Managerial Accounting differentiates itself from Financial Accounting in the sense that financial accounting takes into account aggregate information of a company’s financial position. The information extrapolated from financial statements is meant for external stakeholders, such as investors, banks, and the government. Financial accounting generally includes four types of documents: the balance sheet, the income statement, the statement of owners’ equity, and the cash flow position. Managerial accounting, on the other hand, is highly specific and tends to be for internal users. This type of accounting focuses on topics which include pricing, break even, and budgeting. Further details are listed below.
Direct Labour- Labour that is easily traceable to a specific product or service. Direct Material- Material that is easily traceable to a specific product or service. Manufacturing Overhead- Any material or labour that is not easily traceable to a specific product or service. Variable Costs- Costs that rise and fall in proportion to activity levels. Fixed Costs- Costs that remain the same regardless of activity level. Mixed Costs- Costs that have a mix of variable and fixed costs. Product Costs- Costs associated with a product (material, labour, and MOH) Period Costs- Costs associated with administration (selling, administration)
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The break-even equation is designed to express both in units and in dollars how much a company needs to be in a position where they neither make a profit or a loss. The equation is listed below: Sales=Variable Costs + Fixed Costs + Operating Income Brake-even= Sales-Product Cost=Contribution Margin 500-300=200(contribution margin) Fixed Costs divided by Contribution Margin equals number of units to break even 200000/200=1000(units to sell in order to break even) Contribution Margin divided by Sales equal contribution ratio 200/500=40% Example: Variable Costs: $200 Fixed Costs: $200000 Sale Price: $500 Contribution Margin (in dollars): $200 Contribution Margin (as a ratio): 40% Break-even in units-$200000/200=1000units Break-even in dollars-$200000/40%=$500000
Cost + Markup x percentage = target selling price DM 23 DL 17 VMFO 12 VSAE 8 VCU 60 FMFO 280000/10000=28 FSAE 240000/10000=24 FCU 52 VC 60 FC 52 TC 112 DROI 20 PPU 132 DROI (20) / total cost (112) = mark up % (17.86%) Total Unit Cost + TUC*MU (112*.176) = 132
DM 25 DL 17 VMFO 12 FMFO 28 TCU 80 VSAE 8 FSAE 24 DROI 20% DROI (20) + SAE (32) = MP * TCU (80) MP = (20+32)/65=65 MCU (80) + (MP*MCU) (65%*80)=132
DM 23 DL 17 VMFO 12 VSAE 8 TVCU 60 DROI (20) + (FMFO + FSAE) (28 + 24) = MP * VCU (60) (20+(28 + 24))/60=120% VCU (60) + (MP *VCU) (120% * 60) = 132
Expected unit sales
Unit selling Price
Total Sales
Expected Sales
Add: Desired Finished Goods
Total Required Units
Less: Beginning units
Required Production
Units to be produced
Direct Labour required per unit
Total Required hours
Multiply by hours
Units to be Produced
Direct Materials Per Unit
Total
Add: Desire Ending of Materials
Total Materials Required
Less: Beginning Materials
Variable Costs
Direct Materials Purchased
Cost Per Weight
Total Cost
Variable Costs
Fixed Costs
Total Fixed Costs
Required Units
Variable Expenses
Fixed Expenses
Total selling and Administration
Beginning Cash Balance
Add: Cash Receipts
Total Cash Available
Less: Cash Discernments
Excess or Deficiency of disbursements
Financing
End Cash Balance