Welcome to Principle of Accounting II Managerial Accounting

Welcome to Principle of Accounting II, Managerial Accounting ACCT 2302 Course # 93212 Atef Abuelaish 1

Instructor Name : Atef Abuelaish • Married with 3 kids, Born in Cairo/Egypt. • Like traveling, Reading, and Sports activities. • Master of Science in Accounting, Kaplan University. • Master Tax Advisor, Enrolled Agent. • Accreditation council for accountancy & Taxation [ATP # 1101038551]. Abuelaish • Working with HRAtef. Block for 10 years. 2

Instructor Name : Atef Abuelaish • Accountant with long experiences with domestic and international companies. • Master of Science in Accounting, Kaplan University [3. 92 GPA; GPA Highest honor]. • Bachelor degree in accounting and diploma in accounting applied science [3. 85 GPA - highest honor]. Atef Abuelaish 3

Contact Me Email address: atef. abuelaish 1@hccs. edu Cell # 832 -474 -1118 Online Mc. Graw – Hill’s Connect All Course materials under the course name and number. Atef Abuelaish 4

Meet NO. Dates Chapter Topic Homework Assignment 1 01/19 1 Managerial Accounting Concepts and Principles. Using Connect – 7 Questions for 60 Points. 2 01/26 2 Job Order Costing and Analysis. Using Connect – 6 Questions for 60 Points. 3 02/02 3 Process Costing and Analysis. Using Connect – 7 Questions for 60 Points. 4 02/09 REV. EX 01 Chapters 1, 2, and 3 Using Connect - EXAM # 1; 3 PARTS FOR 60 POINTS. in class 5 02/16 4 Activity-Based Costing and Analysis. Using Connect – 7 Questions for 60 Points. 6 02/23 5 Cost Behavior and Cost-Volume. Profit Analysis. Using Connect – 7 Questions for 60 Points. 7 03/01 6 Variable Costing and Analysis. Using Connect – 7 Questions for 60 Points. Atef Abuelaish 5

Meet NO. Dates Chapter Topic 8 03/08 REV. EX 02 9 03/15 10 03/22 7 Master Budgets and Performance Using Connect – 7 Planning. Questions for 60 Points. 11 03/29 8 Flexible Budgets and Standard Costs. Using Connect – 6 Questions for 60 Points. 12 04/05 9 Performance Measurement and Responsibility Accounting. Using Connect – 8 Questions for 60 Points. 13 04/12 REV. EX 03 Chapters 7, 8, and 9 Using Connect - EXAM # 3; 3 PARTS FOR 60 POINTS. in class Chapters 4, 5, and 6 Homework Assignment Using Connect EXAM # 2; 3 PARTS FOR 60 POINTS. in class NO SPRING BREAK CLASS Atef Abuelaish 6

Meet NO. Dates Chapter Topic 14 04/19 10 Relevant Costing for Managerial Decisions. Using Connect – 8 Questions for 60 Points. 15 04/26 11 Capital Budgeting and Investment Analysis. Using Connect – 7 Questions for 60 Points. 16 05/03 13 Analysis of Financial Statement. Using Connect – 6 Questions for 60 Points. 17 05/10 FINAL COURSE FINAL EXAM Chapters 10, 11, AND 13 Atef Abuelaish Homework Assignment Using Connect EXAM of 3 PARTS FOR 60 POINTS. in class 7

Evaluation Requirements • • • Homework – At Home 4 Quizzes 3 Exams – In Class Final Exam – In Class Grand Total Atef Abuelaish 720 points 40 points 180 points 60 Points 1000 points 8

HCC Grading Scale • • • 90 – 100% 80 – 89% 70 – 79% 60 – 69% BELOW 60% Atef Abuelaish = = = A B C D F 900 – 1000 points 800 – 899 points 700 – 799 points 600 – 699 points 0 – 599 points 9

COURSE PLAN • Syllabus: Service to direct the activities that all of us must undertake to move everyone from where he/she is, to where he/she wants to be. • Atef Abuelaish 10

Managerial Accounting Concepts and Principles Chapter 1 Power. Point Editor: Beth Kane, MBA, CPA Wild and Shaw Managerial Accounting 5 th Edition Copyright © 2016 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education.

Purpose of Managerial Accounting 12

Managerial Accounting Basics Managerial accounting provides financial and nonfinancial information for managers of an organization and other decision makers. C 1 13

Purpose of Managerial Accounting C 1 14

Nature of Managerial Accounting C 1 15

Fraud and Ethics in Managerial Accounting Fraud affects all business and it is costly: A 2014 Report to the Nation from the Association of Certified Fraud Examiners (ACFE) estimates the average U. S. business loses 5% of its annual revenues to fraud. The Institute of Management Accountants has issued a code of ethics to help accountants involved in solving ethical dilemmas. C 1 16

Cost Classifications 17

Types of Cost Classifications Classification by Behavior Cost behavior refers to how a cost will react to changes in the level of business activity. • Total fixed costs do not change when activity changes. Cost Activity C 2 • Total variable costs change in proportion to activity changes. 18

Types of Cost Classifications Classification by Traceability Direct costs l l C 2 Costs traceable to a single cost object. Examples: material and labor cost for a product. Indirect costs l l Costs that cannot be traced to a single cost object. Example: A maintenance expenditure benefiting two or more departments. 19

Comparing Product and Period Costs 20

Types of Cost Classifications Classification by Function Direct Labor Direct Material Manufacturing Overhead Product Period costs are expenses not attached to the product. Selling costs are incurred to obtain orders and to deliver finished goods to customers. C 3 Administrative costs are non-manufacturing costs of staff support and administrative functions. 21

Period and Product Costs in Financial Statements C 3 22

Identifications of Cost Classifications C 3 23

Cost Concepts for Service Companies The cost concepts described are generally applicable to service organizations. For example, the cost of beverages for passengers of Southwest Airlines is a variable cost based on number of passengers. C 3 24

Following are the costs of a company that manufactures computer chips. Classify each as either a product cost or a period cost. Then classify each of the product costs as direct material, direct labor, or factory overhead. 1. Plastic board used to mount the chip 2. Advertising costs 3. Factory maintenance workers’ salaries 4. Real estate taxes paid on the sales office 5. Real estate taxes paid on the factory 6. Factory supervisor salary 7. Depreciation on factory equipment 8. Assembly worker hourly pay to make chips Product Costs All Factory Costs Assets on Balance Sheet C 2/C 3 5. Real estate taxes paid on the factory 6. Factory supervisor salary 7. Depreciation on factory equipment 8. Assembly worker hourly pay to make chips Product Costs Direct Factory Material Labor Overhead X Period Cost X X X X Period Costs Non-Factory Costs Expensed on Income Statement as Selling, General and Administrative 25

Manufacturer’s Costs C 3 26

Direct Materials Direct material costs are the expenditures for direct materials that are separately and readily traced through the manufacturing process to finished goods. Example: Steel used in the frame of a mountain bike. C 3 27

Direct Labor Direct labor costs are the wages and salaries for direct labor that are separately and readily traced through the manufacturing process to finished goods. Example: Wages paid to a mountain bike assembly worker. C 3 28

Factory Overhead Factory overhead consists of all manufacturing costs that are not direct materials or direct labor and the costs cannot be separately or readily traced to finished goods. Examples: Indirect labor – maintenance. Indirect material – cleaning supplies. Factory utility costs. Supervisory costs. C 3 29

Prime and Conversion Costs Manufacturing costs are often combined as follows: Direct Material Direct Labor Prime Cost C 3 Manufacturing Overhead Conversion Cost 30

10 Minutes Break Atef Abuelaish 31

Balance Sheet 32

Reporting Manufacturing Activities Merchandisers. . . Manufacturers. . . v Buy finished goods. v Buy raw materials. v Sell finished goods. v Produce and sell finished goods. Sale. Mart C 4 33

Manufacturer’s Balance Sheet MERCHANDISER Current Assets u u u Cash Receivables Merchandise Inventory MANUFACTURER Current Assets u u u Cash Receivables Inventories Raw Materials Goods in Process Finished Goods The primary difference is inventory. C 4 34

Manufacturer’s Balance Sheet Raw Materials Goods in Process Finished Goods Materials waiting to be processed. Partially complete products. Completed products for sale. Can be direct or indirect. Material to which some labor and/or overhead have been added. C 4 35

Income Statement 36

Manufacturer’s Income Statement P 1 37

Cost of Goods Sold for a Merchandiser and Manufacturer Cost of goods sold for manufacturers differs only slightly from cost of goods sold for merchandisers. P 1 38

NEED-TO-KNOW Indicate whether the following financial statement items apply to a manufacturer, a merchandiser, or a service provider. Some items apply to more than one type of organization. 1. Merchandise inventory 2. Finished goods inventory 3. Cost of goods sold Manufacturer 4. Operating expenses 5. Cost of goods manufactured 6. Supplies inventory Merchandiser Produces units for sale Purchases units for resale Balance Sheet includes: Raw Materials Inventory Work in Process Inventory Finished Goods Inventory Balance Sheet includes: Merchandise Inventory Manufacturer 1. Merchandise inventory 2. Finished goods inventory 3. Cost of goods sold 4. Operating expenses 5. Cost of goods manufactured 6. Supplies inventory P 1 X X X Service Provider Does not provide a product to its customers; no inventories. Merchandiser X Service Provider X X X 39

Flow of Manufacturing Activities 40

Activities and Cost Flows in Manufacturing C 5 41

Schedule of Cost of Goods Manufactured 42

Schedule of Cost of Good Manufactured Summarizes the types and amounts of costs incurred in a company’s manufacturing process. P 2 + + = + – = Direct Materials Used Direct Labor Factory Overhead Total Manufacturing Costs Beginning Work in Process Ending Work in Process Cost of Goods Manufactured 43

Manufacturing Statement P 2 44

Manufacturing Statement P 2 45

Manufacturing Statement Include all direct labor costs incurred during the current period. P 2 46

Manufacturing Statement P 2 47

Manufacturing Statement P 2 48

Overhead Cost Flows Across Accounting Reports P 2 49

NEED-TO-KNOW Compute the following three measures using the information below. 1. Cost of materials used $70, 900 Cost of Direct Materials transferred from Raw Materials Inventory to Work in Process Inventory. 2. Cost of goods manufactured $173, 900 Cost of goods completed in the current period and transferred from Work in Process Inventory to Finished Goods Inventory. 3. Cost of goods sold $160, 500 Cost of goods leaving Finished Goods Inventory and going to the customer. Expensed on the income statement. Beginning raw materials inventory Beginning work in process inventory Beginning finished goods inventory Raw materials purchased Total factory overhead used Raw Materials Inventory Beg. Inv. Purchases 15, 500 66, 000 Avail for Use 81, 500 P 1/P 2 10, 600 Ending raw materials inventory $10, 600 Ending work in process inventory 44, 000 Ending finished goods inventory 37, 400 Direct labor used 38, 000 Work in Process Inventory Beg. Inv. Matls. Used Direct Labor Fact. OH Avail for Mfg. Matls. Used End. Inv. $15, 500 29, 000 24, 000 66, 000 80, 000 29, 000 70, 900 38, 000 80, 000 217, 900 70, 900 44, 000 24, 000 173, 900 Avail for Sale 197, 900 Cost of GM End. Inv. Finished Goods Inventory Beg. Inv. Cost of GM 173, 900 Cost of GS End. Inv. 160, 500 37, 400 50

NEED-TO-KNOW Raw Materials Inventory Beg. Inv. Purchases 15, 500 66, 000 Avail for Use 81, 500 Matls. Used End. Inv. 10, 600 Work in Process Inventory Beg. Inv. Matls. Used Direct Labor Fact. OH Avail for Mfg. 70, 900 44, 000 Balance Sheet Current assets: Raw Materials Inventory Work in Process Inventory Finished Goods Inventory Income Statement Sales Cost of Goods Sold P 1/P 2 Beg. Inv. Cost of GM 24, 000 173, 900 Avail for Sale 197, 900 Cost of GM End. Inv. Finished Goods Inventory 29, 000 70, 900 38, 000 80, 000 217, 900 173, 900 Cost of GS End. Inv. 160, 500 37, 400 $10, 600 44, 000 37, 400 $XXXXX (160, 500) 51

Trends in Managerial Accounting 52

Trends in Managerial Accounting Customer Orientation E-Commerce Lean Practices C 6 Global Economy Service Economy Value Chain 53

Customer Orientation C 6 54

Total Quality Management Quality improvement applied to all aspects of business activities. Seek and uncover waste. Constant Focus on Higher Standards Employees encouraged to try new methods to improve quality. C 6 Company emphasizes value of quality through quality awards. 55

Just-In-Time (JIT) Manufacturing Receive customer orders Complete products just-in-time to ship to customers Schedule Production Receive materials just-in-time for production C 6 Complete parts just-in-time for assembly into products 56

Value Chain The value chain refers to the series of activities that add value to a company’s products or services. Companies can use lean practices to increase efficiency and profits. C 6 57

Global View 58

Raw Materials Inventory Turnover and Days’ Sales 59

1) Raw Materials Inventory Turnover Raw materials Inventory turnover = A 1 Raw materials used Average materials inventory 60

Important Stuff v Raw materials Inventory turnover = Raw materials used / Average materials inventory v Manufacturers cost of Goods Sold (COGS) = Beg. Inventory + Purchases Costs – End. Inventory = COGS v Merchandisers Cost of Goods Sold = Beg. Inventory + Cost of Goods Manufactured – End. Inventory = COGS v Cost of Goods Manufactured = Direct Materials + Direct Labors + Factory Overhead = Total Manufacturing Costs + Beg. Work in Progress - End. Work in Progress = Cost of Goods Manufactured Atef Abuelaish 61

Homework assignment Ø Using Connect – 7 Questions for 60 Points. Ø Complete the “Connect Orientation” at Connect web site for 10 points, before 2/15/2016. Job Order Costing and Ø Prepare chapter 2 “ Analysis. ” Happiness is having all homework up to date Atef Abuelaish 62

Thank you and See You Next Week at the Same Time, Take Care Atef Abuelaish 63