Chapter 19-1 Chapter 19 Managerial Accounting Chapter 19-2 Accounting Principles, Ninth Edition Study Study Objectives Objectives Explain the distinguishing features of managerial accounting Identify the three broad functions of management Define the three classes of manufacturing costs Distinguish between product and period costs Explain the difference between a merchandising and a manufacturing income statement Indicate how cost of goods manufactured is determined Explain the difference between a merchandising and a manufacturing balance sheet Identify trends in managerial accounting Chapter 19-3 Managerial Managerial Accounting Accounting Managerial Managerial Accounting Accounting Basics Basics Compare Managerial and Financial Accounting Management Functions Business Ethics Chapter 19-4 Managerial ManagerialCost Cost Concepts Concepts Manufacturing Costs Product vs Period Costs Manufacturing Manufacturing Costs Costsin in Financial Financial Statements Statements Income Statement Balance Sheet Cost Concepts – A Review Managerial Managerial Accounting Accounting Today Today Service Industry Trends Managerial Accounting Practices Managerial Managerial Accounting Accounting Basics Basics Definition of Managerial Accounting A field of accounting that provides economic and financial information for managers and other internal users Also called Management Accounting Chapter 19-5 Managerial Managerial Accounting Accounting Basics Basics Managerial Accounting Activities Explain manufacturing and nonmanufacturing costs and how they are reported (Chapter 19) Compute cost of providing a service or manufacturing a product (Chapters 20 and 21) Determine behavior of costs and expenses as activity changes (Chapter 22) Chapter 19-6 Managerial Managerial Accounting Accounting Basics Basics Managerial Accounting Activities (continued) Assist management in profit planning and formalizing these plans in the form of budgets (Chapter 23) Help to control costs by comparing actual results with planned objectives and standard costs (Chapters 24 and 25) Accumulate and present data for making decisions (Chapter 26) Chapter 19-7 Managerial Managerial Accounting Accounting Basics Basics Distinguishing Features Applies to all types of business Service, Merchandising, and Manufacturing Applies to all forms of businesses – Proprietorships, Partnerships, and Corporations Applies to not-for-profit and profit oriented companies Chapter 19-8 Managerial Managerial Accounting Accounting Basics Basics Distinguishing Features: Continued More responsible for strategic cost management Teams with people from production, marketing, engineering, etc Aid in making critical decisions Chapter 19-9 Comparing Comparing Managerial Managerial and and Financial Financial Accounting Accounting Similarities Both deal with economic events of a business – Thus, interests overlap Both require that economic events be quantified and communicated to interested parties – Determining unit cost is part of managerial accounting, Reporting cost of goods manufactured is a part of financial accounting Chapter 19-10 SO Explain the distinguishing features of managerial accounting Product Product Versus Versus Period Period Costs Costs Illustration 19-3 Chapter 19-29 SO Distinguish between product costs and period costs Manufacturing Manufacturing Costs Costs in in Financial Financial Statements Statements Income Statement The income statement for a manufacturer is similar to that of a merchandiser except for the cost of goods sold section Chapter 19-30 SO Explain the difference between a merchandising and a manufacturing income statement Manufacturing Manufacturing Costs Costs in in Financial Financial Statements Statements Cost of Goods Sold Components Merchandiser versus Manufacturer Chapter 19-31 Illustration 19-4 SO Explain the difference between a merchandising and a manufacturing income statement Manufacturing Manufacturing Costs Costs in in Financial Financial Statements Statements Cost of Goods Sold Section of the Income Statement Illustration 19-5 Chapter 19-32 SO Explain the difference between a merchandising and a manufacturing income statement Manufacturing Manufacturing Costs Costs in in Financial Financial Statements Statements Determining the Cost of Goods Manufactured Illustration 19-6 Work in Process – partially completed units of product Total Manufacturing Costs – sum of direct material costs, direct labor costs, and manufacturing overhead; all incurred in the current period Chapter 19-33 SO Indicate how cost of goods manufactured is determined Manufacturing Manufacturing Costs Costs in in Financial Financial Statements Statements Illustration 19-7 Chapter 19-34 SO Indicate how cost of goods manufactured is determined Manufacturing Manufacturing Costs Costs in in Financial Financial Statements Statements Balance Sheet - Inventories Merchandising Company One category of inventory: Merchandise Inventory Illustration 19-8 Chapter 19-35 Manufacturing Company May have three inventories: Raw Materials Work in Process Finished Goods SO Explain the difference between a merchandising and a manufacturing balance sheet Manufacturing Manufacturing Costs Costs in in Financial Financial Statements Statements Balance Sheet - Inventories Illustration 19-9 Chapter 19-36 SO Explain the difference between a merchandising and a manufacturing balance sheet Manufacturing Manufacturing Costs Costs in in Financial Financial Statements Statements Review Question Direct Materials are a: Product Cost Period Cost a Yes Yes No b Yes No No c Yes Yes No No Yes d No Chapter 19-37 Manufacturing Overhead Managerial Managerial Accounting Accounting Today Today Service Industry Trends U.S economy has shifted toward an emphasis on providing services rather than goods Over 50% of U.S workers are now employed by service companies Trend is expected to continue in the future Most of the techniques learned for manufacturing firms are applicable to service companies Chapter 19-38 SO Identify trends in management accounting Managerial Managerial Accounting Accounting Today Today Managerial Accounting Practices Value Chain Refers to all activities associated with providing a product or service For a manufacturing firm these include the following: Chapter 19-39 Illustration 19-12 SO Identify trends in management accounting Managerial Managerial Accounting Accounting Today Today Managerial Accounting Practices Just-In-Time (JIT) Inventory Methods Inventory system in which goods are manufactured or purchased just in time for use Quality Increased emphasis on product quality because goods are produced only as needed Total Quality Management (TQM) - a philosophy of zero defects Chapter 19-40 SO Identify trends in management accounting Managerial Managerial Accounting Accounting Today Today Managerial Accounting Practices Activity-Based-Costing (ABC) Allocates overhead based on use of activities Results in more accurate product costing and scrutiny of all activities in the value chain Balanced Scorecard Evaluates operations in an integrated fashion Uses both financial and non-financial measures Links performance measures to overall company objectives Chapter 19-41 SO Identify trends in management accounting Managerial Managerial Accounting Accounting Today Today Review Question Which of the following managerial accounting techniques attempts to allocate manufacturing overhead in a more meaningful manner? Chapter 19-42 a Just-in-time inventory b Total-quality management c Balanced scorecard d Activity-based costing SO Identify trends in management accounting Copyright Copyright Copyright © 2009 John Wiley & Sons, Inc All rights reserved Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc The purchaser may make back-up copies for his/her own use only and not for distribution or resale The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein Chapter 19-43 .. .Chapter 19 Managerial Accounting Chapter 19- 2 Accounting Principles, Ninth Edition Study Study Objectives Objectives Explain the distinguishing features of managerial accounting Identify... trends in managerial accounting Chapter 19- 3 Managerial Managerial Accounting Accounting Managerial Managerial Accounting Accounting Basics Basics Compare Managerial and Financial Accounting Management... Managerial Accounting Accounting Today Today Service Industry Trends Managerial Accounting Practices Managerial Managerial Accounting Accounting Basics Basics Definition of Managerial Accounting