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An Introduction to Management Accounting

An Introduction to Management Accounting. Emphasizing the flow of costs through factory. Richard E. McDermott. Understanding the Factory. Manufacturing costs Total manufacturing costs Cost of goods m anufactured. McDermott Manufacturing. Administration. Marketing. Factory Supervisor.

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An Introduction to Management Accounting

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  1. An Introduction to Management Accounting Emphasizing the flow of costs through factory. Richard E. McDermott

  2. Understanding the Factory Manufacturing costs Total manufacturing costs Cost of goods manufactured

  3. McDermott Manufacturing Administration Marketing Factory Supervisor Raw Material Storeroom Finished Goods Storeroom Factory

  4. Some Basic Formulas Beginning inventory + transferred in - ending inventory = transferred out BI + TI – EI = TO

  5. Direct Costs

  6. Indirect Costs Overhead Costs Administrative and Marketing Indirect Costs

  7. Other Terms Manufacturing costs added Total manufacturing costs Cost of goods manufactured

  8. McDermott Manufacturing Direct Costs Indirect Costs Overhead Costs Key BI = Beginning inventory TI = Transferred in EI = Ending inventory TO = Transferred out Administration $13,500 Marketing $6,000 Factory Supervisor $9,500 Raw Material Storeroom BI = $12,000 TI = $30,000 EI = $27,000 Finished Goods Storeroom BI = $17,000 TI = $60,000 ED = $12,000 Factory BI = $50,000 TI = overhead applied of $9,000, direct labor of $18,000, and direct materials of $15,000 EI = $32,000

  9. Calculating the Cost of Raw Materials Transferred Out Of the Raw Material Storeroom BI + TI – EI = TO $12,000 + $30,000 - $27,000 = $15,000

  10. Calculating the Cost of Goods Manufactured $50,000 beginning inventory work in process + a total of $42,000 of manufacturing costs added $-32,000 and ending inventory = $60,000 cost of goods manufactured.

  11. Calculating the Cost of Goods Sold Beginning inventory of finished goods equaling $17,000 + cost of goods manufactured of $60,000 - ending inventory finished goods of $12,000 = $65,000 cost of goods sold before adjustment for over or under applied overhead. Over or under applied overhead?

  12. The End

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