Matt Ennis

Accounting 152
Professor Folsom
October 4th
Accounting Study Guide

Chapter 1 – Managerial Accounting & the Business Environment

What is Managerial Accounting – providing information to managers

How does it differ from Financial Accounting – providing information to stockholders, creditors, and
others who are outside of organization. Managerial Accounting is for internal purposes while financial
accounting is for those outside of the organization

Financial Accounting Managerial Accounting

Emphasizes financial consequences of past Emphasizes decisions affecting the future
activities
Emphasizes objectivity and verifiability Emphasizes relevance
Emphasizes precision Emphasizes timeliness
Mandatory and follows GAAP Not mandatory no rules

Goal of Firms – Maximize Shareholder Wealth

Maximize Shareholder Wealth = Maximize Economic Profits

Value Chain - consists of major business functions that add value to a company’s product and services

Non Value Added Activities – customers are not willing to pay for because they add no value

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Chapter 2 – Managerial Accounting & Cost Concepts

Product vs. Period Costs

Product -all costs involved in acquiring or making of products (Include: Direct Labor, Direct Materials, &
Manufacturing Overhead)

Period – not product costs and accrued on income statement in period they are occurred (Selling &
Administrative Expenses)
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Matt Ennis
Accounting 152
Professor Folsom
October 4th
Direct vs. Indirect Costs

Direct Cost – cost that can be easily traced to a specific cost object
-Cost Objective – something which costs can be specifically assigned Ex. Company Departments

Indirect Cost – Costs that cannot be traced to a cost object

Common Costs – Costs shared across subunits that cannot be easily divided

Average vs. Marginal Costs

Marginal Cost – cost to make one more unit

-Maximize profit by making MC = MR

Average Cost = Total Costs / Total Units

Other

Differential Costs – Difference in accounting costs incurred by choosing one action over another

Sunk Costs – costs that has already occurred and doesn’t matter to current decision

Opportunity Costs – Profits forgone by choosing one action over another

*Profit forgone by option

Costs of Quality – Product is free from defects

Product Costs DM + DL + MOH

Prime Cost DM + DL
Conversion Cost DL + MOH

Over and Under Applied

COGS Method
Overapplied – means Applied MOH is greater than Actual so you Debit Actual MOH and Credit COGS

Underapplied – means Applied MOH is greater than Actual so you Debit Actual MOH and Credit COGS
Matt Ennis
Accounting 152
Professor Folsom
October 4th

Chapter 4 – Systems Design: Process Costing

Job Order vs. Process Costing

-Process costing is used when a company produces a continuous flow of indistinguishable units
-Process costing accumulates costs by department since it is so hard to try and identify materials, labor
and overhead costs
-Process costing systems compute unit costs by department