Let S Take Notes on the FIRST DAY of CLASS?

Let’s Take Notes ... ON THE FIRST DAY OF CLASS?

What is accounting?

What is an accountant?

What is accounting usedfor?

DESIGNATED DOODLE ZONE

Let’s Take Notes ... ON THE FIRST DAY OF CLASS?

How management accounting is different than financial accounting, tax, or audit:

Don’t be afraid to take a big step if one is indicated. You can’t cross a chasm in two small jumps.

-- David Lloyd George (1863-1945), Statesman

Let’s Take Notes ... ON THE FIRST DAY OF CLASS?

Choose always the way that seems best, however rough it may be; custom will soon render it easy and agreeable.

-- Pythagoras (c. 580-c. 500 B.C.), Philosopher and mathematician

DESIGNATED DOODLE ZONE

Let’s Take Notes ... ON THE FIRST DAY OF CLASS?

Nothing is particularly hard if you divide it into small jobs.

-- Henry Ford (1863-1947), Founder of the Ford Motor Company

REVIEW / SELF-QUIZ

Do you know the answers to these questions??

What are the four Financial Statements?

How do you increase an Asset account?

… a Liability account?

… a Revenue account?

… an Expense account?

What is the Accounting Equation?

How is “profit” calculated (most simply)?

How does Managerial Accounting differ from Financial Accounting, Tax, and Auditing?

Note:

We may or may not cover all of this material on this day of class, but we should cover the material before the next exam. So, if we have not covered this material, be sure to ask about it during the exam review.

Let’s Take Notes ... TERMS AND FLOWS

Terms:

See next page for more noteworthy space for terms …

Let’s Take Notes ... TERMS AND FLOWS

[More] Terms: (if you need additional space)

See next page for Income Statement formats …

A certain amount of opposition is a great help to a person. Kites rise against, not with the wind.

-- John Neal (1793-1870), Writer

Let’s Take Notes ... TERMS AND FLOWS

Variable Costing Income Statement

Absorption Costing Income Statement

Balance Sheet

More noteworthy space on the next page …

Let’s Take Notes ... TERMS AND FLOWS

More Space …

Youth is the best time to be rich and the best time to be poor.

-- Euripides (c. 485-406 B.C.), Playwright

Let’s Take Notes ... TERMS AND FLOWS

And even more space …

You will soon break the bow if you

Keep it always stretched.

-- Phaedrus (c. 15 B.C. – 50 A.D.),

Fabulist

** NOTE TO “SELF”! **
See problem: ______
On page ______of the Handy Handouts
For an example of t-accounts and cost flows.

Let’s Take Notes ... TERMS AND FLOWS

What would you describe as the theme of these quotes?

The harder you work, the harder it is to surrender.

-- Vince Lombardi

I pray hard, work hard, and leave the rest to God.

-- FlorenceGriffith Joyner

Work is a good word. When we work hard at something we enjoy and feel good about it, we feel good about ourselves again and again and again.

-- Mike Krzyzewski

Work Hard. There is no short cut.

-- Alfred P. Sloan, Jr. (1875-1966), Business leader and philanthropist

Nothing will work unless you do.

-- John Wooden

The road to happiness lies in two simple principles: find what it is that interests you and that you can do well, and when you find it, put your whole soul into it, every bit of energy and ambition and natural ability you have.

-- John D. Rockefeller, III

If the power to do hard work is not talent, it is the best possible substitute for it.

-- James A. Garfield

Let’s Take Notes ... TERMS AND FLOWS

DESIGNATED DOODLE ZONE

Let’s Take Notes ... TERMS AND FLOWS

REVIEW / SELF-QUIZ

Do you know the answers to these questions??

What are Fixed Costs?
… Variable Costs?

What are Product Costs?
… Period Costs?

What are Prime Costs?
… Conversion Costs?
What is Revenue? Expense? Profit?

What is Cost of Goods Manufactured?
What is Cost of Goods Sold?

What are the t-accounts down the left side?
What is true of all of them?

What are the t-accounts across the top?
What is true of all of them?

What are the t-accounts down the right side?
What is true of all of them?
What kind of account is COGS? COGM? I/S? DM? WIP? DL? MOH?

What phrase appears at the top of every Income Statement? Why?
… every Balance Sheet? Why?

Note:

Mango Motors

(Variable and Fixed Costs)

Mango Motors has incurred the following expenses during the 1996 calendar year.

Sales revenue $810,000

Fixed manufacturing costs 60,000

Fixed selling and administrative costs 50,000

Variable manufacturing costs 540,000

Variable selling and administrative costs 67,500

Required:

Calculate net income using both the absorption costing and the variable costing income statement formats.

SoMuch STEReos

(Variable and Fixed Costs)

As the chief financial officer of SoMuch Stereos, headquartered in Timbuktoo, Tennessee, you have summarized the financial information for the fiscal year ending February 2000.

Direct materials $22,000

Direct labor 14,000

Variable manufacturing overhead 9,000

Fixed manufacturing overhead 10,000

Variable selling expense 5,000

Fixed selling expense 16,000

Fixed administrative expense 14,000

Sales revenue 89,000

Required:

The CEO has asked you to provide her with income statements using both the absorption costing format and the variable costing format.

Bojangle Dance Shoes

(Variable and Fixed Costs)

A partial list of sales and cost data is presented below for the Bojangle Dance Shoes Co. for the calendar year 2002.

Sales (18,000 units) $630,000

Manufacturing costs:

Prime costs $252,000

Variable MOH 84,000

Budgeted and actual fixed MOH 100,000

Operating expenses:

Variable selling expense 54,000

Fixed selling expense 45,000

Fixed administrative 90,000

Required:

Calculate Bojangle’s cost of goods sold, contribution margin, and net income using both the absorption costing format and the variable costing format.

Cattle Company

(Cost Flows)

Below are summarized financial data of the Cattle Company for two consecutive years.

1997 1998

Administrative expenses $135,000 $161,000

Beginning finished goods 45,000 82,000

Beginning work in process 71,000 65,000

Beginning direct materials 96,000 108,000

Sales 566,000 812,000

Ending finished goods - 69,000

Ending work in process - 84,000

Ending direct materials - 102,000

Cost of goods manufactured 445,000 562,000

Direct materials requisitioned 190,000 235,000

Direct labor 130,000 170,000

Indirect materials 15,000 18,000

All other manufacturing overhead costs 104,000 158,000

Required:

Use T-accounts to show the flow of costs and revenues.
Prepare income statements for both years.

Cattle Company

Calculations ...

Judge Ely Jeans

(Cost Flows)

The December 31, 1999 ledger account balances are presented below for Judge Ely Jeans. Beginning inventories on January 1, 1999 were $37,600 for finished goods inventory, $49,600 for work in process inventory, and $29,500 for direct materials inventory.

Sales $715,200

Insurance on production inventories 7,200

Factory supervision 44,800

Indirect materials 4,800

Office equipment depreciation 7,200

Utilities (60 percent factory) 36,000

Delivery expense for finished products 4,000

Direct labor 118,400

Direct materials purchased 98,400

Office fire insurance 2,640

Finished goods inventory 52,000

Indirect labor 10,400

Administrative and marketing salaries 123,200

Factory property tax 15,200

Advertising 15,300

Production equipment lease cost 35,200

Work in process inventory 62,400

Direct materials inventory 32,300

Required:

Calculate cost of goods manufactured, cost of good sold, and net income.

Judge Ely Jeans

Calculations ...

Bob’s Beef Boy

(Cost Flows)

Bob, the owner and sole proprietor of Bob’s Beef Boy, sells hamburgers for carry out or drive through only. The restaurant is known for the high quality of the meat used in the burgers, and for the kaiser roll used in place of the normal hamburger bun.

Each Hamburger sells for $3.99. Bob employs several part-time employees and a full-time manager. He leases the building and hires a cleaning company to provide services on a weekly basis. The manager, who is paid a monthly salary, carries out all administrative functions such as hiring, scheduling, and counting cash. Bob purchases the ingredients needed to make hamburgers on a weekly basis to ensure its freshness; thus, there were no inventory balances at the beginning or the end of the year.

During the year 1997 the following expenses were incurred:

Ground meat $54,000 (No accusations here about “Where’s the beef!?”)

Lettuce 6,750 Manager’s salary$41,000

Tomatoes 7,500 Utilities22,500

Kaiser rolls 9,250 Depreciation, grill 7,000

Condiments 2,650 Depreciation, signs 3,250

Part-time labor, cooks 66,400 Advertising 3,500

Part-time labor, servers 53,000 Rent 25,000

Wrapping paper and bags 2,400 Cleaning services 6,800

Bob’s restaurant sold 120,000 hamburgers during 1997.

Required:

1.Classify each cost as being a product cost (specify either direct materials, direct labor, or manufacturing overhead) or as being a period cost.

2.Use T-accounts to show the flow of costs and revenues for Bob’s Beef Boy.

3.Prepare an income statement for the year.

Bob’s Beef Boy

Calculations ...

Sleepwell Incorporated

(Cost Flows)

The following data is available for Sleepwell, Inc. for the month of August:

Beginning of August:

Direct Materials inventory $18,500

Work in Process inventory $12,000

Finished Goods inventory $10,200

During August:

Direct Labor cost $40,500

Direct Materials purchases $80,000

Total Overhead cost $105,750

Sales Revenue $400,000

Selling & Admin. Exp. $100,000

End of August:

Direct Materials inventory $16,800

Work in Process inventory $23,500

Finished Goods inventory $9,100

Required:

Calculate the cost of goods manufactured, the cost of goods sold, and net income for Sleepwell, Inc. in August.

Sleepwell Incorporated

Calculations ...

Hannibal Company

(Cost Flows)

The following information is available for Hannibal Company:

Raw materials purchased $160,000

Raw materials inventory, 1-1-1993 $23,400

Raw materials inventory, 12-31-1993 $33,400

Direct labor $100,000

Indirect labor $20,000

Factory rent $21,000

Depreciation, factory equipment $30,000

Factory utilities $5,978

Sales salaries $55,000

Sales commissions $38,000

Administrative costs $61,000

Sales revenue $600,000

Work in process inventory, 1-1-1993 $6,520

Work in process inventory, 12-31-1993 $7,498

Finished goods inventory, 1-1-1993 $40,000

Finished goods inventory, 12-31-1993 $57,050

Required:

Calculate the cost of goods manufactured, cost of goods sold, and net income for Hannibal Co.

Hannibal Company

Calculations ...

[This page left blank]

Let’s Take Notes ... BREAKEVEN (C-V-P)

What is the GOAL of any business?

C-V-P analysis seeks the most profitable combination of …

Love itself is love’ chief nourishment.

-- Sextus Propertius (c. 50-16 B.C.), Poet

Let’s Take Notes ... BREAKEVEN (C-V-P)

How do costs behave … In Total

How do costs behave … Per Unit

Let’s Take Notes ... BREAKEVEN (C-V-P)

More … How do costs behave …

There will always be a conflict between “good” and “good enough”.

-- Henry Martyn Leland (1843-1932), Engineer