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2: Nature of Managerial Accounting and Costs

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    • 2.1: Chapter 1 Study Plan
      This page details targets for a unit on accounting concepts, including knowledge targets on key definitions such as direct and indirect costs, reasoning targets on cost classifications and inventory flows, and skill targets related to calculations of direct materials, cost of goods manufactured, and cost of goods sold, as well as the preparation of manufacturing statements for both manufacturers and merchandisers.
    • 2.2: Process Costing Vs. Job Order Costing
      This page explains process costing, used by businesses producing large quantities of identical products, contrasting it with job costing for varied jobs. Both aim to determine product costs but differ in cost accumulation—by department for process costing and by job for job costing. Costs are calculated by dividing total period costs by units produced. There are two methods for process costing: Weighted Average and FIFO, each treating equivalent units differently.
    • 2.3: Equivalent Units (Weighted Average)
      This page explains the concept of equivalent units in accounting, which allows for the simplification of cost assessments by expressing partially completed units as fully completed ones. For example, 1,000 units that are 40% complete are equivalent to 400 completed units. The calculation incorporates both finished and in-process units, often using percentages. Jax Company exemplifies this by calculating equivalent units for materials and conversion costs to enhance production management.
    • 2.4: Process Costing (Weighted Average)
      This page outlines the steps in process costing, which include tracking unit flow, calculating equivalent units of production, determining cost per unit, assigning costs to units, and reconciling total costs. It emphasizes flexibility in reporting since there are no GAAP requirements. An example from Jax Company illustrates cost assignment based on equivalent units and reconciliation to match costs incurred with total accounted costs.
    • 2.5: Journal Entries For the Flow of Production Costs
      This page outlines journal entries related to production costs in process and job costing, covering accounts affected by raw material purchases, payroll for factory workers, and manufacturing overhead. It details entries for direct and indirect materials and labor, along with the movement of goods from work in process to finished goods, culminating in the recording of the cost of goods sold.
    • 2.6: Process Costing (FIFO Method)
      This page explores the FIFO (First-In, First-Out) method for process costing, highlighting its differences from the weighted average method. FIFO prioritizes completing prior period units before processing new ones, impacting equivalent unit calculations and cost assignments. Key process costing steps include analyzing unit flow, calculating equivalent units based on work in progress, assigning costs to both completed and ending inventory, and reconciling costs for accuracy in reported figures.
    • 2.7: Process Cost Demonstration (FIFO Method)
      This page details the FIFO process cost method through a June production example from Department B. It covers the management of a work-in-process inventory of 2,000 units and outlines steps including the calculation of physical unit flow, equivalent units of production, cost per equivalent unit, and the assignment of costs to completed and in-progress units. The analysis also emphasizes the tracking and allocation of costs, providing a comprehensive understanding of the method.
    • 2.8: Accounting in the Headlines
      This page discusses the Smarties Candy Company, which uses process costing for its large-scale production of uniform candies. The main components of costing include direct materials, labor for machine operation, overhead for maintenance, and expenses related to marketing. If the company introduces Smarties 'n creme, it may continue with process costing for bulk production but might explore job order costing for product differentiation.
    • 2.9: Chapter 1 Key Points
      This page discusses managerial accounting principles, emphasizing decision-making in companies. It defines manufacturing costs as Direct Materials, Direct Labor, and Overhead, and introduces concepts like Prime Costs and Conversion Costs. Important calculations include Direct Materials Used, Cost of Goods Manufactured, and Cost of Goods Sold, noting that Gross Profit is derived from Sales minus Cost of Goods Sold, while Net Income encompasses all expenses.
    • 2.10: Glossary
      This page contains a glossary of key financial terms in accounting relevant to manufacturing, including definitions for administrative costs, cost drivers, cost of goods manufactured and sold, and direct versus indirect costs. It highlights managerial accounting, manufacturing overhead, and differentiates between finished goods and work in process, stressing the importance of internal managerial accounting for decision-making.
    • 2.11: Chapter 1- Exercises
      This page contains short answer questions and exercises on managerial and financial accounting topics, including cost classification, income statements, and manufacturing costs, with applications to businesses like Domino's Pizza. It also instructs on analyzing annual reports of Wells Fargo and Home Depot, addressing key financial concepts and ethical considerations in management accounting.

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