Description
Week Two Discussion
For your week two discussion board post I would like you to explore what types of accounting certification exist. In particular research the Certified Public Accountant (CPA) and Certified Management Accountant (CMA) certification. What is the difference between the two? Which one is more applicable to Managerial Accounting? Which one is more applicable to Financial Accounting? In your post discuss each of these certifications.
Submission Details:
Initial post due by day four (Thursday) @ 11:59 PM (EST).
Respond substantively to two other students’ posts on different days of the week by day seven (Sunday) @ 11:59 PM (EST).
Your initial response to the discussion question should be 250-300 words. You must have at least one course (our text) and one non-course scholarly/peer reviewed source in your initial posting. Sources require in-text citations and must be incorporated into the body of the post in addition to a full APA citation at the end of the post. Your Response Postings: Responses to classmates must serve to advance the conversation related to the discussion topic. For your response postings this week, comment about your perception of how the recommended change to either the vision or mission statements of your classmates initial posting brings that statement closer to meeting our course criteria. Explain by incorporating our text material. Please respond to at least two peers on different days of the week from each other and from your initial post, in approximately 150-200 words. Incorporate a minimum of our course text and at least one non-course scholarly/peer reviewed source with each of your response postings. Sources require in-text citations and must be incorporated into the body of the post in addition to a full APA citation at the end of the post. Submission Details:
Post your response to the following questions in the discussion forum by Thursday, Day 4 at 11:59 PM.
Comment on at least two of your classmates’ posts on two separate days of the week from each other and from your initial post by Sunday, Day 7 at 11:59 PM.
Required Readings
Required Readings
Attached Files:
Hilton_MA_13e_Chap002_PPT.pptx Hilton_MA_13e_Chap002_PPT.pptx – Alternative Formats (1.56 MB)
Please read from Managerial Accounting: Creating Value in a Dynamic Business Environment.
Chapter 2 pages 35-44
Chapter 2 PowerPoint (attached)
Unformatted Attachment Preview
Chapter 2
Basic Cost
Management Concepts
McGraw-Hill/Irwin
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2-1
Learning Objective 2-1 – Explain what is meant by the
word cost.
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2-2
Process of Management
Strategy
Formulation
Planning
Managers need cost information to
perform each of these functions.
Control
Directing
Decision
Making
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2-3
What Do We Mean By a Cost?
A cost
is the measure of
resources given
up to achieve a
particular purpose.
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2-4
Learning Objective 2-2 – Distinguish among product costs,
period costs, and expenses.
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2-5
Product Costs, Period Costs, and
Expenses
Product costs are costs assigned to inventory, to
goods that are either purchased or manufactured
for resale. Another term for product cost is
inventoriable cost.
Period costs are costs that are expensed during
the time period in which they are incurred.
Expenses are the consumption of assets for the
purpose of generating revenue.
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2-6
Learning Objective 2-3 – Describe the role of costs in
published financial statements.
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2-7 2-7
Cost Classifications on Financial
Statements – Income Statement
Product Costs
Period Costs
Cost of goods sold
Operating expenses
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2-8
Cost Classifications on Financial
Statements – Balance Sheet (1 of 4)
Merchandiser
Current Assets
Cash
Receivables
Prepaid Expenses
Merchandise Inventory
Manufacturer
Current Assets
Cash
Receivables
Prepaid Expenses
Inventories
• Raw Materials
• Work in Process
• Finished Goods
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2-9
Cost Classifications on Financial
Statements – Balance Sheet (2 of 4)
Merchandiser
Current Assets
Cash
Receivables
Prepaid Expenses
Merchandise Inventory
Manufacturer
Current Assets
Cash materials
Those
waiting to be
Receivables
processed.
Inventories
• Raw Materials
• Work in Process
• Finished Goods
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2-10
Cost Classifications on Financial
Statements – Balance Sheet (3 of 4)
Merchandiser
Current Assets
Cash
Receivables
Prepaid Expenses
Merchandise Inventory
Manufacturer
Current
Assets
Partially
completed
products
Cash – material to
which some labor
Receivables
and/or
overhead has
Prepaid
Expenses
been added.
Inventories
• Raw Materials
• Work in Process
• Finished Goods
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2-11
Cost Classifications on Financial
Statements – Balance Sheet (4 of 4)
Merchandiser
Manufacturer
Current Assets
Current Assets
Cash
Cash
Receivables
Completed
products
awaiting
sale.
Prepaid
Expenses
Inventories
Receivables
Prepaid Expenses
Merchandise Inventory
• Raw Materials
• Work in Process
• Finished Goods
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2-12
Learning Objective 2-4 – List and describe four types of
manufacturing processes.
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2-132-13
Types of Production Processes
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2-14
Learning Objective 2-5 – Give examples of three types of
manufacturing costs.
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2-152-15
Manufacturing Costs
Direct
Material
Direct
Labor
Manufacturing
Overhead
The
Product
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2-16
Direct Material
Cost of raw material that is used to
make, and can be conveniently
traced, to the finished product.
Example:
Steel used to
manufacture
an automobile.
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2-17
Direct Labor
Cost of salaries, wages, and fringe
benefits for personnel who work
directly on manufactured products.
Example:
Wages paid to an
automobile assembly
worker.
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2-18
Manufacturing Overhead (1 of 3)
All other manufacturing costs
Indirect
Material
Indirect
Labor
Other
Costs
Materials used to support
the production process.
Examples: lubricants and
cleaning supplies used in an
automobile assembly plant.
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2-19
Manufacturing Overhead (2 of 3)
All other manufacturing costs
Indirect
Material
Indirect
Labor
Other
Costs
Cost of personnel who
do not work directly on
the product. Examples:
maintenance workers,
janitors, and security
guards.
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2-20
Manufacturing Overhead (3 of 3)
All other manufacturing costs
Indirect
Material
Indirect
Labor
Other
Costs
Examples: depreciation
on plant and equipment,
property taxes,
insurance, utilities,
overtime premium, and
unavoidable idle time.
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2-21
Classifications of Costs in
Manufacturing Companies
Total Manufacturing Cost
Direct
Material
Direct
Labor
Manufacturing
Overhead
Prime Costs
Conversation Costs
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2-22
Manufacturing Cost Flows
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2-23
Learning Objective 2-6 – Prepare a schedule of cost of
goods manufactured, a schedule of cost of goods sold,
and an income statement for a manufacturer.
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2-24
Schedule of Cost of Goods
Manufactured (1 of 4)
Comet Computer Corporation
Schedule of Cost of Goods Manufactured
Raw material used
$
Direct labor
Total manufacturing overhead
134,980
50,000
230,000
Total manufacturing costs
Add: Work-in-process inventory, January 1
$
414,980
120
Subtotal
Deduct: Work-in-process inventory, December 31
$
415,100
100
Cost of goods manufactured
$
415,000
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2-25
Schedule of Cost of Goods Manufactured (2 of 4)
Computation of Cost of Raw Material Used
Raw-material inventory, January 1
Add: Purchases of raw materials
Raw material available for use
Deduct: Raw material inventory, December 31
Raw material used
$
6,000
134,000
140,000
5,020
$ 134,980
Comet Computer Corporation
Schedule of Cost of Goods Manufactured
Raw material used
$
Direct labor
Total manufacturing overhead
134,980
50,000
230,000
Total manufacturing costs
Add: Work-in-process inventory, January 1
$
414,980
120
Subtotal
Deduct: Work-in-process inventory, December 31
$
415,100
100
Cost of goods manufactured
$
415,000
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2-26
Schedule of Cost of Goods Manufactured
(3 of 4)
Include all direct labor
costs incurred during the
period.
Cometcurrent
Computer
Corporation
Schedule of Cost of Goods Manufactured
Raw material used
$
Direct labor
Total manufacturing overhead
134,980
50,000
230,000
Total manufacturing costs
Add: Work-in-process inventory, January 1
$
414,980
120
Subtotal
Deduct: Work-in-process inventory, December 31
$
415,100
100
Cost of goods manufactured
$
415,000
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2-27
Schedule of Cost of Goods Manufactured
(4 of 4)
Computation of Total Manufacturing Overhead
Indirect material
$
10,000
Indirect labor
40,000
Depreciation on factory
90,000
Depreciation on equipment
70,000
Utilities
15,000
Insurance
5,000 Corporation
Comet Computer
Total manufacturing overheadSchedule of$Cost
230,000
of Goods Manufactured
Raw material used
$ 134,980
Direct labor
Total manufacturing overhead
50,000
230,000
Total manufacturing costs
Add: Work-in-process inventory, January 1
$ 414,980
120
Subtotal
Deduct: Work-in-process inventory, December 31
$ 415,100
100
Cost of goods manufactured
$ 415,000
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2-28
Schedule of Cost of Goods
Manufactured – WIP
Beginning work-inprocess inventory is
carried over from the
Comet Computer Corporation
prior period.
Schedule of Cost of Goods Manufactured
Raw material used
$
Direct labor
Total manufacturing overhead
Ending
work-in-process
Total manufacturing
costs
inventory
contains the
cost ofJanuary 1
Add: Work-in-process
inventory,
unfinished
goods, and is
Subtotal
reported
in the current inventory,
assets December 31
Deduct: Work-in-process
section
of themanufactured
balance sheet.
Cost of goods
134,980
50,000
230,000
$
414,980
120
$
415,100
100
$
415,000
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2-29
Schedule of Cost of Goods Sold
Comet Computer Corporation
Schedule of Cost of Goods Sold
For the Year Ended December 31, 20X2
Finished-goods inventory, Jan. 1
Add: Cost of goods manufactured
$
200
415,000
Cost of goods available for sale
Comet Computer Corporation
Deduct Finished-goods inventory, Dec. 31
415,200
190
Income Statement
$ 415,010
For the Year Ended December 31, 20X2
Cost of goods sold
Sales revenue
Less: Cost of goods sold
$
700,000
415,010
Gross margin
Selling and administrative expenses
$
284,990
174,490
Income before taxes
Income tax expense
$
110,500
30,000
Net income
$
80,500
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2-30
Income Statement for a Manufacturer
Comet Computer Corporation
Income Statement
For the Year Ended December 31, 20X2
Sales revenue
Less: Cost of goods sold
$
700,000
415,010
Gross margin
Selling and administrative expenses
$
284,990
174,490
Income before taxes
Income tax expense
$
110,500
30,000
Net income
$
80,500
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2-31
Learning Objective 2-7 – Understand the importance of
identifying an organization’s cost drivers.
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2-322-32
Cost Drivers
Activities that cause costs to be incurred are called COST DRIVERS:
Cost Driver Examples
Activity
Machining operations
Setup
Production scheduling
Inspection
Purchasing
Shop order handling
Valve assembly support
Cost Driver
Machine hours
Setup hours
Manufacturing orders
Pieces inspected
Purchase orders
Shop orders
Customer requisitions
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2-33
Learning Objective 2-8 – Describe the behavior of variable
and fixed costs, in total and on a per-unit basis.
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2-342-34
Cost Classifications
Cost behavior means how a cost will react to
changes in the level of business activity.
Total variable costs change when activity
changes.
Total fixed costs remain unchanged when
activity changes.
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2-35
Total Variable Cost Example
Total Amazon Prime Bill
Your total
monthly bill is
based on how
many movies
you watch.
Prime (for-fee) Movies Watched
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2-36
The cost per movie
watched is
constant. For
example, @ $4.00
per movie.
Per Movie Charge
Variable Cost Per Unit Example
Movies Watched
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2-37
Total Fixed Cost Example
Monthly Netflix
Charge
Your monthly subscription cost does not change
when you watch movies on streaming services
such as Netflix that charge a flat monthly fee.
Number of Netflix Movies Watched
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2-38
Graph of Unit Fixed Cost
Monthly Subscription per
Movie Watched
The average cost per movie decreases as more Netflix
movies are watched.
Number of Movies Watched
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2-39
Cost Classifications – Summary
Summary of Variable and Fixed Cost Behavior
Cost
In Total
Per Unit
Variable
Total variable cost changes
as activity level changes.
Variable cost per unit
remains the same over
wide ranges of activity.
Total fixed cost remains
the same even when the
activity level changes.
Fixed cost per unit
goes down as activity
level goes up.
Fixed
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2-40
Cost Management Systems
Objectives
Measure the cost of resources consumed.
Identify and eliminate non–value-added costs.
Determine efficiency and effectiveness of
major activities.
Identify and evaluate new activities that can
improve performance.
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2-41
Learning Objective 2-9 – Distinguish among direct,
indirect, controllable, and uncontrollable costs.
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2-422-42
Direct and Indirect Costs
Direct costs
Indirect costs
Costs that can be easily
Costs that must be
and conveniently traced to
a product or department.
Example: cost of paint in
the paint department of an
automobile assembly
plant.
allocated in order to be
assigned to a product or
department.
Example: cost of national
advertising for an airline is
indirect to a particular
flight.
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2-43
Controllable and Uncontrollable Costs
A cost that can be significantly influenced by a manager is a
controllable cost.
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2-44
Learning Objective 2-10 – Define and give examples of an
opportunity cost, an out-of-pocket cost, a sunk cost, a
differential cost, a marginal cost, and an average cost.
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2-45
2-45
Opportunity Costs
Example: If you were not attending college,
you could be earning $30,000 per year. Your
opportunity cost of attending college for one
year is $30,000.
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2-46
Out-of-Pocket Costs
Those costs that require the payment of
cash or other assets as a result of its
incurrence.
These costs should be considered when
making decisions.
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2-47
Sunk Costs
All costs incurred in the past that cannot be
changed by any decision made now or in the future
are sunk costs.
Sunk costs should NOT be considered in decisions.
Example: You bought an automobile that cost
$22,000 two years ago. The $22,000 cost is sunk
because whether you drive it, park it, trade it, or sell
it, you cannot change the $22,000 cost.
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2-48
Differential Costs
Costs that differ between alternatives.
Example: You can earn $1,500 per month in your
hometown or $2,000 per month in a nearby city.
Your commuting costs are $50 per month in your
hometown and $300 per month to the city.
What is your differential cost?
$300 – $50 = $250
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2-49
Marginal Costs and Average Costs
The extra cost
incurred to produce
one additional unit.
The total cost to
produce a quantity
divided by the
quantity produced.
Marginal and average costs are
largely a function of cost behavior
– variable and fixed costs.
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2-50
Costs and Benefits of Information
Costs
Benefits
More information does not mean more
benefits if information overload results.
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2-51
End of Chapter 2
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2-52
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