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Managerial Accounting coursera
Accounting
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Managerial accounting
- Helps compile the costs of the organizations products and services?
- what products or services should we offer? -how much should we charge? -should we outsource the making of a product to other organization
Helps in planning future actvties -budgets -investments
Assist in monitoring actual performance by comparing to planned results
3 books Financial books-FS- external users-in accordance with standards US GAap/IFRS/PFRS Mgmt books-budget reports, product profitability- internal audience-to facilitate mgmt decision making in the org- no rules because mgmt has the authority Tax books-tax return-tax authpritie
Financial acctg- past performance-often too aggregated based on historical cost-- annually or quarterly not enough to make daily management decision Mgmt acctg - no standards - compiled for a specific purpose or mgmt decision for the futurei-- need current or future cost when making decisions
Managers use different costs for diff decisions 3 classification
- Direct/indirect--direct can be traced easily to individual cost object
Ex. Make tshirts Direct-raw material-direct material, labor-direct labor, sales rep commission to sale of tshirt
Indirect cost/Overhead- electricity, cost of equip, rent, maintenance, sales rep salary or allowance
- Product/manufacturing or Period/non manufacturing costs
Product- direct and indirect cost related to manufacturing prpcess--- seen as inventory in balance sheet-- variable cost, if prpduce-COGS/// if resale, Period-costs not associate with the manufacturing of the product, ---administrative, selling , finance costs--fixed cost, salary, rent, depreciation, interest-expense on Income Statement as incurred
Service companies do not have product costs, only period costs
Business that has no operation will not incur product cost but will incur period costs
- Variable /Fixed Based on how they behave in response to activity Variable- fabric, sales comm for everyunit sold Fixed- salary of sales rep
Example... is a product /service is profitable? How much does it cost to serve that customer
Cost Behavior- relationship between cost and cost driver. Or how a cost respond to change in activity Cost driver- causing costs to be incurred 4 general patterns:
- Variable
- Fixed- rent do not increase regardless of production
- Mixed- have both variable and fixed Sales rep salary and commission --- salary- fixed, commission- variable Electricity- it is likely that they incur costs regardless of production because of lighting, but may also incrrase as it runs equupment more to produce more
- Step costs- increase new step as activity increases to a new range of activity Had to hire additional people due to increase in sales of number of tshirts
3 tools for estimating cost function
- Scatter plot- graph of past cost and activity data whrre each observation is represented by a dot
-Use to get behavior of a cost -assess whether relationship between a cost and units can be captured by a line -assess whether data points are representative of normal relationship bet cost and activity --can notice outliers (special cade not a representative of a normal relationship)
Y=mx+b M= slope -- change in cost/change in unit X=no B= y intercept or fixed cost Y=variable cost
B 500000
M = 1500000 20000
1000000 10000
500000/10000= 50
Y=50x+
Pure estimation-- estimated cost function
Cost objects --- term for products Cost pool--- a group of costs used in indirect cost
Allocating overhead
Determine the total amount to be allocated or the cost pool
Choose an allocation base
Calculate an allocation rate
Use allocation rate to allocate overhead as products or cost objects are being made
Allocate by estimates based on the budget As a sidenote, we hope that our estimates in the budget are accurate Relative good estimates Budgeted overhead allocation rate is == budgeted overhead divided by budgeted allocation base
Managerial Accounting coursera
Subject: Accounting
School: Imus National High School
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