managerial accounting

Essay by Clem2dUniversity, Bachelor's August 2014

download word file, 8 pages 0.0

Managerial accounting

Financial Accounting - Develops in formation

Financial accounting is external for the outside world

Goal is to publish the financial statements

Income statement

Balance sheet

Cash flows

According to the rules

Managerial accounting is internal and stays in the company

No rules!!!

Is usually confidential

IPhone

Sales = Units x Price

Cost? Plastic Research: - Salaries

Metal - Equipment + space

Labor Market study

Shipping Advertising

Battery Legal Fees

Duty

Mr. Young's story: Medtronic

All product sold in Europe went through the Dutch

Distribution center

The price of the product to each "sister" company was the end price to the customer, less 30%.

Financial accounting

Switzerland Greece

Sales $3,000 $1,200

COGS 2,100 840

Gross profit 900 360

Selling Expenses 600 200

Profit 300 160

Return on sales 10% 13%

Management reporting

Switzerland Greece

Sales $3,000 $1,200

COGS 1,000 1000

Gross profit 2,000 200

Selling Expenses 600 200

Profit 1,400 0

Return on sales 47% 0%

Cost behavior

How costs react to changes in activity

Cost driver = Something which causes a cost to happen

Activity

Cost

Cost driver

Production

Labor

# Of products labor hours

Research

Salaries

# Of new products

Marketing

Advertising

Target Range

Type of Media

# Of ads

Shipping

Transportation

# Of Boxes

Type of transport

Distance

Weight

2 types of costs

1/ Variable costs (VC): Change directly with a change in the level of activity

2/ Fixed costs (FC): Does not change with a change in the level of activity

Variable Cost /Unit

Relevant Range

VC/Unit

Cost Remains the

same

Units

Fixed Costs

Move in steps

Relevant Range

Cost

Units

As the level of activity increases

Total Cost

Cost per Unit

Variable costs

Increase

No change

Fixed costs

No change

Decrease

Add a 2nd coke Machine

Monthly rental: $200/Month.

Fixed cost

Each can cost: $1.00/can.