Chapter 18

Introduction to Managerial Accounting

Directed Reading Guide

12. Why is managerial accounting important?

1. Identify as a focus of Managerial (M) or Financial (F) accounting:
   1. Primarily for internal users ______
   2. Primarily for external users ______
   3. Follows GAAP rules ______
   4. Summary reports of the entire company ______
   5. Concerned about how reports will affect employee behavior ______
2. Managers need information for?

12. How are costs classified?

1. Manufacturing (product) costs categories are:

1. materials

2. labor
3. overhead

2. __________________ combines direct materials and direct labor.

3. __________________ combines direct labor and manufacturing overhead.

4. Selling and administrative expenses are referred to as _________________.

12. How do manufacturing companies prepare financial statement?

1. Identify if the item is part of the Cost of Goods Manufactured (COGM) or the Cost of Goods Sold (COGS):

1. Beginning Finished Goods Inventory __________
2. Direct Materials Used __________
3. Direct Labor __________
4. Beginning Work-in-Process Inventory __________

2. If beginning Finished Good Inventory is $2,000, ending Finished Goods Inventory is $3,000, and Cost of Goods Manufactured is $10,000, what is Cost of Gods Sold?

12. What are business trends that are affecting managerial accounting?

1. Which business trend to you think is affecting managerial accounting the most in todays businesss and why?

2. Pick an activity in the value chain and describe how it can add value to a product (you may pick a product to use as part of your example).

12. How is managerial accounting used in service and merchandising companies?

1. ABC Company has incurred costs of $4,000 and provided service to 1,000 customers, what is the cost per service?

2. ABC Company sold 300 bottles of water that costs $150 to purchase, what is the cost per water bottle?