CMA Week 1 Lecture

Slide 1: 

COST & MANAGERIAL ACCOUNTING October Semester 2008

Housekeeping Rules : 

Housekeeping Rules Punctuality Come prepared (read lecture notes / do tutorial) Do not introduce disturbances that will affect the learning of the whole class (talking, answering phonecalls, etc.) Assessment – structured in such manner to prepare you for the “problem solving” mode during exams (please respect timing and deadlines imposed)

Module Information : 

Module Information * Students are eligible for Re-test if their average marks for CT and Test 1 fall below 50. Re-test effort is capped at 50%. No re-test for MC cases. 0 mark for those absent without valid reasons (eg. misreading timetable, oversleeping) for tests and exam.

Module Information : 

Module Information Module Leader: Ms Tham Puah Ling Blk 72, Level 8 Tel (O): 6460 6086 Email: tpl5@np.edu.sg Co-lecturer: Mrs Sue Tan Blk 72, Level 9 Tel (O): 6406 6065 Email: tbl3@np.edu.sg Teaching Schedule & materials posted on MeL Basic textbook: $39.70 Managerial Accounting 7th edition Ronald W. Hilton, McGraw Hill

Topics: : 

Topics: 1: Introduction to Managerial Accounting 2: Basic Cost Concepts & Classification Reference: Chapter 1 & 2

Unit 1: Introduction to Managerial AccountingLearning Objectives : 

Unit 1: Introduction to Managerial AccountingLearning Objectives By the end of this lecture, you will be able to: 1. Identify and explain the different types of business operations. 2. Explain four fundamental management processes that help organizations attain their goals. 3. Define managerial accounting and describe its role in management process.   4. Explain the major differences between managerial and financial accounting

Types of Business Operations : 

Types of Business Operations Manufacturing: e.g. Sony, IBM, Fujitsu, Dell

Differences in Focus : 

Differences in Focus

Slide 9: 

Four Management Processes – an organised set of activities Decision Making Planning Directing Operational Activities Controlling Choosing among available alternatives Developing detailed financial & operational description of anticipated operations Running the organisation on a day-to-day basis Ensuring that the organization operates in intended manner & achieves its goals

Define Managerial Accounting : 

Define Managerial Accounting The process of identifying measuring interpreting analysing and communicating information in pursuit of an organisation’s goals.

Role of Accounting : 

Role of Accounting Provision of information for decision-making Managers Lenders: Banks/ Creditors Owners / Investors Others: Government Financial Accounting Management Accounting

Managerial versus Financial Accounting : 

Managerial versus Financial Accounting Accounting System (accumulates financial and managerial accounting data in the cost accounting system) Managerial Accounting Information for decision- making, planning and controlling of an organization’s operations. Financial Accounting Published financial statements and other financial reports. Internal Users External Users

Differences Between Financial and Managerial Accounting : 

Differences Between Financial and Managerial Accounting

Unit 2: Basic Cost Concepts & ClassificationLearning Objectives : 

Unit 2: Basic Cost Concepts & ClassificationLearning Objectives By the end of this lecture, you will be able to: 1. Explain the difference between “cost” and “expense”.   2. Explain three types of manufacturing costs. 3. Determine prime cost and conversion cost. 4. Explain the difference between product costs and period costs.

Cost vs Expense : 

Cost Cash or cash equivalent value sacrificed to achieve a particular purpose (asset / expense) These goods/services are expected to bring current/future benefits to the business. E.g.: Materials, Motor Vehicle ExpenseAmount of resource consumed for the purpose of generating revenue. E.g. : Office rent for July; Sales Commission; Depreciation for Motor Vehicle Cost vs Expense

Lecture Illustration 1: Cost or Expense ? : 

Lecture Illustration 1: Cost or Expense ?

Manufacturing Costs : 

The Product Manufacturing Costs

Direct Materials : 

Direct Materials Raw materials that is consumed in the manufacturing process; is physically incorporated in the finished product; can be conveniently traced directly to it; and carries a significant cost. Examples: A radio installed, steel used, etc. Question: Hubcaps / paint – Direct Material?

Direct Labor : 

Direct Labor Labour which is readily and economically traceable to a single product/process. Cost of wages & benefits for personnel who work directly on the manufactured products. Example: Wages paid to automobile assembly workers

Slide 20: 

+ Manufacturing Costs

Lecture Illustration 2 on product cost terminologies : 

Lecture Illustration 2 on product cost terminologies Annie Time Pte Ltd produces a standard model digital watch called “Anni-X”. The table below shows the different types of costs incurred by the firm. Required: for each of the cost item, determine whether it is considered a direct material (DM), direct labour (DL), manufacturing overhead (OH) or period cost.

Lecture Illustration 3 on product cost terminologies : 

Lecture Illustration 3 on product cost terminologies Annie Time Pte Ltd produces a standard model digital watch called “Anni-X”. The table below shows the total costs incurred for the month of Mar 2008. $ Direct Materials 100 Wages of assembly workers 300 Factory Rental 100 Wages of Security Guards 50 Factory utilities 450 Monthly Advertising costs 1,000 Required: Determine the prime costs: _____________________________ Compute the manufacturing overhead costs: Determine the conversion: Compute the total product costs: Determine the period costs

Manufacturing Overheads : 

Manufacturing costs other than direct materials and direct labour Manufacturing Overheads Eg: indirect materials; indirect labour & others Labour associated with production but which cannot or uneconomical to be traced to a particular product/ process. Costs of personnel who do not work directly on the product. Examples: Supervisors, security guards, etc. Materials that are insignificant, not readily identified with or not integral to the finished product. Examples: drill bits, paint or glue, lubricant. Other manufacturing costs that are neither material nor labour. Examples: property tax, insurance, depreciation (P&M), utilities, unavoidable idle time, overtime premium.

Slide 24: 

+ Manufacturing Costs

Lecture Illustration 2 on product cost terminologies : 

Lecture Illustration 2 on product cost terminologies Annie Time Pte Ltd produces a standard model digital watch called “Anni-X”. The table below shows the different types of costs incurred by the firm. Required: for each of the cost item, determine whether it is considered a direct material (DM), direct labour (DL), manufacturing overhead (OH) or period cost.

Lecture Illustration 3 on product cost terminologies : 

Lecture Illustration 3 on product cost terminologies Annie Time Pte Ltd produces a standard model digital watch called “Anni-X”. The table below shows the total costs incurred for the month of Mar 2008. $ Direct Materials 100 Wages of assembly workers 300 Factory Rental 100 Wages of Security Guards 50 Factory utilities 450 Monthly Advertising costs 1,000 Required: Determine the prime costs: DM + DL = $100 + $300 = $400 Compute the manufacturing overhead costs: ________ Determine the conversion: _____________________ Compute the total product costs: __________________ Determine the period costs:

Product Costs vs Period costs : 

Product Costs vs Period costs

Product Costs vs Period Costs : 

Product Costs vs Period Costs Product costs: Applicable to all manufacturing & merchandising organisations eg: direct materials, direct labor, and manufacturing overhead Period costs: Applicable to all organisations. eg: selling & distribution, General & admin, and financial

Lecture Illustration 2 on product cost terminologies : 

Lecture Illustration 2 on product cost terminologies Annie Time Pte Ltd produces a standard model digital watch called “Anni-X”. The table below shows the different types of costs incurred by the firm. Required: for each of the cost item, determine whether it is considered a direct material (DM), direct labour (DL), manufacturing overhead (OH) or period cost.

Lecture Illustration 3 on product cost terminologies : 

Lecture Illustration 3 on product cost terminologies Annie Time Pte Ltd produces a standard model digital watch called “Anni-X”. The table below shows the total costs incurred for the month of Mar 2008. $ Direct Materials 100 Wages of assembly workers 300 Factory Rental 100 Wages of Security Guards 50 Factory utilities 450 Monthly Advertising costs 1,000 Required: Determine the prime costs: DM + DL = $100 + $300 = $400 Compute the manufacturing overhead costs: $600 Determine the conversion: DL + OH = $300 + $600 = $900 Compute the total product costs: DM + DL + OH = $1,000 Determine the period costs: _____________________

Slide 31: 

An overview:

Slide 32: 

An overview:

Lecture Exercise 1 : 

Lecture Exercise 1 Watch a short video clip (5 mins) Using the format below, try to identify some costs relating to the video that could be classified under the following categories.

Tutorial for week beginning 20 Oct 2008 : 

Tutorial for week beginning 20 Oct 2008 Tutorial Questions Please refer to the handout in MeL. Classwork To be given out at the tutorial session by your tutors. It is to be done in the class. Your effort will count towards part of the 10% class participation marks. In teams of about 4 to 5 members, you will need your notebook to access MeL to do the classwork.

See you next week. : 

See you next week.