Chapter 1 Introduction to Managerial Accounting

Know the differences between financial accounting and managerial accounting who uses it, who regulates it?

What are the five processes in managing? Know each component and be able to identify each component by name if it is described.

Know your definitions:

What do they cost? What are direct costs an indirect costs describe and identify them!

Factory overhead? Conversion cost? Prime cost? Where does direct labor fit into these?

Period costs? Private costs? How are each of these handled and managerial accounting as well as financial accounting?

How are the balance sheet and income statement of a manufacturing business different than a service? What types of inventory are maintained for a manufacturer?

How is COGS calculated? How about cost of goods manufactured? What is a utilization or occupancy rate? How is it calculated differently from industry to industry?

Chapter 2 Job Order Costing

Recognize which firms need a Job Order Cost system versus Process Costing. What type of products need a Job Order Cost approach?

Know the three areas of inventory (WIP, Finished Goods and COGS) where the cost of a job starts and how it flows through the System.

What is a job cost sheet? Whats on it? How do Direct Materials and Direct Labor get recorded? Factory Overhead?

Whats a cost allocation? Predetermined FO rate? Calculate it!

How does the factory overhead account change when actual overhead costs are incurred and when the estimated applied overhead is entered?

Do you the actual and applied overhead differ? When?

What is underapplied factory overhead and over applied factory overhead?

What happens to the balance in the factory overhead account at the end of the year? How does this impact COGS?

What are typical period costs? Do these costs get applied to factory overhead?

Do professionals sometimes used job order costing, like an attorney or doctor, to bill clients?

Chapter 3 Process Cost Systems

What type of product or business would use a process cost system?

What does it cost production report? Does it track units and costs? What about partially completed units?

Understand what FIFO and LIFO are and how the use of each affects COGS, profits and taxes.

Learn the 4-Step Method for Allocating Costs:

What is an equivalent unit? Are equivalent units tracked separately for direct materials and conversion costs? Why?

Be able to compute Equivalent units for Materials and Conversion costs. Know why it matters whether costs are added at the beginning (materials usually) or along the way in stages (conversion costs usually). You need to understand how this is done.

Be able to derive the Direct Materials Cost per Equivalent Unit and the Conversion Cost per Equivalent Unit. Then, be able to allocate costs to the units in a given Stage of Production.

How do you calculate the Yield of a process?

Understand and be able to use the weighted average method to determine the allocation of factory overhead.

Chapter 4 Activity-Based Costing

What is the single plant wide factory overhead rate method? How do you calculate it?

Be certain to know what numbers go into the factory overhead thats budgeted and the importance of the choice of an allocation base, usually direct labor hours or units produced.

Know the advantages and disadvantages of this simple method.

Know and understand use of the multiple production department overhead rate method and that it uses different rates for each production department to allocate overhead. Be able to juggle the calculations to keep the total and per unit allocations for each department.

Be aware of the conditions that indicate that a single plantwide overhead rate may be distorting.

What is activity-based costing (ABC)? How is it different from the first two methods discussed?

What are activity cost pools? How do you calculate an activity rate? Once these activity rates are determined how are they used to allocate factory overhead cost to products and develop an overhead cost per-unit?

Selling and administrative expenses are usually reported as period costs on the income statement. However, for internal purposes, selling and administrative expenses may be allocated to products for decision making. Know how ABC fits into this scheme.

Be certain that you understand how a cost per patient or cost per hotel guest could be calculated using ABC methodology. Look at the slides! ABC methods can also be used to cut costs evaluate this.