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Study Notes Acc 503 Essay

1909 words - 8 pages

Managerial Accounting: Week 1

Key Phrases / Concepts:

1. Managerial accounting: the process of obtaining, creating, and analyzing relevant information to achieve organizational goals.

2. Costs: usage of resources.

3. Cost objects: the item at the center of a decision for which cost is calculated. A cost object can be any level of specification, including a particular manufactured unit or hour of service provided, an entire product line, a department, division, or business unit, or a facility within an organization.

4. Direct costs: Costs that are traceable to a cost object. In a manufacturing setting, direct costs include materials that are specific to a given ...view middle of the document...

2. What is the difference between managerial accounting and financial accounting?
Financial accounting is used to report a companies financial statement utilizing GAAP (Generally Accepted Accounting Principles) for public use and it typically summarizes overall company results, whereas Managerial accounting focuses on internal users to make important decisions and does not need to conform with U.S. GAAP.

“It’s clear that financial accounting focuses on reporting to outside users while managerial accounting focuses on reporting to inside users.”

3. What are costs? Costs include all usage of resources, include; money, time, equipment, maintenance, tax, payroll.
4. What frameworks exist for organizing cost information?
5. Why is understanding cost behavior important?

Week 2 notes: Costing Systems Elements and Design

Glossary:
1. Costing system - A system of organizing cost information within the organization to facilitate and influence decision making. There are a variety of dimensions on which costing systems are differentiated. Some distinctions include simplified/traditional systems versus activity-based costing, and job costing systems versus process costing systems.

2. Predetermined overhead rate - The rate used to apply overhead to products or other cost objects. The general formula for the predetermined overhead rate is the budgeted overhead (in $) divided by an estimate of the cost driver volume (units).

3. Applied overhead - Estimated overhead costs assigned to a cost object during an accounting period. Applying overhead during the accounting period avoids the need to wait for a complete accounting of actual overhead (at the end of an accounting period) before making product cost-related decisions. There are a variety of methods used to apply overhead; however, a common component is the predetermined overhead rate.

4. Absorption costing - Absorption costing (required for financial accounting purposes) treats fixed costs as product costs.

5. Inventory build-up problem - Occurs when managers rely on absorption costing to cost products. Managers can produce higher quantities during an accounting period to increase inventory so that cost of goods sold receives less overall fixed costs for the units sold, resulting in higher (than otherwise) gross margin and net income. When performed repeatedly, inventory grows to higher than necessary levels.

Guiding Questions:

As you complete the lectures and assignments, you will be able to develop answers to the following guiding questions. These questions should be the focus of your learning.

1. What is the role of costing systems inside organizations? Costing systems help organizations track the cost of products and its helpful to drive decisions in regards to product pricing and other pricing negotiations
2. How are costs accounted for in the financial statements for financial accounting purposes? Costs are included in in the...

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