Financial and managerial accounting is both concerned with the economic events of an enterprise. Similarities between financial and managerial accounting do exist, but they do have a different focus. Briefly distinguish between financial and managerial accounting as they relate to (1) the primary users, (2) the type and frequency of reports, (3) the purpose of reports, and (4) the content of reports.
Julie Mills is studying for her accounting mid-term examination. Summarize for Julie what she should know about management functions.
A manufacturing company makes the products that it sells. Briefly identify and define the cost elements that are incurred in making a product. After product cost elements are identified, how is the cost of goods manufactured for a period determined?
A job order cost accounting system is fully integrated into the general ledger of a company. Identify the major general ledger accounts used in a job order cost system. Explain how manufacturing costs flow through these accounts so that inventories may be costed and income determined when goods are sold.
Why do some companies need a cost accounting system while others do not? What are the determining characteristics or factors that influence the type of cost accounting system that is appropriate for a company?
Manufacturing overhead items are indirect product costs that cannot be traced to individual products. Explain how manufacturing overhead costs are accumulated and how they are assigned to products in a job order cost system.
Mike Hilyer is confused about under and overapplied manufacturing overhead. Define the terms for Mike and indicate the balance in the manufacturing overhead account applicable to each term.
What purposes are served by a production cost report?
Describe how the application of ABC to service companies is the same as its application to manufacturing companies.
What are the conditions that would indicate to the management of a firm that they should switch from traditional costing to activity-based costing?
How do differences in production and sales levels affect income under absorption and variable costing?
Management is often faced with the alternative of continuing to make a product or component internally, or going to an external source and purchasing the product or component. In gathering relevant information for these two alternatives, briefly identify the quantitative factors that should be considered. Are there any qualitative factors that should also be considered?
Define the term “opportunity cost.” How may this cost be relevant in a make-or-buy decision?
A variation on cost-plus pricing is time-and-material pricing. Under this approach, two pricing rates are set. Explain where this approach is used and identify the steps involved in time-and-material pricing. Also explain what the material loading charge covers and how it is expressed.
What is participative budgeting? What are its potential benefits? What are its potential shortcomings?
What is responsibility accounting? Explain the purpose of responsibility accounting.
Manny Perez is trying to understand the term “cost of capital.” Define the term, and indicate its relevance to the decision rule under the annual rate of return technique
How is it possible for a company to suffer a net loss for a given year, yet produce a positive net cash flow from operating activities?
Cash flows from operating activities can be calculated using the indirect or direct method. Briefly describe how the two methods differ yet arrive at the same information about the net cash flows from operating activities.
Why is it important to report discontinued operations separately from income from continuing operations?