Transcript Review ch.2 - جامعة فلسطين

Review
Ch 1 2
Review Ch.1
What are the basic differences in orientation between
financial and managerial Accounting ?
Managerial accounting is concerned with providing
information to managers for use within the
organization. Financial accounting is concerned with
providing information to stockholders, creditors, and
others outside of the organization.
What are the major differences between financial and
managerial accounting?
Comparison of Financial and
Managerial Accounting
Financial Accounting
Managerial Accounting
External persons who
make financial decisions
Managers who plan for
and control an organization
Historical perspective
Future emphasis
3. Verifiability
versus relevance
Emphasis on
verifiability
Emphasis on relevance
for planning and control
4. Precision versus
timeliness
Emphasis on
precision
Emphasis on
timeliness
5. Subject
Primary focus is on
the whole organization
Focuses on segments
of an organization
6. GAAP
Must follow GAAP
and prescribed formats
Need not follow GAAP
or any prescribed format
Mandatory for
external reports
Not
Mandatory
1. Users
2. Time focus
7. Requirement
Exh.
1-2
Review Ch.1
 Distinguish between line and staff positions in an
organization.
 A line position is directly related to the achievement
of the basic objectives of the organization. A staff
position is not directly related to the achievement of
those objectives; rather, it is supportive, providing
services and assistance to other parts of the
organization.
Review Ch.1
 What are the major benefits of JIT System?
 The main benefits of a successful JIT system
are reductions in:
(1) funds tied up in inventories;
(2) space requirements;
(3) throughput time; and
(4) defects.
Benefits of a JIT System
Reduced
inventory
costs
Freed-up funds
Greater
customer
satisfaction
Higher quality
products
Increased
throughput
More rapid
response to
customer orders
Review Ch.1
 Why is Process reengineering a more radical
approach to improvement than total quality
management?
 TQM generally approaches improvement in a series of
small steps that are planned and implemented by
teams of front-line workers. Process Reengineering
involves completely redesigning business processes
from the ground up—often with the use of outside
consultants.
Review Ch.1
 See your book P.30
 Exercise 1-1
 Exercise 1-1
1. Line
2.Directing and motivating
3.Budgets
4.Planning
5.Staff
6.Decentralization
7.Precision; Nonmonetary data
8.Managerial accounting; Financial accounting
9.Feedback
10.Controller
11.Performance report
12.Chief Financial Officer
Review Ch.2
 What are the three major elements of product costs
in a manufacturing company ?
 The three major elements of product costs in a
manufacturing company are direct materials, direct
labor, and manufacturing overhead.
 Distinguish between the following :





Direct material
Indirect material
Direct labor
Indirect labor
Manufacturing overhead
Review Ch.2
a. Direct materials are an integral part of a finished product and
their costs can be conveniently traced to it.
b. Indirect materials are generally small items of material such
as glue and nails. They may be an integral part of a finished
product but their costs can be traced to the product only at great
cost or inconvenience. Indirect materials are ordinarily classified
as manufacturing overhead.
c. Direct labor includes those labor costs that can be easily
traced to particular products. Direct labor is also called “touch
labor.”
d. Indirect labor includes the labor costs of janitors, supervisors,
materials handlers, and other factory workers that cannot be
conveniently traced to particular products. These labor costs are
incurred to support production, but the workers involved do not
directly work on the product.
e. Manufacturing overhead includes all manufacturing costs
except direct materials and direct labor.
Review Ch.2
 Explain the differences between a product
cost and a period cost


A product cost is any cost involved in
purchasing or manufacturing goods. In the
case of manufactured goods, these costs
consist of direct materials, direct labor, and
manufacturing overhead.
A period cost is a cost that is taken directly to
the income statement as an expense in the
period in which it is incurred
Review Ch.2
 What is meant by the term cost behavior ?

Cost behavior refers to how a cost will react or
respond to changes in the level of activity.
Review Ch.2
 Define the following terms : differential cost,
opportunity cost, and sunk cost.



A differential cost is a cost that differs between
alternatives in a decision.
An opportunity cost is the potential benefit that
is given up when one alternative is selected
over another.
A sunk cost is a cost that has already been
incurred and cannot be altered by any
decision taken now or in the future.
Review Ch.2
 Lompac products manufactures a variety of products
in its factory. Data for the most recent month's
operations appear below :
Beginning raw material Inventory
$60000
Purchase for raw material
$690000
Ending raw material Inventory
$45000
Direct Labor
$135000
Manufacturing overhead
$370000
Beginning work in process Inventory
$120000
Ending work in process Inventory
$130000
Required:
Prepare a schedule of cost of goods Manufactured for the
company for the month
Review Ch.2
Lompac Products
Schedule of Cost of Goods Manufactured
Direct materials:
Beginning raw materials inventory ............
Add: Purchases of raw materials ...............
Raw materials available for use.................
Deduct: Ending raw materials inventory ....
Raw materials used in production .............
Direct labor ................................................
Manufacturing overhead .............................
Total manufacturing costs ...........................
Add: Beginning work in process inventory ....
Deduct: Ending work in process inventory....
Cost of goods manufactured .......................
$ 60,000
690,000
750,000
45,000
$ 705,000
135,000
370,000
1,210,000
120,000
1,330,000
130,000
$1,200,000
Messinger Manufacturing Company had the
following account balances for the quarter ending
March 31, unless otherwise noted:
Work-in-process inventory (January 1)
Work-in-process inventory (March 31)
Finished goods inventory (January 1)
Finished goods inventory (March 31)
Direct materials used
Indirect materials used
Direct manufacturing labor
Indirect manufacturing labor
Property taxes on manufacturing plant building
Salespersons' company vehicle costs
Depreciation of manufacturing equipment
Depreciation of office equipment
Miscellaneous plant overhead
Plant utilities
General office expenses
Marketing distribution costs
$ 140,400
171,000
540,000
510,000
378,000
84,000
480,000
186,000
28,800
12,000
264,000
123,600
135,000
92,400
305,400
30,000
Required:
a. Prepare a cost of goods manufactured
schedule for the quarter.
b. Prepare a cost of goods sold schedule for the
quarter.
Answer:
a. Messinger Manufacturing Company Cost of Goods
Manufactured Schedule for quarter ending March 31
Direct materials used
$ 378,000
Direct manufacturing labor
480,000
Manufacturing overhead
Depreciation of manufacturing equipment $264,000
Indirect manufacturing labor
186,000
Indirect materials
84,000
Miscellaneous plant overhead
135,000
Plant utilities
92,400
Property taxes on building
28,800
Total Manufacturing overhead
790,200
Total Manufacturing costs incurred
$1,648,200
Work-in-process Statement
Beginning work-in-process inventory
Add Total Manufacturing costs incurred
= Total work-in-process for the period
Less ending work-in-process inventory
= Cost of goods manufactured
a.
140,400
$1,648,200
$1,788,600
171,000
$1,617,600
Finished goods Statement
b. Messinger Manufacturing Company
Cost of Goods Sold Schedule For the
quarter ending March 31
Beginning finished goods inventory
Cost of goods manufactured
Cost of goods available for sale
Ending finished goods inventory
$ 540,000
1,617,600
2,157,600
(510,000)
Cost of goods sold
$1,647,600