Documente Academic
Documente Profesional
Documente Cultură
Concepts
Chapter 1
Work of Management
Planning
Planning
Directing
Directing and
and
Motivating
Motivating
Controlling
Controlling
1-3
Planning
Identify
Identify
alternatives.
alternatives.
Select
Select alternative
alternative that
that does
does
the
the best
best job
job of
of furthering
furthering
organizations
organizations objectives.
objectives.
Develop
Develop budgets
budgets to
to guide
guide
progress
progress toward
toward the
the
selected
selected alternative.
alternative.
1-4
Controlling
The
The control
control function
function ensures
ensures
that
that plans
plans are
are being
being followed.
followed.
Feedback
Feedback inin the
the form
form ofof performance
performance reports
reports
that
that compare
compare actual
actual results
results with
with the
the budget
budget
are
are an
an essential
essential part
part of
of the
the control
control function.
function.
1-6
Comparing
Comparingactual
actual Implementing
Implementing
to
toplanned
planned Decision plans
performance Making plans(Directing
(Directing
performance and
(Controlling) andMotivating)
Motivating)
(Controlling)
Measuring
Measuring
performance
performance
(Controlling)
(Controlling)
1-7
Learning Objective 1
Learning Objective 2
Manufacturing Costs
Direct
Direct Direct
Direct Manufacturing
Manufacturing
Materials
Materials Labor
Labor Overhead
Overhead
The Product
1-11
Direct Materials
Example:
Example: A
A radio
radio installed
installed in
in an
an automobile
automobile
1-12
Direct Labor
Example:
Example: Wages
Wages paid
paid to
to automobile
automobile assembly
assembly workers
workers
1-13
Manufacturing Overhead
Examples:
Examples: Indirect
Indirect materials
materials and
and indirect
indirect labor
labor
Classifications of
Nonmanufacturing Costs
Administrative
Selling Costs
Costs
Learning Objective 3
Distinguish between
product costs and period
costs and give examples
of each.
1-16
Sale
Quick Check
Which of the following costs would be
considered a period rather than a product cost
in a manufacturing company? (There may be
more than one correct answer.)
A. Manufacturing equipment depreciation.
B. Property taxes on corporate headquarters.
C. Direct materials costs.
D. Electrical costs to light the production
facility.
E. Sales commissions.
1-18
Quick Check
Which of the following costs would be
considered a period rather than a product cost
in a manufacturing company? (There may be
more than one correct answer.)
A. Manufacturing equipment depreciation.
B. Property taxes on corporate headquarters.
C. Direct materials costs.
D. Electrical costs to light the production
facility.
E. Sales commissions.
1-19
Direct
Direct Direct
Direct Manufacturing
Manufacturing
Material
Material Labor
Labor Overhead
Overhead
Prime Conversion
Cost Cost
1-20
Comparing Merchandising
and Manufacturing Activities
Merchandisers . . .
Purchase finished
goods from
suppliers for
resale to
customers. Manufacturers . . .
Purchases raw
MegaLoMart materials from
suppliers.
Produce and sell
finished goods to
customers.
1-21
Balance Sheet
Merchandiser Manufacturer
Current Assets Current Assets
Cash Cash
Receivables Receivables
Prepaid Expenses Prepaid Expenses
Merchandise Inventory Inventories:
1. Raw Materials
2. Work in Process
3. Finished Goods
1-22
Balance Sheet
Merchandiser Manufacturer
Current Assets Current Assets
Cash Cash
Receivables Receivables
Materials waiting to
Prepaid Expenses Prepaid Expenses
be processed.
Merchandise Inventory Inventories:
Partially complete
products some 1. Raw Materials
material, labor, or 2. Work in Process
overhead has been 3. Finished Goods
added.
Completed products
awaiting sale.
1-23
Learning Objective 4
Prepare an income
statement including
calculation of the cost of
goods sold.
1-24
Inventory Flows
Withdrawals
Withdrawals
Beginning
Beginning Additions
Additions Ending
Ending
balance
balance
+ to
to inventory
inventory
= balance
balance
+ from
from
inventory
inventory
1-26
Quick Check
If your inventory balance at the beginning of
the month was $1,000, you bought $100
during the month, and sold $300 during the
month, what would be the balance at the end
of the month?
A. $1,000.
B. $ 800.
C. $1,200.
D. $ 200.
1-27
Quick Check
If your inventory balance at the beginning of
the month was $1,000, you bought $100
during the month, and sold $300 during the
month, what would be the balance at the end
of the month?
A. $1,000. $1,000 + $100 = $1,100
B. $ 800. $1,100 - $300 = $800
C. $1,200.
D. $ 200.
1-28
Learning Objective 5
Schedule of Cost of
Goods Manufactured
Manufacturing Work
Conversion
Conversion
Raw Materials Costs In Process
costs
costs are
are costs
costs
Beginning raw Direct materials incurred
incurred toto
materials inventory + Direct labor convert
+ Raw materials + Mfg. overhead convert the
the
purchased = Total manufacturing direct
direct materials
materials
= Raw materials costs into
into aafinished
finished
available for use product.
product.
in production
Ending raw materials
inventory
= Raw materials used As
As items
itemsare
areremoved
removedfrom
fromraw
raw
in production materials
materials inventory
inventoryand
and placed
placedinto
into
the
the production
production process,
process, they
theyare
are
called
called direct
direct materials.
materials.
1-32
Schedule of Cost of
Goods Manufactured
Manufacturing Work
Raw Materials Costs In Process
Schedule of Cost of
Goods Manufactured
Manufacturing Work
Raw Materials Costs In Process
Manufacturing Cost
Flows
Balance Sheet Income
Costs Inventories Statement
Material Purchases Raw Materials Expenses
Quick Check
Beginning raw materials inventory was
$32,000. During the month, $276,000 of raw
material was purchased. A count at the end of
the month revealed that $28,000 of raw
material was still present. What is the cost of
direct material used?
A. $276,000
B. $272,000
C. $280,000
D. $ 2,000
1-37
Quick Check
Beginning raw materials inventory was
$32,000. During the month, $276,000 of raw
material was purchased. A count at the end of
the month revealed that $28,000 of raw
material was still present. What is the cost of
direct material used? Beg. raw materials $ 32,000
Quick Check
Quick Check
Quick Check
Quick Check
Quick Check
Quick Check
Learning Objective 6
Understand the
differences between
variable costs and fixed
costs.
1-45
How
How aa cost
cost will
will react
react to
to
changes
changes in
in the
the level
level of
of
business
business activity.
activity.
Total
Total variable
variable costs
costs change
change
when
when activity
activity changes.
changes.
Total
Total fixed
fixed costs
costs remain
remain
unchanged
unchanged when when activity
activity
changes.
changes.
1-46
Variable Cost
Fixed Cost
Your monthly contract fee for your cell phone is
fixed for the number of monthly minutes in your
contract. The monthly contract fee does not
change based on the number of calls you make.
Monthly Cell Phone
Contract Fee
Variable Total variable cost changes Variable cost per unit remains
as activity level changes. the same over wide ranges
of activity.
Fixed Total fixed cost remains Average fixed cost per unit goes
the same even when the down as activity level goes up.
activity level changes.
1-51
Quick Check
Quick Check
Learning Objective 7
Understand the
differences between
direct and indirect costs.
1-54
Learning Objective 8
Understand cost
classifications used in making
decisions: differential costs,
opportunity costs, and sunk
costs.
1-56
Opportunity Costs
Sunk Costs
Quick Check
Quick Check
Quick Check
Quick Check
Quick Check
Quick Check
Assigning
Decision
Costs to Cost
Making
Objects
1-67
End of Chapter 1