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Managers Three Responsibilities

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-planning: setting goals and objectives for the company and determining how to achieve them. Ex. Management decides to increase sale growth 10% -directing: overseeing the company's day-to-day operations. Uses product cost reports, product sales info, and other managerial accounting reports to run daily business operations. Ex. Management uses info on product costs to determine sales prices. Ex. to lower product costs, management moves production to mexico (also control). Ex. management reviews hourly sales reports to determine the level of staffing needed to service customers. -controlling: evaluating the results of business operations against the plan and making adjustments to keep the company pressing toward its goals. Ex. Management conducts variance analysis by comparing budget to actual. Ex. to lower product costs, management moves production to Mexico.

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financial accounting

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-aimed toward producing annual and quarterly consolidated financial statements that will be used by investors and creditors to make decisions. focuses on providing stockholders and creditors with the information they need to make investment and lending decisions. Balance sheet, income statement, equity, cashflows. -external : creditors stockholders, govt regulations -GAAP must be included in report -info based on historical transactions -reports annually and quarterly -data must be reliable and objective

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managerial accounting

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-to plan, direct, control providing internal management with the information it needs to run the company efficiently and effectively. Info takes many forms depending on the management's needs. -internal; managers -management determines what it wants to report and it it wants it formatted. -some past, but focuses on future -data must be relevant

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Role of managerial accountants in a company and how it has changed

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-organizational structure: stockholders elect board of directors to oversee company, and they hire COO (operations such as research and development) and CFO (all company's financial concerns) -used to work in accounting departments and reported directly to the controller, now half are throughout the company and work on cross fcn teams. -computers have changed, used to do accounting routine tasks, now management views them as internal consultants or business advisors. now spend more time planning, analyzing, and interpreting accounting data and provide decision report.

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CFO

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coo: chief operating officer companys operations such as research and development, production and distribution -CFO: all company's financial concerns -treasurer:raising capitial through issuing stocks and bonds and investing fonds -controller: general financial accounting, managerial accounting, and tax reporting. -internal audit fcn: ensure that the company's internal controls and risk management policies are fcn properly -audit committee: internal audit fcn as well as the annual audit of the financial statements by independent CPAs.

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Sarbanes-Oxley Act

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-DEFINITION of 'Sarbanes-Oxley Act Of 2002 - SOX' An act passed by U.S. Congress in 2002 to protect investors from the possibility of fraudulent accounting activities by corporations. The Sarbanes-Oxley Act (SOX) mandated strict reforms to improve financial disclosures from corporations and prevent accounting fraud. SOX was enacted in response to the accounting scandals in the early 2000s. Scandals such as Enron, Tyco, and WorldCom shook investor confidence in financial statements and required an overhaul of regulatory standards. -SOX is to restore trust in publicly traded corporations, their management, their financial statements, and their auditors. -enhances internal control and financial reporting requirements and establishes new regulatory requirements for publicly traded companies and their independent auditors

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Internal Financial Reporting Standards -IFRS

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-International Financial Reporting Standards (IFRS) is a set of accounting standards developed by an independent, not-for-profit organization called the International Accounting Standards Board (IASB). -The goal of IFRS is to provide a global framework for how public companies prepare and disclose their financial statements. IFRS provides general guidance for the preparation of financial statements, rather than setting rules for industry-specific reporting.

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Extensible Business Reporting Language -XBRL

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-enables companies to release financial and business information in a format that can be quickly, efficiently, and cost-effectively accessed, sorted, and analyzed over the internet. -uses a standardized costing system to "tag" each piece of reported financial and business data so that it can be read by computer programs, rather than human eyes

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Business Trends that affect Management Accounting: Sustainability, Shifting Economy, Global Marketplace, Lean Operations, TQM

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-Sustainability: the ability to meet the needs of the present without compromising the ability of future generations to meet their own needs. do onto other what you would do to you -shifting economy: in North america industry is shifting from manufacturing to service companies. Managerial accounting has expanded to meet the needs of service -global marketplace: provide highly competitive domestic companies with great opportunities for growth. must make accurate and timely decisions, must decide to expand to foreign companies (which place has strict environmental laws?), learn from companies around the world.

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What is sustainability

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-Sustainability: the ability to meet the needs of the present without compromising the ability of future generations to meet their own needs

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What does the term "triple bottom line" mean?

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recognizes that a company's performance should not only be viewed in terms of its ability to generate economic profits for its owners, as has traditionally been the case, but also be viewed by its impact on ppl and the planet PROFIT, PEOPLE, PLANET

question

Why should companies adopt a sustainability policy?

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-Cost reduction ( might be expensive at first but saves over time) eg. reusing sheets/ towels at hotels, less labor and materials used -regulatory compliance: laws. eg red bull charged for not recycling -stakeholder influence: ppl want to invest in environmentally friendly companies -competitive strategy: cuts cost, environmentally friendly packaging is less waste

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Know what the Global Reporting Initiative is - and their main mission.

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framework and guidelines provide standards for reporting on sustainability-related performances for organizations, including specific countries and specific sectors -Our mission is to empower decision makers everywhere, through our sustainability standards and multi-stakeholder network, to take action towards a more sustainable economy and world.

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Know what a Life cycle assessment is

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method of product design in which the company analyzes the environmental impact of a product, from cradle to grave, in an attempt to minimize negative environmental consequences throughout the entire lifespan of the product

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Know the requirements for third party assurance (or not) of sustainability reports

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- third party verification of the data and metrics used for reporting purposes -

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Know the following terms: green washing, carbon footprint, water footprint

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-Greenwashing: overstating commitment to being green -carbon footprint: a measure of the total emissions of carbon dioxide and other greenhouse gases often expressed for simplicity as tons of equivalent carbon dioxide -water footprint: the total volume of water use associated with the processes and products of a business

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Current trends in Sustainability reporting (see lecture notes)

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Large companies are increasingly including major sustainability content on investor websites -Specific goals are common -Reporting is challenging - how to verify? -Many corporate reports address third party verification of reported sustainability data -Trend "Corporate Sustainability Officer"

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Why do companies issue sustainability reports? (see lecture notes)

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To show corporate commitment to environmental and social issues -Articulate sustainability goals -Inform stakeholders of activities and progress against goals -Enhance corporate stature by appearing green -Appeal to customers who respond favorably to green initiatives -To grow shareholder and brand value

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What is an EMA system?

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a system used for the identification, collection, analysis and use of two types of information for internal decision making, include monetary and physical

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What two types of information are collected in an EMA system?

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-monetary: type of info traditionally used can include cost of inout and outputs, waste and emission control, prevention costs, research and development, intangible costs physical- quantity of air emissions, tons of solid waste generated, gallons of waste generated, pounds of packaging recycled, total amount of water consumed

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The value chain

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o Which business activities make up the value chain? o Coordinating activities across the value chain o Which costs in the value chain are product costs? Which are period costs?

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Cost object

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anything for which managers want a separate measurement of cost

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Direct costs

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cost that can be traced to the cost object

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Indirect costs

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costs that relate to the cost object but cannot be traced to it

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o Total costs

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the cost of all resources used throughout the value chain

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o Inventoriable costs

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only the cost incurred during the production or purchases stage of the value chain

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o Product costs

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associated w/ product we are selling

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o Period costs

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everything else in the value chain other than production -selling, general, administrative expenses

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o Prime costs

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combination of direct material and direct labor costs

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o Conversion Costs

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- direct labor + manufacturing overhead - costs of converting direct material into finished goods

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o Fringe benefit costs

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health insurance, paid vacations, payroll taxes, and retirement plan contributions

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o Controllable versus uncontrollable costs

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controllable- costs that can be influenced or changed by management uncontrollable- fixed costs that will continue to be incurred even if a particular course of action is taken

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o Relevant and irrelevant costs

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pg.67

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o Fixed and variable costs

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fixed- a constant in total over a wide range of activity levels variable- change in total in direct proportion to changes in volume

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o Average costs

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total costs/ #units

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• Merchandising companies' inventoriable product costs

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costs related to goods either purchased for resale "merchandising," made for resale, or manufacturing overhead

question

• Manufacturing companies' inventoriable product costs

answer

raw materials, WIP, Finished goods

question

• Three costs that make up product costs in a manufacturer (DM, DL, Man-OH

answer

Man OH:

question

• Manufacturing Overhead costs

answer

o Indirect materials: glue hard to trace o Indirect labor o Other indirect manufacturing costs pg.57

question

• Income statements of

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o Service Company o Merchandising Company o Manufacturing Company

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• Manufacturing Cost Flows

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o Know inventory account cost flows: Raw Materials ? WIP ? FG ? CGS o Calculate raw materials used, cost of goods manufactured and cost of goods sold

question

• Fixed and Variable costs

answer

o Be able to calculate total cost using variable cost per unit times volume, plus fixed costs o Be able to calculate total average cost per unit o Be able to predict total costs if you know variable cost per unit and fixed costs

question

merchandising 1 account=

answer

revenue-cogs-operating expenses=operating income f

question

service company

answer

revenue-operating

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total cost

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fixed costs+variable costs

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Manufacturing Cost Flows

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Know inventory account cost flows: Raw Materials ? WIP ? FG ? CGS number 8 on chapter 2 examples raw material: beg. balance + purchases direct material +(plug which is direct material)=end balance WIP: beg. balance+ direct material from before + direct labor +MOH (indirect labor, insurance, depreciation, repairs) +(cogm)= end balance Finished goods: beg bal+ Cogm+(cost of goods sold)=ending balance

question

Where does a job begin?

answer

raw materials

question

What source documents feed a job cost record?

answer

Materials Requisition: sheet to keep track of things taken out of raw materials Labor Time Record: keeps track of how much each worker works on a certain job (time card)

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Completing a job cost record

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Adding DM, DL and Applied (allocated) Overhead

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• Allocating Manufacturing Overhead to a Job

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What does allocating mean- estimating -Estimating manufacturing overhead for the year -Estimating the allocation base for the year *• Can be DL Hours, DL dollars, Machine Hours, etc. -

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• End of period adjustment for under or over applied overhead

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-Actual versus applied overhead -Adjust difference into CGS as the overhead account is closed out

question

• Compute Cost of Goods Manufactured

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-Remember under job costing, DM, DL and APPLIED overhead is added to the WIP account (not actual overhead)-So Cost of Goods Manufactured includes applied not actual overhead -

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