Managerial Accounting by Nathan Guannan Zhang

Mgr Acc

Managerial AccountingAllChapters

Chapter 01Nathan Zhang

I: Nature of Managerial Acc:Users/Decision Makers

Purpose of Info

Flexibility of Practice

Timeliness of Info

Time Dimension

Focus of Info

Nature of Info

I: Users/Decision MakersUsers: Managers, Employees, Purchasing, Marketing, Senior management

NOT: investors, the SEC, the IRS, creditors, analysts

I: Purpose of InfoUsed for:

planning

controlling

I: Flexibility of PracticeGAAP not required

Nonmonetary items permitted

Standardizing is difficult, if not impossible.

I: Timeliness of InfoPast, present, and future all included

Historical data as well as predictions

Used to check accuracy of predictions.

I: Time DimensionBudgets predict the future

Past, present, as well as future.

I: Focus of Info Top, middle and low-level managers.

Managerial data.

I: Nature of InfoMonetary

Nonmonetary

I: Lean ManagementLean Business Model

Lean Practices

I: Lean Business ModelCustomer Orientation

expect company to offer right product or service at right time and right price

all business is worked around the customer

I: Lean PracticesContinuous Improvement (CI)

Total Quality Management (TQM)

Just-In-Time Manufacturing (JIT)

I: Classification by BehaviorFixed Cost

Doesn't change per unit based on volume

Doesn't change overall based on volume

Variable Cost

Doesn't change per unit based on volume

Changes overall based on volume

I: Classification by TracingCost object

Thing to trace

Direct Cost

Traceable to single cost object

Indirect cost

Can't be traced to single cost object

May be traced to all cost objects

May be traced to severall cost objects.

I: Classification by ControlControllable

Not Controllable

I: Classification by RelevanceSunk Cost

Always irrelevant

Out-of-pocket cost

Sometimes relevant

Opportunity Cost

What you lose (one thing) for taking another thing - sometimes relevant

I: Classification by functionProduct

Period

I: Necessary DocumentsRaw Materials Inventory

Works in Process (WIP) Inventory

Finished Goods (FG) Inventory

I: Cost EffectsDirect Materials (DM)

Direct Labor (DL)

Factory Overhead (FOH)

Prime & Conversion Costs

Reporting Performace

(End of Ch 01)

Chapter 02NathanZhang

II: Job Order CostingDM+DL+FOH=Total Mfg Cost (TMC)

Raw Materials = RM; B/E=Begin/End

ERM+TMC-BRM=Cost of Goods Mfg (COGM)

EFG+COGM-BFG=Cost of Goods Sold (COGS)

Sales - COGS - Sellling Exp. - Adm. Exp. = Net Income (NI)

II: Predetermined OverheadPOHR = Predetermined Overhead Rate

POHR = Est. OH Costs / Est. Activity Base

Activity Base usually is DL

(End of Ch 02)(End of Ch 02)


III: Process Order CostingEUP = Equivalent Units of Production

Solving EUP: some % DM + some % DL = Process 01. Then some % DM + some % DL = Process 02. Then take "some %" and add all "some %"'s together to get EUP.

III: EUP, Cont'dIf there are no BWIP and no EWIP, then take "Total cost assigned to Process (DM, DL, OH)" and divide that by "Total number of units started and ended this period" to get EUP

(End of Ch 03)


IV: Activity Based CostingUnit Level Activities

Batch Level Activities

Product Level Activities

Facility Level Activities

IV: ABC MethodIdentify (ID) activities and cost pools (see previous slide)

Trace OH costs to cost pools

Determine activity rate

Assign OH costs to cost objects

IV: Disadvantages of ABCCost to implement and maintain ABC systems is extremely high for most industries other than computer and auto mfg.

Uncertainty with decision making remains even after full-scale implementation of ABC systems

IV: Advantages of ABCMore accurate OH cost allocation

More effective OH cost control

Focus on relevant factors

Better mgt of activities

(End of Ch 04)


V: Cost-Volume-Profit (CVP)Cost-Volume-Profit (CVP) Analysis

fixed costs (FC)

fixed overhead (FOH)

variable costs (VC)

DM

DL

variable overhead (VOH)

mixed costs

V: CVP, Cont'dCVP analysis

step-wise costs

curvilinear costs

V: Cost Chartsscatter diagrams

high-low method

least-squares regression

V: Contribution Margin (CM)CM per unit = Sales price per unit - Total VC per unit

CM Ratio (CMR) = CM per unit / Sales price per unit

V: Breaking EvenBreakeven Point (BEP) in units = FC / CM per unit

BEP in $$ = FC / CMR

V: Target Aftertax IncomeDollar sales at target aftertax income = (FC + target pretax income) / CMR

Unit sales at target aftertax income = (FC + target pretax income) / CM per unit

Margin of safety (MoS :: %) = (expected sales - BEP in $$) / expected sales

Revised BEP in $$ = Revised FC / Revised CMR

V: Composite UnitsComposite Unit = EG Basic + Home Premium + Business + Ultimate (Win Vista here...) = EG some composite value

Do same for sales & VC

take sales - VC = CM per composite unit

BEP in composite units = FC / CM per composite unit

(End of Ch 05)


VI: Absorption VS Variable CostingAbsorption (ABS): Fixed overhead included (IE DM + DL + VOH + FOH) in Product Cost

Variable (VAR): Fixed overhead not included (IE DM + DL + VOH) in Product Cost

VI: Comparison, Inc. St.'sABS Inc StRevenues SalesExpenses COGS Selling Exp. Adm Exp.Net Income (Loss)VAR Inc StSalesVariable ExpensesCMFixed ExpensesNet Income (Loss)

(End of Ch 06)


VII: BudgetingMaster Budget

ops budgets

sales budget

merchandise purchasing budget

production budget

mfg budget

selling expense budget

gen. & adm. exp. budget

VII: More BudgetingCapital expenditures budget

Financial Budgets

cash budgets

budgeted income statement

budgeted balance sheet

(End of Ch 07)


VIII: Cost VariancesCost variance = actual cost - standard cost

actual cost = actual price/rate * actual qty/hrs

standard cost = standard "/" * standard "/"

VIII: Cost Var Cont'dPrice variance = [actual price - std price] x actual qty

Quantity variance = [actual qty - std qty] x std price

Rate var (labor) = [actual rate - std rate] x actual hrs

Efficiency var (labor) = [actual hrs - std hrs] x std rate

VIII: Cost Var Cont'd Spending var (OH) = actual overhead -/+ budgeted overhead

Efficiency var (OH) = applied overhead -/+ budgeted overhead

(End of Ch 08)


XI: Payback PeriodPayback period = Cost of Investment / Annual Cash Flows

XI: Net Present ValueTake the annual cash flows and multiply with a total "value of I" factor

first, add up all the "value of I" factors into a total "value of I" factor

XI: Simple Rate of ReturnSRR = Annual aftertax NI(L) / Annual Avg. Investment

Annual avg. investment = (Beg. book value + End. book value) / 2

XI: Internal Rate of ReturnTake amt. invested / net cash flows = factor of an annuity of I

take factor and look up in "PV of an annuity of I" table to find IRR

(End of Ch 11)

Chapter 12Final ChapterNathanZhang

XII: Purpose of Cash Flow StatementTo report all cash and noncash inflows and outflows

(End of Ch 12)

(End of Presentation) Have a nice day!

12/21/08

12/21/08

12/21/08

Managerial Accounting by Nathan Guannan Zhang

Business

Transcript of Managerial Accounting by Nathan Guannan Zhang