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1) Principles of financial planning and budgeting
– Short term planning is typically within one year.
-Long term planning involves longer than a year and up to 5-10 years.
-When strategic planning is transformed into number, it comes a budget. (DOLLARS)
2)Controls: Monitoring Planning Activities and Decisions.
-Feedback needed to managers to improve policies and procedures, processes.
-Measurement of actions and processes.
-Analysis of company results vs. competitors (Benchmarking)
OBJECTIVE=PREVENTION
3)Purpose of managerial accounting:
-Reporting: For use internally by managers and employees.
-Purpose: To take advantage of opportunities and overcome challenges.
-Flexibility: Information as needed to make best decisions for the company.
-Timeliness: Managers dont have to wait for public auditors to obtain key financials.
-Time: Focus is on trends and predictive value.
-Focus: Very specific, by targenting the needs of each management level.
-Nature: Managers use both QUALITATIVE and QUANTITATIVE information.
4) Objectives of internal control
-Reliable Accounting
-Protect Assets
-Uphold Company Policies
-Promote Efficient Operations
(MONOTORING PEOPLE — TRAINED THEM IS TO IMPROVE SOMEBODY LIFE)
5)Ethical Considerations
-Doing what is good for god, legal for law, and civilized society.
6) Study the compensation and learn . the hierarchy from staff to CFO
-Staff
-Senior accountant
-Financial analyst
-General manager
-Division Controller
-Controller- Treasurer
-CFO (Chief Financial officer)
7)Nature of Costs: Variable, fixed and mixed within the Relevant Range or production
– Variable Costs are fixed per unit and variable in volume (the more shirts you sell the more in COGS)
– Fixed Costs are variable per unit and fixed in volume (You pay rent on a fixed space, the more students you place in the room, the lower the cost per student)
– Mixed Costs: Salespeople get paid typically on salary plus commission. The Salary might be fixed, but additional sales would bring additional commissions.
Depending on the split (50%/50% or any other) the more allocated to variable the more the total compensation can increase according to growth in sales.
8)Product Costs: DL + DM + FOH. They are necessary to build a product.
9)Period Costs: Related typically to a period not a batch of products such as admin salaries, maintenance wages.
-A period cost is any cost that cannot be capitalized into prepaid expenses, inventory, or fixed assets. A period cost is more closely associated with the passage of time than with a transactional event. Since a period cost is essentially always charged to expense at once, it may more appropriately be called a period expense
10) Job order costing systems: customization (such as wedding planning services) vs. Process costing systems (mass production)
-Job order costing or job costing is a system for assigning and accumulating manufacturing costs of an individual unit of output. The job order costing system is used when the various items produced are sufficiently different from each other and each has a significant cost.
11) Conversion costs include DL and FOH to convert DM into FG.
12) Study Exhibit 14.9 and example 14.2; and learn the distinctions between Fixed or Variable, Direct or Indirect and Product or Period using these examples
-Bicycle tires and wheels, variable,direct, product
-Wages of assembly worker, variable,direct,product
-Advertising fixed, indirect,period
-Production managers salary fixed, indirect,product
-Office depreciation, fixed, indirect, period
-Fsctory depreciation fixed, indirect,product
-Oil and grease applied to gears variable, indirect, product
-Sales commissions variable,indirect, period
13) Calculate the pre-determined FOH rate based on Estimated FOH costs and Estimated activity base or level of activity (such
-Suppose GX company uses direct labor hours to assign manufacturing overhead cost to job orders. The budget of the GX company shows an estimated manufacturing overhead cost of $8,000 for the forthcoming year. The company estimates that 1,000 direct labors hours will be worked in the forthcoming year.
Using the above information, we can compute the predetermined overhead rate as follows:
Predetermined overhead rate = Estimated manufacturing overhead cost/Estimated total units in the allocation base
Predetermined overhead rate = $8,000 / 1,000 hours
= $8.00 per direct labor hour
14) Process Design: Change in design for management to separate products into sub-categories and improve efficiency and cost accounting.
15) Just-in-time: Materials are ordered from vendors just in time to arrive when they are needed, they are debited to WIP.
16) Automation: Using Robots to do manufacturing tasks and provide a healthier workforce environment.
17) Continuous processing: To reduce the use of requisitions, manufacturing is an active workflow and a report called materials consumption report is used instead.
18) Services: Tax preparation and other professional services such as medical, are provided using computer and automation, increasing efficiency and improving customer service.
19) Customer Orientation: Use of Consumer Focus Groups and Feedback to cater to customers.
20) Yield: Efficiency in the use of materials, input vs. output. The greater the yield the better use of inputs. Example: Sugar Cane production.