information collected by managerial accountants
historical and estimated data
what is historical data
provide objective measures of post operations
what is estimated data
provide subjective estimates about future decisions
what are the 5 elements of the management process?
planning, directing, controlling, improving and decision making
what is planning?
used in developing the company goals and translating goals into courses of action
what is directing?
a process by which managers run the day to day operations
what is controlling?
monitoring operating results with the expected results
what is improving?
continuous process improvement
management by exception
what is decision making?
inherent in each of the preceding management processes
when managing a company management must continually decide among alternative actions
strategic planning
long term strategies
operational planning
short term strategies
day to day
continuous process improvement
philosophy of continually improving employees, business processes, products, etc
to eliminate the source of problems in a process
management by exception
philosophy of controlling by comparing actual and expected results
direct costs
identified with and traced to a cost object
ex: cost of wood to make a guitar
indirect costs
are not identified with or traced to a cost object
ex: cost of salaries of supervisors in guitar making
period costs
-Selling and administrative expenses incurred in marketing the product, delivering the product, or managing the company and not directly related to manufacturing the product.
-used in generating rev during the current period
not involved in the manufacturing process
recorded as expenses of the current period
prime costs
The combination of direct materials and direct labor costs.
product costs
The three components of manufacturing cost: direct materials, direct labor, and factory overhead costs.
underapplied foh
the amount applied (using POHR) is LESS THAN the actual amount
factory oh will have debit balance
overapplied foh
the amount applied (using POHR) is GREATER THAN the actual amount
FOH will have credit balance
product costing allocating methods
single plantwide FOH rate method
multiple productions dept FOH rate method
activity based costing method
single plantwide method
costs are allocated to products using only one rate total
budgeted FOH/total budgeted plantwide allocation base
simple and inexpensive
Multiple production dept FOH rate method
uses diff rates for each dept to allocate FOH costs to products
budgeted dept FOH/budgeted dept allocation base
ABC method
provides an alternative approach for allocating FOH that uses multiple FOH rates based on diff activities
costs are initially budgeted for activities
budgeted activity costs/total activity base usage used for each activity
variable costs
Vary in proportion to changes in activity base
Total: -Increases and decreases proportionately w/ activity level
per unit: Remains the same regardless of activity level
fixed costs
Remain the same in total dollar amount as the activity base changes
total:Remains the same regardless of activity level
per unit: Increases and decreases inversely with activity level
order of budgets for preparation
Operating
- Sales
- Production
- Direct material purchases
- Direct labor cost
- FOH
- COGs
- Selling & admin expenses (uses sales budget as the starting point)
- Budgeted income statement (sales, cogs, selling and admin)
direct materials and direct labor costs are normally classified as
variable costs
high low method
- Cost estimation methods
- Find the highest point in units produced and subtract the lowest amount (units produced and total cost)
- Variable cost per unit: difference in total cost/difference in units produced
mixed costs
have characteristics of both a variable and a fixed cost
For purposes of analysis, mixed costs are usually separated into their fixed and variable components by using the high-low method
contribution margin ratio
- indicates the percentage of each sales dollar available to cover fixed costs and to provide operating income
- contribution margin/sales
types of budgets
static flexible zero based continuous operating financial
static budget
shows the expected results of a responsibility center for only one activity level Once the budget has been determined, it is not changed, even if the activity changes.
flexible budget
show the expected results of a responsibility center for several activity levels, series of static budgets.
zero based
requires managers to estimate sales, production, and other operating data as though operations are being started for the first time
continuous
maintains a 12-month projection into the future. The 12-month budget is continually revised by replacing the data for the month just ended with the budget data for the same month in the next year,
operating budget
sales, COGS budget, production, dm purchased, dl cost, FOH, sell + admin,can be used to prepare a budgeted income statement
financial budget
cash, cash expenditure,provide info for a budgeted balance sheet
standard cost includes
direct materials
foh
direct labor
ideal standards
only achieved with perfect conditions
normal standards
attained with reasonable effort
allow for normal production difficulties and mistakes
employees focus more on cost and are more likely to put forth best efforts
what 2 components can the standards for direct materials, labor, and foh be separated into?
cost an quantity
when is a variance unfavorable?
actual>standard
when is a variance favorable?
standard>actual
what is cost variances?
difference between actual and standard costs
what is a total manufacturing cost variance?
difference between total standard costs and total actual costs
total direct material variance is separated into what
a price and quantity variance
total direct labor variance is separated into what
a rate and time variance
direct materials price variance
(actual price - standard price) * actual quantity
direct materials quantity variance
(actual quantity- standard quantity) * standard price
direct labor variance formula
(actual rate per/h - standard rate per/h) * actual hours
direct labor time variance formula
(actual direct labor hours - standard direct labor hours) * standard rate per/h
conversion costs
direct labor and foh
COGS manufactures
work in process inventory beg of month (cr)
cost of dm used in production + dl + foh (de) = Total manufacturing costs incurred (cr) + work in process inventory beg = total man costs - work in process inventory end of month = cogs man
break even in sales units
fixed costs/ unit contribution margin
unit contribution margin
sales price per unit-var cost per unit
prepare a flexible budget
total sales across top
Variable cost
add all variable costs together for each sale amount
total var cost
Fixed costs
add all fixed costs together for each sale amount (amounts remain the same)
total fixed costs
add total var and fixed costs for total _____
activity rate formula
budgeted activity cost/total activity base usage