Lecture Fundamentals of cost accounting (4th edition): Chapter 1 - Lanen, Anderson, Maher

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(BQ) Chapter 1 - Cost accounting: Information for decision making. After studying this chapter you should be able to: First, describe the way managers use accounting information to create value in organizations. Second, distinguish between the uses and users of cost accounting and financial accounting information. Third, explain how cost accounting information is used for decision making and performance evaluation in organizations.

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Nội dung Text: Lecture Fundamentals of cost accounting (4th edition): Chapter 1 - Lanen, Anderson, Maher

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Cost Accounting: Information for Decision Making Chapter 1 PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA McGrawHill/Irwin Copyright © 2014 by The McGrawHill Companies, Inc. All rights reserved.
Learning Objectives LO 1-1 Describe the way managers use accounting information to create value in organizations. LO 1-2 Distinguish between the uses and users of cost accounting and financial accounting information. LO 1-3 Explain how cost accounting information is used for decision making and performance evaluation in organizations. LO 1-4 Identify current trends in cost accounting. LO 1-5 Understand ethical issues faced by accountants and ways to deal with ethical problems that you face in your career. 13
LO 1-1 Value Chain LO 1-1 Describe the way managers use accounting information to create value in organizations. The value chain describes a set of activities that transforms raw materials and resources into the goods and services end users purchase and consume. Those activities that Value-Added customers perceive as Activities adding utility to the goods or services they purchase. 14
LO 1-1 The Value Chain Components Production 15
LO 1-2 Accounting Systems LO 1-2 Distinguish between the uses and users of cost accounting and financial accounting information. Reports Financial Financial position and accounting income Cost Reports Information accounting about costs 16
LO 1-2 Accounting Systems The primary purpose of financial accounting is to provide investors and creditors information regarding company and management performance. The financial data prepared for this purpose are governed by generally accepted accounting principles (GAAP) in the United States and by international financial reporting (IFRS) in many other countries. Cost data for managerial use need not comply with GAAP or IFRS. 17
LO 1-2 Customers of Accounting Accountants must work with the users of cost accounting information to provide the best possible information for managerial purposes. Different uses of accounting information require different types of accounting information. 18
LO 1-3 Managerial Decisions LO 1-3 Explain how cost accounting information is used for decision making and performance evaluation in organizations. Individuals make decisions. Decisions determine the performance of the organization. Managers use information from the accounting system to make decisions. Owners evaluate organizational and managerial performance with accounting information. 19
Cost Data for Managerial LO 1-3 Decisions Costs for decision making Costs for control and evaluations Different data for different decisions 110
LO 1-3 Costs for Decision Making Carmen’s Cookies has been making and selling cookies through a small store downtown. One of her customers suggests that she expand operations and sell to wholesalers and retailers. Should Carmen expand operations? 111
LO 1-3 Carmen’s Cost Drivers Cost Driver Rent Insurance Labor Number of cookies Ingredients 112
LO 1-3 Differential Costs Costs that change in response to a particular course of action. Differential costs change (differ) between actions. 113
LO 1-3 Differential Revenues Revenues that change in response to a particular course of action. Differential revenues change (differ) between actions. 114
Differential Costs, Revenues, and LO 1-3 Profits Carmen’s Cookies Projected Income Statement for One Week (1) (2) (3) Status Quo Alternative Original Shop Wholesale & Retail Sales Only Distribution Difference Sales revenue $6,300 $8,505a $2,205 Costs: Food 1,800 2,700b 900 Labor 1,000 1,500b 500 Utilities 400 600b 200 Rent 1,250 1,250 -0- Other 1,000 1,200c 200 Total costs $5,450 $7,250 $1,800 Operating profits $ 850 $1,255 $ 405 (a) 35 percent higher than status quo (b) 50 percent higher than status quo (c) 20 percent higher than status quo 115
LO 1-3 Costs for Control and Evaluation A responsibility center is a specific unit of an organization assigned to a manager who is held accountable for its operations and resources. 116
Responsibility Centers, LO 1-3 Revenues, and Costs Carmen Diaz President Ray Adams Cathy Peterson Vice-President Vice-President Retail Operations Wholesale Operations 117
Responsibility Centers, LO 1-3 Revenues, and Costs Carmen’s Cookies Income Statement For the Month Ending April 30 Retail Wholesale Operations Operations Total Sales revenue $28,400 $23,600 $52,000 Department costs: Food 13,500 9,800 23,300 Labora 4,500 3,200 7,700 Utilities 1,800 2,100 3,900 Rent 5,000 2,500 7,500 Total department costs $24,800 $17,600 $42,400 Center marginb $ 3,600 $ 6,000 $ 9,600 General and admin. costs: General manager’s salaryc 5,000 Other (administrative) 3,200 Total general and admin. costs $ 8,200 Operating profit $ 1,400 (a) Includes department managers’ salaries but excludes Carmen’s salary (b) The difference between revenues and costs attributable to a responsibility center (c) Carmen’s salary 118
Responsibility Centers, LO 1-3 Revenues, and Costs Carmen’s Cookies Retail Responsibility Center Budgeted versus Actual Costs For the Month Ending April 30 Actual Budget Difference Food: Flour $ 2,100 $ 2,200 $ (100) Eggs 5,200 4,700 500 Chocolate 2,000 1,900 100 Nuts 2,000 1,900 100 Other 2,200 2,200 -0- Total food $13,500 $12,900 $ 600 Labor: Manager 3,000 3,000 -0- Other 1,500 1,500 -0- Total labor $ 4,500 $ 4,500 $ -0- Utilities 1,800 1,800 -0- Rent 5,000 5,000 -0- Total cookie costs $24,800 $24,200 $ 600 Number of cookies sold 32,000 32,000 -0- 119
LO 1-4 Trends in Cost Accounting LO 1-4 Identify current trends in cost accounting. 1. Research and development 2. Design 3. Purchasing 4. Production 5. Marketing 6. Distribution 7. Customer service 8. ERP – Enterprise resource planning 9. Creating value in the organization 120