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Objective 1
Distinguish between financial accounting and management accounting.
Primary Users
Financial Management Investors Internal managers of the business Creditors Government authorities (IRS, SEC, etc.)
Purpose of Information
Financial Help investors, creditors, and others make investment, credit, and other decisions Management Help managers plan and control business operations
Type of Report
Financial Financial statements restricted by GAAP Management Internal reports not restricted by GAAP; determined by cost-benefit analysis
Verification
Financial Annual independent audit by CPAs Management No independent audit
Scope of Information
Financial Management Summary Detailed reports reports primarily on parts of the on the company company as a whole
Behavioral Implications
Financial Concern about adequacy of disclosure Management Concern about how reports will affect employees behavior
Objective 2
Value Chain
Design
Production or Purchases
Marketing
Distribution
Customer Services
S19-3
Objective 3
Objective 4
Distinguish among full product costs, inventoriable product costs, and period costs.
Product Costs
What are product costs? They are the costs to produce (or purchase) tangible products intended for sale.
Product Costs
There are two types of product costs:
Full product costs Inventoriable product costs
External Reporting
Period costs
Manufacturing Overhead
Inventory
Materials Inventory
deduct
Manufacturing Company Example Kendall Manufacturing Companys beginning finished goods inventory was $60,000 and its ending finished goods inventory was $55,000. How much is the cost of goods sold?
Beg. finished goods inventory + Cost of goods manufactured = Cost of goods available for sale Ending finished goods = Cost of goods sold
Manufacturing Company Example Kendall Manufacturing Company had sales of $627,000 for the period. How much is the gross margin?
Sales Cost of goods sold = Gross margin $627,000 327,000 $300,000
Manufacturing Company Example Kendall Manufacturing Company had operating expenses as follows:
$80,000 Sales salaries 10,000 Delivery expense 30,000 Administrative expenses $120,000 Total What is Kendalls operating income?
Objective 6
Identify major trends in the siness environment, and use ost-benefit analysis to make business decisions.
Just-in-Time
JIT philosophy means that the company schedules production just in time to satisfy needs. Speeding up of the production process reduces throughput time. Throughput time is the time between buying raw materials
Objective 7
Confidentiality
Objectivity
End of Chapter 19