Professional Documents
Culture Documents
Managerial Accounting
Chapter 1
Dr. Hisham Madi
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What Is Managerial Accounting?
Corporations Partnerships
Proprietorships Not-for-profit
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Why Accounting is Essential for Decision
Makers and Managers
Managerial accounting adds value to the organization by
helping managers do their jobs more efficiently and
effectively.
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MANAGERIAL ACCOUNTING vs. FINANCIAL
ACCOUNTING
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The Manager’s Role
Management Functions
Organizational Structure
Organization charts show the
interrelationships of activities
and the delegation of authority
and responsibility within the
company.
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Managerial Accounting Basics
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Managerial Accounting Basics
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Business Ethics
► Enron,
► Global Crossing,
► WorldCom
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Business Ethics
Creating Proper Incentives
Systems and controls sometimes create incentives
for managers to take unethical actions.
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Business Ethics
Code of Ethical Standards
Sarbanes-Oxley Act (SOX)
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Manufacturing Costs
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Manufacturing Costs
Manufacturing Costs
Manufacturing consists of activities and processes that
convert raw materials into finished goods.
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Manufacturing Costs
Direct Materials
Raw Materials
Direct Materials
Direct Materials
Indirect Materials
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Manufacturing Costs
Direct Labor
Work of factory employees that can be
physically and directly associated with
converting raw materials into finished goods.
Bottlers at Coca-Cola, and bakers at Sara
Lee, are employees whose activities are
usually classified as direct labor
Indirect Labor
Work of factory employees that has no physical
association with the finished product or for which it is
impractical to trace costs to the goods produced.
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Manufacturing Costs
Indirect Labor
Work of factory employees that has no physical
association with the finished product or for which it is
impractical to trace costs to the goods produced.
Examples include wages of factory maintenance people,
factory time-keepers, and factory supervisors.
Like indirect materials, companies classify indirect labor
as manufacturing overhead
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Manufacturing Costs
Manufacturing Overhead
Costs that are indirectly associated with manufacturing
the finished product.
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Manufacturing Costs
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Product Versus Period Costs
Product Costs
Direct materials
Components: Direct labor
Manufacturing overhead
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Product Versus Period Costs
Period Costs
Charged to expense as incurred.
Non-manufacturing costs.
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Product Versus Period Costs
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A bicycle company has these costs: tires, salaries of employees
who put tires on the wheels, factory building depreciation, wheel
nuts, spokes, salary of factory manager, handlebars, and salaries
of factory maintenance employees. Classify each cost as direct
materials, direct labor, or overhead.
Income Statement
Under a periodic inventory system, the income statements
of a merchandiser and a manufacturer differ in the cost of
goods sold section.
“COGS”
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Manufacturing Costs in Financial Statements
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Manufacturing Costs in Financial Statements
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Manufacturing Costs in Financial Statements
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Illustration 1-8
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Manufacturing Costs in Financial Statements
Balance Sheet
Inventory accounts for a manufacturer
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Manufacturing Costs in Financial Statements
Balance Sheet
Current assets sections of merchandising and manufacturing balance
sheets
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Managerial Accounting Today
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Managerial Accounting Today
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Managerial Accounting Today
Theory of Constraints
Constraints (“bottlenecks” ) limit the company’s potential
profitability.
A specific approach to identify and manage these
constraints in order to achieve company goals.
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Managerial Accounting Today
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Managerial Accounting Today
Balanced Scorecard
Evaluates operations in an integrated fashion.
Uses both financial and non-financial measures.
Links performance to overall company objectives.
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