Fundamental Managerial Accounting Concepts Sixth Edition

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Fundamental-accounting-principles-会计学原理1234689(汇编)

会计学原理概念整理C hapter 1 Accounting in Business第一章商业会计1. 会计信息使用者User of accounting information1. 外部信息使用者：External users of accounting information are not directly involved in running theExternal information user organization．银行 Banks储蓄贷款机构savings and loans 使用债权人消费合作社 co-opsLenders（creditors）抵押 mortgage金融机构 finance companies通用财务报表股东、董事会general-purpose financial statement shareholders（investors）、board of directors外部审计人员 external (independent) auditors员工employees工会 labor union美国国税局 the internal revenue service（IRS）政府管理机构 Regulators公用事业委员会Utility boards证券管理机构 securities regulators选举人 voters立法者 legislators政府官员 government officials捐赠人 contributors供应商 suppliers2. 内部信息使用者: Internal users of accounting information are those directly involved in managing andInternal information users operating an organizations研发经理 research and development managers使用采购经理 purchasing managers人力资源经理 human resource managers生产经理 production managers管理会计销售经理 distribution managersManagerial accounting 营销经理 marketing managers服务经理 service managers内部控制：Internal controls are procedures designed to protect company property and equipment, ensure Internal controls reliable accounting reports,promote efficiency , and encourage adherence to company policies．2. 会计领域的工作机会Opportunities in accounting1）四大领域财务 financial管理 managerial税收 taxation相关领域 accounting-related（见表 accounting opportunities Page4 ）2）会计工作所占比例私用会计private accountingAccounting jobs by area公共会计public accounting政府、非营利机构及教育机构government，not-for-profit and education（见表accounting jobs by area Page4）3）会计证书CPA certified public accounting注册公共会计师Accounting certificate CMA certificate in management accounting注册管理会计证书CIA certified Internet auditor注册内部审计证书CB certified bookkeeper 注册簿记员CPP certified payroll professional注册薪金专家PFS personal financial specialist个人理财专家4）一些会计岗位的薪酬Salaries for several accounting position （Page 5）3. 会计基本原则Fundamentals of accounting1.概念accounting is guided by principles ，standards，concepts and assumptions。

agp0107管理会计

Understand how to base target costs. 理解如何设定目标成本
Managerial Decision Making
C管ha理pte决r 7策的制定第7章
After studying chapter 7, you should be able to:学习第7章后，你应该能够：
Understand ethical standards 理解伦理标准
•Fundamental Concepts 基础概念
After studying chapter 2, you should be able to:学习第2章后，你应该能够：
Master the concept of cost. 掌握成本概念
管理决策的制定第3章（续）
Describe how managers use cost behavior patterns. 描述管理者如何使用成本习性模式
Understand how analysts estimate cost behavior using engineering methods and account analysis. 理解分析家使用工程方法与会计分析来估计成本习性
Variable costs and fixed costs. 可变成本与固定成本
Short run and long run. 短期运营与长期运营
Define relevant range.明确相关范围 Identify capacity costs, committed costs, and
discretionary costs. 识别资本成本，承诺成本，以及可随意支配成本
Understand the nature of various cost behavior patterns. 理解不同成本习性模式的本质

会计概念英文作文

会计概念英文作文Title: Understanding Key Accounting Concepts。

Accounting is the language of business, providing a framework for recording, analyzing, and communicating financial information. In this essay, we will explore several fundamental accounting concepts that form the basis of financial reporting.1. Accrual Basis vs. Cash Basis Accounting:Accrual basis accounting recognizes revenue and expenses when they are incurred, regardless of when cash changes hands. This method provides a more accurate picture of a company's financial performance over a specific period. In contrast, cash basis accounting records transactionsonly when cash is received or paid out, which may not accurately reflect the timing of economic activities.2. Going Concern Principle:The going concern principle assumes that a businesswill continue to operate indefinitely unless there is evidence to the contrary. This principle allows companies to prepare financial statements under the assumption that they will continue their normal operations for the foreseeable future. It influences how assets andliabilities are valued and disclosed in financial reports.3. Consistency Principle:The consistency principle requires companies to use the same accounting methods and procedures from one period to the next, ensuring comparability between financial statements. Changes in accounting methods should only be made if they improve the relevance and reliability of financial information and are disclosed properly.4. Materiality Concept:The materiality concept states that financial information should only be disclosed if its omission ormisstatement could influence the economic decisions of users. Determining materiality involves considering the nature and size of an item relative to the overallfinancial picture of the business. Materiality helps accountants prioritize information and focus on what is most important for users of financial statements.5. Conservatism Principle:The conservatism principle suggests that when faced with uncertainty, accountants should err on the side of caution by recognizing losses and liabilities as soon as they are reasonably possible, while delaying the recognition of gains and assets until they are realized. This principle helps to mitigate the risk of overstating assets or income, leading to a more conservative estimation of financial position and performance.6. Historical Cost Principle:According to the historical cost principle, assets should be recorded at their original cost when acquired,rather than their current market value. This principle provides a reliable and objective basis for valuing assets, as it is based on actual transactions rather than subjective estimates. However, it may not always reflect the true economic value of assets, especially in periods of inflation or deflation.7. Matching Principle:The matching principle requires that expenses be recorded in the same period as the revenues they help to generate. This principle ensures that financial statements accurately reflect the costs associated with earning revenue, leading to a more accurate representation of profitability. Matching expenses with related revenues enables users to assess the profitability of a business over a specific period.8. Revenue Recognition Principle:The revenue recognition principle dictates when revenue should be recognized in financial statements. Revenue istypically recognized when it is earned and realized or realizable, regardless of when cash is received. This principle ensures that revenue is recorded in the period in which it is earned, providing a more accurate depiction of a company's financial performance.In conclusion, these accounting concepts provide asolid foundation for preparing and interpreting financial statements. By understanding and applying these principles, accountants can ensure the accuracy, relevance, and reliability of financial information, ultimatelyfacilitating informed decision-making by stakeholders.。

会计学主要知识点英文

会计学主要知识点英文Accounting is a field of study that revolves around the measurement, processing, and communication of financial information. It plays a crucial role in providing information that enables decision-making, resource allocation, and performance evaluation for individuals, organizations, and governments. In this article, we will delve into the key concepts and principles of accounting.1. Fundamental Principles of AccountingIn order to understand accounting, one must first grasp its fundamental principles. These principles serve as the foundation for accurate and reliable financial reporting. The four main principles of accounting are:(a) Going Concern: This principle assumes that a business will continue to operate indefinitely, and its financial statements should be prepared on that basis.(b) Consistency: Consistency ensures that accounting practices and methods remain unchanged over time, allowingfor comparisons across different periods.(c) Materiality: Materiality refers to the significance of an item or transaction to a business's financial statements. Material items should be disclosed separately to provide accurate and relevant information.(d) Prudence: Also known as conservatism, this principle guides accountants to be cautious when recording assets, liabilities, income, and expenses. It encourages understating assets and income, while overstating liabilities and expenses, to avoid overstating profits.2. Accounting Standards and FrameworksTo ensure consistency and comparability in financial reporting, accounting standards and frameworks are established. The two main frameworks are Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).GAAP is mainly followed in the United States, while IFRS is adopted by more than 120 countries worldwide. These frameworks provide guidelines on how financial statements should be prepared, presenting a common language forfinancial reporting.The standards cover various aspects of accounting, such as revenue recognition, depreciation, inventory valuation,and financial statement presentation. The adoption of these standards allows for accurate and fair reporting across different companies and countries.3. Financial StatementsFinancial statements are the end result of accounting processes. They provide a snapshot of a company's financialposition, performance, and cash flows. The three main financial statements are:(a) Balance Sheet: The balance sheet displays a company's assets, liabilities, and shareholders' equity at a specific point in time. It helps to assess a company's financial health and its ability to meet its obligations.(b) Income Statement: The income statement summarizes a company's revenues, expenses, gains, and losses over a given period of time. It outlines the company's profitability and performance during that period.(c) Cash Flow Statement: The cash flow statement tracks the inflows and outflows of cash and cash equivalents during a specific period. It discloses the cash generated from operating activities, investing activities, and financing activities.4. Types of AccountingAccounting can be broadly classified into three main types:(a) Financial Accounting: This branch of accounting focuses on the preparation and presentation of financial statements for external users, such as investors, creditors, and regulators. It aims to provide reliable information for decision-making and assessing a company's financial health.(b) Management Accounting: Management accounting isconcerned with providing information to internal users, specifically management, for planning, controlling, and decision-making purposes. It involves the preparation of budgets, cost analyses, and performance reports.(c) Auditing: Auditing involves the examination of financial statements and records to ensure they are accurate and comply with accounting standards. It is carried out by independent professionals called auditors, who provide an objective opinion on the fairness and reliability of financial statements.In conclusion, accounting is a multifaceted discipline that encompasses various principles, frameworks, and practices. It is essential for businesses, governments, and individuals to understand these key concepts and principles to ensure accurate financial reporting, informed decision-making, and transparency in the world of finance.。

Fundamental accounting principles 会计学原理1234689

Fundamental Accounting Concepts and Principles

Users of accounting info? (Pg 12.)
Internals: managers, employees, stockholders, Externals: creditors, banks, suppliers, government agencies, general public
Topic#4 Two fields of accounting
Financial Accounting (the course will focus on financial accounting) Is oriented toward the needs of external decision makers. Provides information in the form of financial statements so that external decision makers can evaluate how well the business has achieved its goals. Financial statements report directly on the goals of profitability and liquidity. –Financial statements are used extensively both inside and outside a business to evaluate the business’s success.
Fundamental Accounting Concepts and Principles
Learning Objectives:
Understand the definition of accounting Identify the accounting elements and be able to use the accounting equation Explain the characteristics of T-account

FUNDAMENTAL ACCOUNTING Lesson notes (13)

Lesson NotesLesson 13 Managerial Accounting: Concepts and PrinciplesLearning objectives1.Describe the definition of managerial accounting.2.Identify and explain the difference between managerial accounting and financial accounting.3.Analyze different ways to classify costs.4.Describe the flow of manufacturing activities.5.Identify and explain job order cost accounting systems and process cost accounting systems6.Analyze different methods of cost allocationTeaching hoursStudents major in accounting 0 hoursOther students 6 hoursTeaching contentsIntroductionThe previous 12 chapters focus on the financial accounting topics. Please summarize the basic points of financial accounting: Users/ Time focus/ Emphasis/ Importance/ Subject focus/ Requirements.(1) Is the information provided by financial accounting enough for an enterprise to conduct its operation and management?(2) If not, how to satisfy this demand for the internal used information?(3) Have you ever heard “managerial accounting”?What is Managerial Accounting?Managerial accounting is an activity that provides financial and nonfinancial information to managers and other internal decision makers. It is quite important to planning, control, and decision making activities.Comparison between Managerial Accounting and Financial AccountingCost ClassificationsCosts can be classified by relevance, behaviour, controllability, traceability, and function.Costs Classification by Relevance If costs influence a decision, we call them relevant costs, such as costs that are applicable to a particular decision, costs that should have a bearing on which alternative a manager selects, costs that are avoidable, future costs that differ between alternatives.If costs do not influence a decision, we call them irrelevant costs.Sunk costs means that all costs incurred in the past that cannot be changed by any decision made now or in the future. They are irrelevant, and should not be considered in decisions. For example: You bought an automobile that cost $30,000 two years ago. The $30,000 cost is sunk because whether you drive it, park it, trade it, or sell it, you cannot change the $30,000 cost.Out-of-pocket costs require future outlays of cash, they are associated with a particular decision, and are relevant for future decisions. For example: Considering the decision to take a vacation or stay at home, if you choose a vacation, you will only have travel costs (out-of-pocket costs).Opportunity costs means the potential benefit that is given up when one alternative is selected over another. For example: If you were not attending college or university, you could be earning $25,000 per year. Your opportunity cost of attending college or university for one year is $25,000.Costs Classification by Behaviour Cost behavior refers to how a cost will react to changes in the level of business activity. Fixed costs do not change when activity changes; variable costs change in proportion to changes in the volume of activity. Total fixed costs remains unchanged when activity changes within a relevant range. Fixed costs per unit decline as activity increases. Total variable costs change when activity changes. Variable costs per unit do not change as activity increases.Mixed costs contain a combination of fixed and variable costs.Step-wise costs remain fixed over limited ranges of volumes but increase by a lump sum when volume increases beyond maximum amounts. For example: additional production supervisors must be added when another shift is added.Costs Classification by Controllability Controllable costs vs not controllable costs depend upon the employee’s responsibilities. Fo r example: A lower level manager may have control over overtime costs but not over the purchase of high-cost machinery.Costs Classification by Traceability Traceable costs are classified as (1) direct costs can be conveniently traced to a unit of product or other cost objective, for examples: salaries of production workers, salary of maintenance department employees; (2) indirect costs must be allocated to a unit of product or other cost objective, for examples: factory rent, factory light and heat, factory accounting costs.Costs Classification by Function Manufacturing costs are necessary and integral to the production of finished goods, for examples: direct labour, direct materials, and manufacturing overhead.Non-manufacturing costs are not integral to the manufacture of finished goods. For examples: selling and administrative expenses.Manufacturing costs can be further classified as (1) direct materials, materials that are clearlyand easily identified with a particular product, for example: steel used to manufacture an automobile; (2) direct labour, labour costs that are clearly traceable to, or readily identifiable with, the finished product, for example: wages paid to an automobile assembly worker; (3) manufacturing overhead, all manufacturing costs except direct material and direct labour, that is , manufacturing costs that cannot be traced directly to specific units produced. For examples: indirect labour –maintenance, indirect material –cleaning supplies, factory utility costs, and supervisory costs.Manufacturing costs are often combined as follows: (1) prime cost, including direct material and direct labour; (2) conversion cost, including direct labour and manufacturing overhead.Non-Manufacturing costs (period costs) are expenses not charged to the product. (1) Selling costs, costs incurred to obtain customer orders and to deliver finished goods to customers —advertising and shipping; (2) Administrative costs, non-manufacturing costs of staff support and administrative functions —accounting, data processing, personnel, research and development.DiscussionsABC company manufactures a portable radio designed for mounting on the wall of the bathroom. The following list represents some of the different types of costs incurred in the manufacture of these radios:1) The plant manager's salary.2) The cost of heating the plant.3) The cost of heating executive offices.4) The cost of printed circuit boards used in the radios.5) Salaries and commissions of company salespersons.6) Depreciation on office equipment used in the executive offices.7) Depreciation on production equipment used in plant.8) Wages of janitorial personnel who clean the plant.9) The cost of insurance on the plant building.10) The cost of electricity to light the plant.11) The cost of electricity to power plant equipment.12) The cost of maintaining and repairing equipment in the plant.13) The cost of printing promotional materials for trade shows.14) The cost of solder used in assembling the radios.15) The cost of telephone service for the executive offices.Required:Classify each of the items above as product cost or period costs.Answer:1) Product.2) Product.3) Period.4) Product.5) Period.6) Period.7) Product.8) Product.9) Product.10) Product.11) Product.12) Product.13) Period.14) Product.15) Period.Flow of Manufacturing ActivitiesFlow of manufacturing activities can be listed as the following graph: (ppt page 25)Job Order Cost Accounting Systems and Process Cost Accounting SystemsJob Order Cost Accounting Systems Here the production of products responds to special orders. It is quite flexible in the number of products they can produce, where jobs involving the production of more than one unit of product are called job lots. Please refer to ppt page 27 and page 28.Process Cost Accounting Systems Process cost accounting systems are used for production of small, identical, low-cost items, for example, mass produced in automated continuous production process. Here costs cannot be directly traced to each unit of product. Please refer to ppt page 30.To determine the cost of goods transferred from department to department and to finished goods, we need to calculate unit cost. Unit cost is computed by dividing the accumulated costs by the number of equivalent units produced in the period.Costs are accumulated for a period of time by process or department.Equivalent units is a concept expressing a number of partially completed units as a smaller number of fully completed units. For example: Three one-third full pitchers are equivalent to one full pitcher. Equivalent units may be different for material and labour and overhead at different stages of a process.Comparing Job Order and Process Production We can compare job order and process cost accounting systems as follows:Similarities: (1) Same objective, to determine the cost of products; (2) Same inventory accounts, raw materials, goods in process, and finished goods; (3) Same overhead assignment method, predetermined rate times actual activityDifferences (job order systems vs process systems: (1) Custom orders vs Repetitive production; (2) Heterogeneous products vs Homogeneous offering; (3) Low output volume vs High output volume; (4) High flexibility vs Low product flexibility; (5) Low to medium standardization vs High standardization.Cost AllocationBased on the complexity from low to high, the methods of cost allocation can be classified as plant-wide overhead rate, two-stage cost allocation, and activity-based costing.Plant-wide Overhead Rate A single plant-wide overhead rate is relatively easy to use, but may result in inaccurate product costs.Two-stage Cost Allocation Two-stage cost allocation is more accurate method than plant-wide.Stage 1: Allocate service department costs to production departments. Service department costs are assigned to operating (or production) departments.Stage 2: Allocate production department costs to cost objects. Costs accumulated within operating (or production) departments are assigned to cost objects.Activity-based Costing Activity-based costing attempts to better allocate costs to the desired cost objects by focusing on activities consumed by the cost objects. Many activities within a department drive overhead costs. Products require activities. Activities consume resources.Activity-based Costing: Procedures The procedures include: (1) Identify activities that consume resources; (2) Assign costs to a cost pool for each activity; (3) Identify cost drivers associated with each activity; (4) Compute overhead rate for each cost pool, rate equals to estimated overhead costs in activity cost pool over to estimated number of activity units; (5) Allocate overhead cost, overhead rate times actual activity..Activity-based Costing: Identifying Cost Driver s Most cost drivers are related to either volume or complexity of production. For example: purchasing, invoicing, quality inspection, product design.Three factors must be considered in choosing a cost driver: (1) Causal relationship; (2) Benefits received; (3) Reasonableness.Activity-based Costing: Benefits The benefits of activity-based costing include: (1) More detailed measures of costs; (2) Better understanding of activities; (3) More accurate product costs for pricing decisions, product elimination decisions, and managing activities that cause costs.Certainly, benefits should always be compared with costs of implementationCase StudyABC Company acquired its factory building about 25 years ago. For a number of years, the company has rented out a small, unused part of the building. The renter's lease will expire soon.Rather than renewing the lease, ABC Company is considering using the space itself to manufacture a new product. Under this option, the unused space will continue to be depreciated on a straight-line basis, as in past years.Direct materials and direct labour cost for the new product is $45 per unit. In order to store finished units of the new product, the company will rent a small warehouse nearby. The rental cost is $1,800 per month. It will cost the company an additional $3,500 each month to advertise the new product. A new production supervisor, hired to oversee production of the new product, will be paid $2,500 per month. The company will pay a sales commission of $12 for each unit of product that is sold.Required: Complete the chart below (in the next page) by placing an "√" under each column heading that helps to identify the costs listed to the left. You can place an "√" under more than one heading for a single cost: for example, a cost may be a product cost, an opportunity cost, and a sunk cost; you would place an "√" under each of these headings on the answer sheet opposite the cost.Key points1.definition of managerial accounting2.cost classification3.job order cost accounting systems4.cost allocationReading material1.Charles T. Horngren, George Foster and Srilant Datar, Cost Accounting: A ManagerialEmphasis (Tenth Edition), Prentice Hall Inc., 2000.2.Anthony A. Atkinson, Rajiv D.Banker, Robert S. Kaplan, S. Mark Young, ManagementAccounting , Prentice Hall Inc., 2001.。

FundamentalManagerialAccountingConcepts第五版ppt

accept or reject the offer.
5-10
Budgeted Cost for Expected Production of 2,000 Printers
Unit-level costs
Materials costs (2,000 × $90) $ 180,000
Labor costs (2,000 × $82.50)
Total batch-level costs
22,000
Product-level costs
Engineering design
14,000
Production manager's salary
63,300
Total product-level costs
77,300
Facility-level costs
internally is commonly called outsourcing.
5-5
Relevance is Context-Sensitive
A particular cost that is relevant in one context may be irrelevant in another.
A department store sells men’s, women’s, and children’s clothing. The store manager’s salary could
Assembly setup
(1,700)
Materials handling
(500)
Contribution to income
$ 11,800
If the order is accepted, profitability will increase by $11,800.

FUNDAMENTAL ACCOUNTING Lesson notes (14)

Lesson NotesLesson 14 Managerial Accounting: ApplicationsLearning objectives1.Describe segmented reporting and responsibility accounting system2.Explain the main aspects of Cost-volume-profit analysis3.Analyze budgeting and budgetary control4.Describe standard costs and variance analysis5.Explain the use of managerial accounting in decision makingTeaching hoursStudents major in accounting 0 hoursOther students 6 hoursTeaching contentsIntroductionLet’s look at the XYZ Company exa mple.A manager at XYZ Company wants to replace anXYZ’s sales are $2000000 per year.Fixed expenses, other than amortization, are $700000 per year. Should the manager purchase the new machine? The manager recommends that the（1）Is it correct?（2）What’s your comment to the manager’s decision?After learning this chapter, you will know how to employ the tools of managerial accounting and make decisions correctly.Segmented Reporting and Responsibility Accounting SystemsSegmented Reporting Organizations may break down their operations into various segments, such as divisions, stores, services, or departments. Thus, management needs reports on each segment for cost management and performance evaluation.Segments may be evaluated as a cost centre, a profit centre, where profit centre reportsinclude information on a segment’s revenues and costs, and an investment centre.Some costs are direct and some are indirect, and indirect costs may be allocated to various departments. Service department costs are shared indirect expenses of operation departments.Responsibility Accounting System Responsibility accounting system is an accounting system which assigns managers the responsibility for costs and expenses under their control.Responsibility accounting budgets are prepared prior to each accounting period. Responsibility accounting performance reports compare actual costs and expenses to budgeted amountsCost-volume-profit AnalysisCVP analysis is used to answer the questions such as (1) How much must I sell to earn my desired income? (2) How will income be affected if I reduce selling prices to increase sales volume? (3) How will income be affected if I change the sales mix of my products?....The basic assumptions of CVP analysis is that CVP analysis assumes relations can be expressed as straight lines within the relevant range, which means that unit selling price remains constant, unit variable costs remain constant, and total fixed cost remain constant. If the expected cost and revenue behaviour is different from the assumptions, then the results of CVP analysis are of limited use.The objective of the cost analysis is determination of total fixed cost and the variable unit cost. The basic methods to estimate the total costs equation include: (1) scatter diagram; (2) high-low method; and (3) least-squares regression. Here least-squares regression is usually covered in advanced cost accounting courses. It is commonly used with computer software because of the large number of calculations required.Break-even Analysis The break-even point is the unique sales level at which a company neither earns a profit nor incurs a loss. The break-even point may be expressed in units or in dollars of sales.Fixed CostsBreak-even point in units =Contribution margin per unitFixed CostsBreak-even point in dollars =Contribution margin ratioComputing Income from Expected Sales The income given a predicted level of sales can be computed as follows:Sales V olume Needed to Earn a Target Income Break-even formulas can be adjusted to show the sales volume needed to earn any amount of income.Margin of Safety Margin of safety is used to estimate how much sales can decrease before the company incurs a loss?Sensitivity Analysis Sensitivity analysis is used to estimate the effects of changes in variables such as sales price, variable costs, and fixed costs. CVP analysis can be used to show the effects of such changes.Budgeting and Budgetary ControlBudgets Budgets are formal statements of a company’s plans expressed in monetary terms,which attempt to capture the future activities of an organization. They are used by businesses, not-for-profit, government, educational, and other types of organizations.The importance of budgeting include (1) defines goals and objectives; (2) promotes analysis and a focus on the future; (3) motivates employees; (4) provides a basis for evaluating performance; (5) coordinates business activities; (6) communicates plans and instructions.Budget Committee consists of managers from all departments of the organization. It provides central guidance to insure that individual budgets submitted from all departments are realistic and coordinated. Flow of budget data is a bottom-up process.Budget horizons are usually for one year, but may extend for several years. The annual operating budget may be divided into quarterly or monthly budgets.Rolling budgets mean that the budget may be a twelve-month budget that rolls forward one month as the current month is completed.Master Budget Master budget is a formal, comprehensive plan for the future of a company. It consists of several budgets linked together to form a coordinated plan for the organization.Sales Budget Sales budget is the starting point in the budgeting process. Most of the other budgets are linked to the sales budget. Sales personnel are often involved in developing the sales budgets.Merchandise Purchases Budget Merchandise purchases budget provides detailed information about the purchases necessary to fulfill the sales budget and provide adequate inventories.The quantity purchased is affected by: (1) Just-in-time inventory systems, which enable purchases of smaller, frequently delivered quantities; (2) Safety stock inventory systems, which provide protection against lost sales caused by delays in supplier shipments.Selling Expense Budget Selling expense budget lists the types and amounts of selling expenses. Predictions of expenses are based on the sales budget and past experience.General and Administrative Expense Budget General and administrative expense budget lists the predicted operating expenses not listed in the sales budget. It includes both cash and non-cash expenses and is often prepared by the office manager or person responsible for general administration.Capital Expenditures Budget Capital expenditures budget lists the cash inflows or outflows pertaining to the disposal or acquisition of capital equipment, and it is usually affected by the organization’s long-term plans.Cash Budget Cash Budget lists the expected cash inflows and outflows for the period. It is a tool used by management to avoid excess cash balances or cash shortages. Information from other budgets is used in its preparation. Information from the cash budget is used to prepare the budgeted income statement and balance sheet.Production and Manufacturing Budgets Manufacturing companies need to prepareadditional budgets that include: production budgets, direct materials purchase budgets, direct labour budgets, and manufacturing overhead budgets. Production and manufacturing budgets provides detailed information about the production necessary to fulfill the sales budget and provide adequate inventories.Direct materials budget provides detailed information about the purchases of raw materials necessary to fulfill the production budget and provide adequate inventories.Direct labour and manufacturing overhead budgets provides information about the labour and manufacturing overhead costs given the level of production for the period. Preparing Financial BudgetsBudgetary Control Capital Budgeting Capital budgeting analyzes alternative long-term investments and deciding which assets to acquire or sell. These decisions require careful analysis since: (1) The outcome is uncertain; (2) Large amounts of money are usually involved; (3) Investment involves a long-term commitment; (4) Any decision may be difficult or impossible to reverse. Zero-based Budgeting Zero-based budgeting are prepared assuming no previous activities for the activities being planned. Managers must justify the amounts budgeted for each activity. It is popular among government and non-profit organizations. Fixed Budget Fixed budgets are prepared fora single, predicted level of activity.x=_Performance evaluation is difficult when actual activity differs from the predicted level of activity. For example: How much of the unfavourable cost variance is due to higher activity, and how much is due to poor cost control? To answer these questions, we must flex the budget to the actual level of activityFlexible (Variable) Budgets Flexible budgets are prepared after a period’s activities are complete. They show revenues and expenses that should have occurred at the actual level of activity. Flexible budgets reveal cost variances due to good cost control or lack of cost control, which improve performance evaluation.Since flexible budgets prepare a budget for different activity levels, we must know how costs behave with changes in activity levels. Total variable costs change in direct proportion to changes in activity; Total fixed costs remain unchanged within the relevant range.Standard Costs and Variance AnalysisStandard Costs Standard costs are preset costs for delivering a product or service under normal conditions, which are established through personnel, engineering, and accounting studies using past experience. Standard costs are benchmarks used in evaluating performance, and are often used in setting budgets.V ariance Analysis The process of variance analysis can be listed as follows:Standard cost accounting provides management with information about costs that differ from budgeted amounts (variances). Management may choose to focus only on variances that are significant. This approach is referred to as management by exception.Material variances: Please refer to ppt page 51.Labour variances: Please refer to ppt page 52.Variable overhead variances: Please refer to ppt page 53.Fixed overhead variances: Please refer to ppt page 54.Standard costs accounting systems record variances in the accounts, which can simplify recordkeeping and help in the preparation of reports.DiscussionsABC Company has the following direct material standard to manufacture one unit product: 3.0 kilograms per unit at $8.00 per kilogram. Last week 6600 kilograms of material were purchased and used to make 2000 units. The material cost a total of $53000.What is the actual price per kilogram paid for the material?a. $7.26 per kilogram.b. $8.13 per kilogram.c. $8.03 per kilogram.d. $8.00 per kilogram.AP = $53000 ÷6600 kgAP = $8.03 per kgABC’s material price variance (MPV) for the week was:a. $198 favourable.b. $198 unfavourable.c. $189 favourable.d. $189 unfavourable.MPV = AQ(AP - SP)MPV =6600 kg ×($8.03 - 8.00)MPV = $198 unfavourableThe standard quantity of material that should have been used to produce 2000 units is:a. 6500 kilograms.b. 6000 kilograms.c. 7000 kilograms.d. 5000 kilograms.SQ = 2000 units ×3 kg per unitSQ = 6000 kgABC’s material quantity variance (MQV) for the week was:a. $4300 unfavourable.b. $4300 favourable.c. $4800 unfavourable.d. $4800 favourable.MQV = SP(AQ - SQ)MQV = $8.00(6600 kg - 6000 kg)MQV = $4800 unfavourableManagerial Decision MakingCost accounting information is often used by management for short-term decisions. Decision making involves five steps: (1) Define the problem; (2) Identify alternatives; (3) Collect relevant information on alternatives; (4) Select the preferred alternative; (5) Analyze decisions made.Accepting additional business This decision making should be based on incremental costs and incremental revenues. Incremental amounts are those that occur if the company decides to accept the new business.Make or Buy Decisions Incremental costs also are important in the decision to make a product or purchase it from a supplier. The cost to produce an item must include direct materials, direct labour, and incremental overhead. We should not use the predetermined overhead rate to determine product cost.Scrap or Rework Defects Costs incurred in manufacturing units of product that do not meet quality standards are sunk costs and cannot be recovered. As long as rework costs are recovered through sale of the product and rework does not interfere with normal production, we should rework rather than scrap.Sell or Process Further This decision making is related to sell partially completed products vs. process them to completion. As a general rule, process further only if incremental revenues exceed incremental costs.Selecting Sales Mix When a company sells a variety of products, some are likely to be more profitable than others. To make an informed decision regarding sales mix, management must consider (1) the contribution margin of each product; (2) the facilities required to produce each product and any constraints on the facilities, and (3) the demand for each product.Eliminating a Segment A segment is a candidate for elimination if its revenues are less than its avoidable expenses.Qualitative Factors in Decisions Qualitative factors are involved in most all managerial decisions, including quality, delivery schedule, supplier reputation, employee morale, customer opinions, etc.DiscussionsCase StudyABC Corporation, a merchandising company, has provided the following budget data:Collections from customers are normally 75% in the month of sale, 15% in the month following the sale, and 8% in the second month following the sale. The balance is expected to be uncollectible. ABC pays for purchases in the month following the purchase. Cash disbursements for expenses other than merchandise purchases are expected to be $28,800 for September. ABC's cash balance on September 1 was $44,000.Required:1) Compute the expected cash collections during September.2) Compute the expected cash balance on September 30.Key points1.cost-volume-profit analysis2.budgets3.variance analysis4.decision makingReading material1.Charles T. Horngren, George Foster and Srilant Datar, Cost Accounting: A ManagerialEmphasis (Tenth Edition), Prentice Hall Inc., 2000.2.Anthony A. Atkinson, Rajiv D.Banker, Robert S. Kaplan, S. Mark Young, ManagementAccounting , Prentice Hall Inc., 2001.。

Fundamental Accounting Principles (18)

11
18 - 12
Period and Product Costs in Financial Statements
C3
12
18 - 13
Identifications of Cost Classifications
C3
13
18 - 14
Cost Concepts for Service Companies
Materials waiting to be processed. Can be direct or indirect.
C4
Partially complete products.

Costs that cannot be traced to a single cost object. Example: A maintenance expenditure benefiting two or more departments.

C2
9
18-C3: Comparing Product and Period Costs
15
18 - 16
Manufacturer’s Costs
C3
16
18 - 17
Direct Materials
Direct material costs are the expenditures for direct materials that are separately and readily traced through the manufacturing process to finished goods.
Cash Receivables Inventories
Raw Materials Goods in Process Finished Goods

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Relevant Costs for 2,000 Printers Unit-level costs ($180 × 2,000) $ 360,000 Batch-level costs ($2,200 x 10) 22,000 Product-level costs 77,300 Opportunity cost of warehouse 40,000 Total relevant cost $ 499,300
$ 360,000
22,000
77,300
÷ 2,000 = $329.25
199,200 $ 658,500
6-3
Outsourcing Decisions
Let’s return to our Premier example. Recall that the unit cost per printer was $329.25. A supplier offers to sell an unlimited number of printers to Premier for $240 each. Should Premier accept this outsourcing offer?
Premier should reject the outsourcing offer.
6-5
Outsourcing Decisions
Opportunity Costs
If Premier purchases the printers, it could use its manufacturing Management should inventory. Premier is currently space for storing finished goodspurchase the printers because the price of $240 is below the cost of renting warehouse space at the cost of $40,000. Should $249.65 when the opportunity cost is printers? in. Premier continue to manufacture the factored
6-11
Segment Elimination Decisions
Step 2: If Premier eliminates copiers, it will avoid the following costs:
Unit-level costs Materials costs Labor costs Overhead Batch-level costs Assembly setup Materials handling Product-level costs Engineering costs Production manager salary Facility-level costs Segment level Division manager salary Administrative costs Total relevant costs $ (120,000) (160,000) (30,800) (15,000) (6,000) (10,000) (52,000)
The corporate-level facility-sustaining costs will not be eliminated, but will be allocated to the remaining segments.
6-13
An alternative approach to the analysis results in the same conclusion but compares the net loss of the copier segment with the UNAVOIDABLE COSTS .
Learning Objective
Make appropriate asset replacement decisions.
LO3
6-15
Equipment Replacement Decisions
The equipment replacement decision should be based on profitability rather than physical deterioration. Consider the following:
Unit-level costs Materials costs (2,000 × $90) $ 180,000 Labor costs (2,000 × $82.50) 165,000 Overhead (2,000 × $7.50) 15,000 Total unit-level costs Batch-level costs Assembly setup (10 × $1,700) 17,000 Materials handling (10 × $500) 5,000 Total batch-level costs Product-level costs Engineering design 14,000 Production manager's salary 63,300 Total product-level costs Facility-level costs Segment-level costs 85,000 Division manager's salary 12,700 Company president's salary 43,200 Depreciation 27,300 Cost General expenses per unit : $658,500 31,000 Total facility-level costs Total expected costs
Cost per unit = $499,300 ÷ 2,000 = $249.65 $40,000 ÷ 2,000 = $20.00 additional cost per unit
6-6
Learning Objective
Make appropriate segment elimination decisions.
Exhibit 6.1
Here is budgeted cost information for Premier, a company that produces printers. The company has enough capacity to produce additional printers, but is planning to produce to meet current demand.
Step 1: Determine the production costs Premier can avoid if it elects to outsource printer production.
Relevent Costs for 2,000 Printers
Unit-level costs ($180 × 2,000) Batch-level costs ($2,200 x 10) Product-level costs Total relevant cost
LO2
6-7
Segment Elimination Decisions
Businesses are frequently organized into operating units known as segments. Segment reports can be prepared for products, services, departments, branches, centers, offices, or divisions. These reports normally show segment revenues and costs. Let’s look at a segment report for Premier Office Products that has divided its operations into three segments: (1) copiers, (2) computers, and (3) printers.
Net Loss associated with Copiers
$ 22,250
Presidents Salary
Building Rental General Facility Level
$34,000
$19,250 $31,000 $84,250 $62,000
6-14
TOTAL UNAVOIDABLE COSTS Difference in favor of keeping Copiers
Comparison
Purchase price per unit Relevant cost per unit In favor of manufacturing Number of printers Profit decline by outsourcing
$ 240.00 229.65 10.35 2,000 $ 20,700
3. If the relevant revenue is less than the avoidable cost, eliminate the segment. If not, continue to operate it.
6-10
Should management eliminate the copier segment? To do so, they would lose $550,000 of projected revenues.
$ 360,000 22,000 77,300 $ 459,300