Chapter 1 Managerial Accounting: Tools for Decision Making Discussion QUESTIONS Q1-1. Financial accounting is oriented toward external users and is concerned with general-purpose financial statements. These financial accounting statements are highly aggregated‚ report on relatively long time periods‚ are oriented toward the past‚ and must conform to external standards. These standards emphasize the use of objective data. Management accounting is oriented toward internal users and is
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CHAPTER 2: RELEVANT REVENUES AND COSTS The primary goal of a firm is to maximize profits. This implies‚ of course‚ that each decision a manager makes is consistent with that goal. Although managers are expected to rely on internally-produced reports‚ such as balance sheets and income statements‚ to help them make decisions‚ most of the information that appears on these statements is period-based rather than decision-based. A balance sheet shows the sum total of a firm’s assets and liabilities
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Chapter 13 Relevant Costs for Decision Making Solutions to Questions 13-1 A relevant cost is a cost that differs in total between the alternatives in a decision. 13-2 An incremental cost (or benefit) is the change in cost (or benefit) that will result from some proposed action. An opportunity cost is the benefit that is lost or sacrificed when rejecting some course of action. A sunk cost is a cost that has already been incurred and that cannot be changed by any future decision. 13-3 No. Variable
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Chapter 9 Profit Planning and Activity-Based Budgeting McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies‚ Inc. All rights reserved. Learning Objective 1 9-2 Learning objective 1 • List and explain five purposes of budgeting systems. Purposes of Budgeting Systems Budget Budget a detailed plan‚ expressed in quantitative terms‚ that specifies how resources will be acquired and used during a specified period of time. 1. Planning 2. Facilitating Communication and Coordination 3
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overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year: Computer-hours 82‚000 Fixed manufacturing overhead cost $1‚278‚000 Variable manufacturing overhead per computer-hour $3.40 During the year‚ a severe economic recession resulted in cutting back production and a buildup of inventory in the company’s warehouse. The company’s cost records revealed the following actual cost and operating
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Q1: There are two different types of cost accounting systems: Job order cost systems and process cost systems. How does management decide whether to use a job order cost system or a process cost system in any given manufacturing situation? Explain. Job order cost system is used in situations where many different products are produced each period. For example‚ a Levi Strauss clothing factory would typically make many different types of jeans for both men and women during a month. A particular order
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CHAPTER 20 INVENTORY MANAGEMENT‚ JUST-IN-TIME‚ AND SIMPLIFIED COSTING METHODS 20-1 Cost of goods sold (in retail organizations) or direct materials costs (in organizations with a manufacturing function) as a percentage of sales frequently exceeds net income as a percentage of sales by many orders of magnitude. In the Kroger grocery store example cited in the text‚ cost of goods sold to sales is 76.8%‚ and net income to sales is 0.1%. Thus‚ a 10% reduction in the ratio of cost of goods sold to sales
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Relevant Costs Defined Relevant costs possess two characteristics: (1) They are future costs and (2) They differ across alternatives. All pending decisions relate to the future; accordingly‚ only future costs can be relevant to decisions. However‚ to be relevant‚ a cost must not only be a future cost but must also differ from one alternative to another. If a future cost is the same for more than one alternative‚ then it has no effect on the decision. Such a cost is irrelevant. The
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certain that the marriage wouldn’t last‚ and expected Chris would be back any day. But time is passing quickly‚ and there is still no word from the desert. The President‚ desperately needing the budget completed‚ has approached you‚ a management accounting student‚ for help in preparing the budget for the coming fiscal year. Your conversations with the President and your investigations of the company’s records have revealed the following information: 1. Peak months for sales correspond with gift-giving
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Introduction The purpose of management accounting in the organization is to support competitive decision making by collecting‚ processing‚ and communicating information that helps management plan‚ control‚ and evaluate business processes and company strategy. The interesting thing about management accounting is that it is rare to find an individual within a company with the title of “management accountant.” Often many individuals function as accountants within the organization‚ but these individuals
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