exhibit 14.11

© McGraw-Hill Education

26

18 - ‹#›

The primary difference in the Balance Sheet of a Merchandiser and a Manufacturer is the presentation of Inventory under the Current Assets section. Merchandisers have one category of inventory called Merchandise Inventory. Manufacturers have three major categories of inventory: Raw Materials, Work in Process, also called goods in process, and Finished Goods.

The current assets section of the balance sheet will look different for merchandising and service companies as compared to manufacturing companies. A merchandiser will report only merchandise inventory rather than the three types of inventory reported by a manufacturer. A service company’s balance sheet does not have any inventory held for sale. Exhibit 14.11 shows the current assets section of the balance sheet for a manufacturer, a merchandiser, and a service company.

‹#›

P1: Compute cost of goods sold for a manufacturer and for a merchandiser.

Learning Objective

© McGraw-Hill Education

27

‹#›

Costs and the Income Statement

Learning Objective P1: Compute cost of goods sold for a manufacturer and for a merchandiser.

Exhibit 14.12

© McGraw-Hill Education

28

18 - ‹#›

The main difference between the income statement of a manufacturer and that of a merchandiser involves the items making up cost of goods sold.

This slide compares the components of cost of goods sold for a merchandiser with those for a manufacturer. Merchandisers add cost of goods purchased to beginning merchandise inventory and then subtract ending merchandise inventory to get cost of goods sold. Manufacturers add cost of goods manufactured to beginning finished goods inventory and then subtract ending finished goods inventory to compute cost of goods sold.

In computing cost of goods sold, a merchandiser uses merchandise inventory while a manufacturer uses finished goods inventory. A manufacturer’s inventories of raw materials and work in process are not included in finished goods because they are not available for sale. A manufacturer also shows cost of goods manufactured instead of cost of goods purchased.

‹#›

Cost of Goods Sold for a Merchandiser and Manufacturer

Cost of goods sold for manufacturers differs only slightly from cost of goods sold for merchandisers.

Learning Objective P1: Compute cost of goods sold for a manufacturer and for a merchandiser.

Exhibit 14.13

© McGraw-Hill Education

29

18 - ‹#›

The Cost of Goods Sold sections for both a merchandiser (Tele-Mart) and a manufacturer (Rocky Mountain Bikes) are shown in this slide to highlight these differences. The remaining income statement sections are similar for merchandisers and manufacturers.

Although the cost of goods sold computations are similar, the numbers in these computations reflect different activities. A merchandiser’s cost of goods purchased is the cost of buying products to be sold. A manufacturer’s cost of goods manufactured is the sum of direct materials, direct labor, and factory overhead costs incurred in making products.

Since a service provider does not make or buy inventory to be sold, it does not report cost of goods manufactured or cost of goods sold. Instead, its operating expenses include all of the costs it incurs in providing its service.

‹#›

C5: Explain manufacturing activities and the flow of manufacturing costs.

Learning Objective

© McGraw-Hill Education

30

‹#›

Flow of Manufacturing Activities

Learning Objective C5: Explain manufacturing activities and the flow of manufacturing costs.

Exhibit 14.15

© McGraw-Hill Education

31

18 - ‹#›

In addition to income statements and balance sheets, manufacturing companies prepare additional reports for planning and control. To understand these reports, we must know the flow of manufacturing activities and costs. This slide shows the flow of manufacturing activities and the cost flows of those activities. Looking across the top row the activities flow consists of materials activity followed by production activity followed by sales activity. The boxes below those activities show the costs for each activity and how costs flow across the three activities.

The production activity that takes place in the period results in products that are either finished or not finished at the end of the period. The cost of finished products makes up the cost of goods manufactured for the current period. The cost of goods manufactured is the total cost of making and finishing products in the period.

The company adds the cost of the beginning inventory of finished goods with the cost of the newly completed units (goods manufactured). Together, they make up total finished goods available for sale in the current period. As they are sold, the cost of finished products sold is reported on the income statement as cost of goods sold. The cost of any finished products not sold in the period is reported as a current asset, finished goods inventory, on the current period’s balance sheet.

‹#›

P2: Prepare a schedule of cost of goods manufactured and explain its purpose and links to financial statements.

Learning Objective

© McGraw-Hill Education

32

‹#›

Summarizes the types and amounts of costs

incurred in a company’s manufacturing process.

Schedule of Cost of Good Manufactured

Direct Materials Used

+ Direct Labor

+ Factory Overhead

= Total Manufacturing Costs

+ Beginning Work in Process

– Ending Work in Process

= Cost of Goods Manufactured

Learning Objective P2: Prepare a schedule of cost of goods manufactured and explain its purpose and links to financial statements.

© McGraw-Hill Education

33

18 - ‹#›

Managers of manufacturing firms analyze product costs. Those managers aim to make better decisions about materials, labor, and overhead to reduce the cost of goods manufactured and improve income. A company’s manufacturing activities are described in a report called a schedule of cost of goods manufactured also called a manufacturing statement and a statement of cost of goods manufactured. The schedule of cost of goods manufactured summarizes the types and amounts of costs incurred in the manufacturing process.

‹#›

Manufacturing Statement

Learning Objective P2: Prepare a schedule of cost of goods manufactured and explain its purpose and links to financial statements.

Exhibit 14.16

© McGraw-Hill Education

34

18 - ‹#›

This slide shows the schedule of cost of goods manufactured for Rocky Mountain Bikes. The schedule is divided into four parts: direct materials, direct labor, overhead, and computation of cost of goods manufactured.

‹#›

Learning Objective P2: Prepare a schedule of cost of goods manufactured and explain its purpose and links to financial statements.

Exhibit 14.16

© McGraw-Hill Education

35

Manufacturing Statement (Pt. 2)

18 - ‹#›

1. Compute direct materials used. Add the beginning raw materials inventory of $8,000 to the current period’s purchases of $86,500. This yields $94,500 of total raw materials available for use. A physical count of inventory shows $9,000 of ending raw materials inventory. If $94,500 of materials were available for use, and $9,000 of materials remains in inventory, then $85,500 of direct materials were used in the period.

‹#›

Include all direct labor costs incurred during the current period.

Learning Objective P2: Prepare a schedule of cost of goods manufactured and explain its purpose and links to financial statements.

Exhibit 14.16

© McGraw-Hill Education

36

Manufacturing Statement (Pt. 3)

18 - ‹#›

2. Compute direct labor costs used. Rocky Mountain Bikes had total direct labor costs of $60,000 for the period. This amount includes wages, payroll taxes and fringe benefits.

‹#›

Learning Objective P2: Prepare a schedule of cost of goods manufactured and explain its purpose and links to financial statements.

Exhibit 14.16

© McGraw-Hill Education

37

Manufacturing Statement (Pt. 4)

18 - ‹#›

3. Compute total factory overhead costs used. The statement lists each important factory overhead item and its cost. All of these costs are indirectly related to manufacturing activities. (Period expenses, such as selling expenses and other costs not related to manufacturing activities, are not reported on this statement.) Total factory overhead cost is $30,000. Some companies report only total factory overhead on the schedule of cost of goods manufactured and attach a separate schedule listing individual overhead costs.

‹#›

Learning Objective P2: Prepare a schedule of cost of goods manufactured and explain its purpose and links to financial statements.

Exhibit 14.16

© McGraw-Hill Education

38

Manufacturing Statement (Pt. 5)

18 - ‹#›

4. Compute the cost of goods manufactured. Total manufacturing costs for the period are $175,500 ($85,500 + $60,000 + $30,000), the sum of direct materials and direct labor, and overhead costs incurred. This amount is added to beginning work in process inventory which gives the total work in process during the period of $178,000 ($175,500 + $2,500). A physical count shows $7,500 of work in process inventory remains at the end of the period. We then compute the current period’s cost of goods manufactured of $170,500 by taking the $178,000 total work in process and subtracting the $7,500 cost of ending work in process inventory. The cost of goods manufactured amount is also called net cost of goods manufactured or cost of goods completed.

Estimating Cost Per Unit Managers use the schedule of cost of goods manufactured to make rough estimates of per unit costs. For example, if Rocky Mountain Bikes made 1,000 bikes during the year, the average manufacturing cost per unit is $170.50 (computed as $170,500/1,000). Average cost per unit is not always an the appropriate cost for managerial decisions.

‹#›

Manufacturing Cost Flows Across Accounting Reports

Learning Objective P2: Prepare a schedule of cost of goods manufactured and explain its purpose and links to financial statements.

Exhibit 14.17

© McGraw-Hill Education

39

18 - ‹#›

This slide summarizes how product costs flow through the accounting system: Direct materials, direct labor, and overhead costs are summarized in the schedule of cost of goods manufactured; then the amount of cost of goods manufactured from that statement is used to compute cost of goods sold on the income statement. Physical counts determine the dollar amounts of ending raw materials inventory and work in process inventory, and those amounts are included on the end-of-period balance sheet. (Note: This exhibit shows only partial reports.)

‹#›

C6: Describe trends in managerial accounting.

Learning Objective

© McGraw-Hill Education

40

‹#›

Trends in Managerial Accounting

Customer Orientation

E-Commerce

Global

Economy

Service Economy

Lean Practices

Value Chain

Learning Objective C6: Describe trends in managerial accounting.

© McGraw-Hill Education

41

18 - ‹#›

Tools and techniques of managerial accounting continue to evolve due to changes in the business environment. This slide presents some of these changes.

‹#›

Customer Orientation

Learning Objective C6: Describe trends in managerial accounting.

© McGraw-Hill Education

42

18 - ‹#›

There is increased emphasis on customers as the most important constituent of a business. Customers expect to derive a certain value for the money they spend to buy products and services. Buyers expect that suppliers provide them the right service (or product) at the right time and the right price. This implies that companies accept the notion of customer orientation, which means that managers and employees understand the changing needs and wants of customers and align management and operating practices accordingly.

‹#›

Quality improvement

applied to its

business activities.

Seek and uncover

waste.

Employees encouraged to try new methods to improve quality.

Company emphasizes value of quality through quality awards.

Total Quality Management

Constant Focus on Higher Standards

Learning Objective C6: Describe trends in managerial accounting.

© McGraw-Hill Education

43

18 - ‹#›

Total quality management focuses on quality improvement to its business activities. Managers and employees seek to uncover waste in business activities including accounting activities such as payroll and disbursements. To encourage an emphasis on quality, the U.S. Congress established the Malcolm Baldrige National Quality Award (MBNQA). Entrants must conduct a thorough analysis and evaluation of their business using guidelines from the Baldrige committee.

‹#›

Complete products just-in-time to ship to customers

Complete parts just-in-time for assembly into products

Schedule

Production

Receive materials just-in-time for production

Receive customer orders

Just-In-Time (JIT) Manufacturing

Learning Objective C6: Describe trends in managerial accounting.

© McGraw-Hill Education

44

18 - ‹#›

Just-in-time manufacturing is a system that acquires inventory and produces only when needed. An important aspect of JIT is that companies manufacture products only after they receive an order (a demand-pull system) and then deliver the customer’s requirements on time. This means that processes must be aligned to eliminate delays and inefficiencies including inferior inputs and outputs. Companies must also establish good communications with their suppliers. On the downside, JIT is more susceptible to disruption than traditional systems. As one example, several General Motors plants were temporarily shut down due to a strike at a supplier which supplied components just in time to the assembly division.

‹#›

Value Chain

The value chain refers to the series of principles that add value to a company’s products or services. Companies can use lean principles to increase efficiency and profits.

Learning Objective C6: Describe trends in managerial accounting.

Exhibit 14.18

© McGraw-Hill Education

45

18 - ‹#›

The value chain refers to the series of activities that add value to a company’s products or services. This slide illustrates a possible value chain for a retail cookie company. Companies can use lean practices across the value chain to increase efficiency and profits.

‹#›

Lean Model Practices Impact for Managerial Accounting

Adopting the lean practices means that all systems and procedures must be realigned.

Managerial accounting has an important role in providing accurate cost and performance information.

Learning Objective C6: Describe trends in managerial accounting.

© McGraw-Hill Education

46

18 - ‹#›

Adopting lean practices can be challenging because all systems and procedures that a company follows must be realigned. Managerial accounting has an important role in providing accurate cost and performance information.

‹#›

Corporate Social Responsibility

Corporations must consider demands of employees, suppliers, and society.

Corporate social responsibility (CSR) goes beyond law.

Triple bottom line focuses on financial, social and environmental measures.

Adopting a triple bottom line impacts how business report.

Learning Objective C6: Describe trends in managerial accounting.

© McGraw-Hill Education

47

18 - ‹#›

In addition to maximizing shareholder value, corporations must consider the demands of other stakeholders, including employees, suppliers, and society in general. Corporate social responsibility (CSR) is a concept that goes beyond following the law. Triple bottom line, focuses on three measures: financial (“profits”), social (“people”), and environmental (“planet”).

Adopting a triple bottom line impacts how businesses report. In response to a growing trend of such reporting, the Sustainability Accounting Standards Board (SASB) was established to develop reporting standards for businesses’ sustainability activities. Some of the business sectors for which the SASB has developed reporting standards include health care, nonrenewable resources, and renewable resources and alternative energy.

‹#›

A1: Assess raw materials inventory management using raw materials inventory turnover and days’ sales in raw materials inventory.

Learning Objective

© McGraw-Hill Education

48

‹#›

Raw Materials Inventory Turnover

Raw materials Inventory turnover = Raw materials used
Average materials inventory
Learning Objective A1: Assess raw materials inventory management using raw materials inventory turnover and days’ sales in raw materials inventory.

Where Average materials inventory =

Beg material Inv. + End material Inv.

2

© McGraw-Hill Education

49

18 - ‹#›

A manager can assess how effectively a company manages its raw materials inventory by computing the raw materials inventory turnover ratio as shown in this slide.

This ratio reveals how many times a company turns over (uses in production) its raw materials inventory during a period. Generally, a high ratio of raw materials inventory turnover is preferred, as long as raw materials inventory levels are adequate to meet demand.

‹#›

Days’ Sales in Raw Materials Inventory

Days’ sales in raw materials inventory = Ending raw materials inventory
Raw materials used
Learning Objective A1: Assess raw materials inventory management using raw materials inventory turnover and days’ sales in raw materials inventory.

X 365

© McGraw-Hill Education

50

18 - ‹#›

To further assess raw materials inventory management, a manager can measure the adequacy of raw materials inventory to meet production demand. Days’ sales in raw materials inventory reveals how much raw materials inventory is available in terms of the number of days’ sales. It is a measure of how long it takes raw materials to be used in production.

Homework is Completed By:

Writer Writer Name Amount Client Comments & Rating
Instant Homework Helper

ONLINE

Instant Homework Helper

$36

She helped me in last minute in a very reasonable price. She is a lifesaver, I got A+ grade in my homework, I will surely hire her again for my next assignments, Thumbs Up!

Order & Get This Solution Within 3 Hours in $25/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 3 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

Order & Get This Solution Within 6 Hours in $20/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 6 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

Order & Get This Solution Within 12 Hours in $15/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 12 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

6 writers have sent their proposals to do this homework:

Helping Hand
Engineering Guru
Academic Mentor
Write My Coursework
WRITING LAND
Smart Homework Helper
Writer Writer Name Offer Chat
Helping Hand

ONLINE

Helping Hand

I am a professional and experienced writer and I have written research reports, proposals, essays, thesis and dissertations on a variety of topics.

$20 Chat With Writer
Engineering Guru

ONLINE

Engineering Guru

I have read your project details and I can provide you QUALITY WORK within your given timeline and budget.

$25 Chat With Writer
Academic Mentor

ONLINE

Academic Mentor

I have written research reports, assignments, thesis, research proposals, and dissertations for different level students and on different subjects.

$28 Chat With Writer
Write My Coursework

ONLINE

Write My Coursework

I can assist you in plagiarism free writing as I have already done several related projects of writing. I have a master qualification with 5 years’ experience in; Essay Writing, Case Study Writing, Report Writing.

$47 Chat With Writer
WRITING LAND

ONLINE

WRITING LAND

This project is my strength and I can fulfill your requirements properly within your given deadline. I always give plagiarism-free work to my clients at very competitive prices.

$35 Chat With Writer
Smart Homework Helper

ONLINE

Smart Homework Helper

I will be delighted to work on your project. As an experienced writer, I can provide you top quality, well researched, concise and error-free work within your provided deadline at very reasonable prices.

$30 Chat With Writer

Let our expert academic writers to help you in achieving a+ grades in your homework, assignment, quiz or exam.

Similar Homework Questions

A heat engine with a thermal efficiency of 40 - Determine the capacity in liters of the punch bowl - Mosfet differential amplifier small signal analysis - Weekly Application #4-BLOG POST - Merstow green medical practice - Rondell data corporation case study pdf - Channel of distribution of ice cream - Need in 1 hour - Psy 315 week 1 practice problems - Deliverable 3 - Ranking Capital Investment Projects Excel and Power Point - Water by the spoonful full pdf - Asigra ds client download - Key organizational enablers for effective demand management - Why should we study film hum 150 - How to write a reflection statement - Way cool produces two different models of air conditioners - Community Nursing DQ week 6 student reply Yanet garrido - Debate team line example - Best christian publishers for new authors - Whole foods prepared foods job review - Tracing - Is art a waste of time rhys southan - King arthur movie 2004 summary - Nursing - Case management information systems are especially beneficial for those with - Oil flows upward in the wick of a lantern because of the liquid property called - SOCW 6103 Post Responses - Lm358 light sensor circuit - FN week 6 - Activity based costing and management ppt - Transformation with respect to basis - Journal 4 - Finance - Jasper jones how did laura die - Around 1000 words - Barrier Analysis Worksheet Project - Framing the red folsom prison blues - Osi international foods brisbane - Homework Help - Uncp qualtrics - Auditting - My life in you arnold zamora pdf - Statistical studies statistical investigations worksheet 1 answers - Common features of application software - Week 4 Discussion - The fire quotes lord of the flies - 25 callana avenue rostrevor - West end blues sheet music pdf - Fierce grace yoga kilburn lane - Oranges by gary soto - Carl hart ted talk - Discussion - 5.9 8 explore network communications - Continuing cookie chronicle answers - Right and wrong basic readings in ethics christina hoff sommers - Fitness components for cricket - Carescape monitor b450 user manual - First angle projection symbol - Barriers of communication powerpoint presentation - Characteristics of dc shunt motor - Chasteen born in blood and fire pdf - Www bankrate com march 12 2014 - What is vascular shunting - Ready steady yeti go script - Egypt ig student room physics - Plain language principles and document design - Management style - Gcse maths trigonometry revision - Example of received view in nursing - 1minute elevator speech - An urn contains n white and m black balls - I need 300 words in Systematic risk, also known as "market risk" or "un-diversifiable risk" - How similar are the observed phenotypes in each replicate - In formulating hypotheses for a statistical test of significance, the null hypothesis is often - Apple vs samsung case study ppt - Penta hexa hepta octa nona deca - 50 shades of mt druitt - How to calculate piecework - Ofad ust edu ph ustet results - Asa 701 - Carrington financial services john doyle - The apprenticeship of duddy kravitz quotes - Megamart a retailer of consumer goods - Discussion - Computerized accounting with quickbooks 2018 kathleen villani - Classification of magnetic materials - Apm employment services blacktown - Horton ramsay treatment centre - American his. - PSY 361 -5.2 - Leadership Responses - American tongues movie - Michael and rose chaney - Diagnostic Excellence 03 - Chapter 4 Questions - Multisim export to excel - West caribbean airways flight 708 - Sociology - What is the competitive advantage of smoothie king - Survey