Housed within Connect, SmartBook is an adaptivestudy tool that helps identify specific topics and learning objectivesindividual students need to study.
As students read, SmartBook assesscomprehension and dynamically highlights where they need to focus more. Theresult is that students are more engaged with course content, can betterprioritize their time, and come to class ready to participate. End-of-Chapter Material helpsyou apply the concepts in accounting and, in more comprehensive material,analyze the information to form business decisions.
Assignable materialincludes exercises, problems and test bank material. Based on yourinstructor settings, you can receive instant feedback on your work either whileworking on an assignment or after the assignment is submitted for a grade. Fundamentals is short pages making it easy to cover in one semester. Opening vignettes and In Action boxes show realistic applications of these concepts throughout. Comprehensive end-of-chapter problems plus Homework Manager provide students with all the practice they need to fully learn each concept.
Search Ebook here:. Designed by readallbooks. Download here Download Now here. Read Now Ads. Amounts owed to bank for loan to buy building Notes Payable L e. Property on which buildings will be built Land A f. Amounts distributed from profits to stockholders Dividends SE g.
Cost of paper used up during month Supplies Expense E j. This means that Miami Music Corporation could pay its liabilities more than three times over if all assets on hand at January 31, were converted to cash.
Of course, not all assets will be converted into cash right away. Even so, looking only at the amount of cash at the end of January, we see that Miami Music has enough cash to cover all its liabilities.
This is a very strong financial position. CP continued Req. CP Req. This information is presented on the balance sheet. The statement of cash flows would report the reasons for this change in cash. PA continued Req. This information is presented on the statement of retained earnings. PB continued Req. PB Req. This answer ignores the possible income tax savings that would be created by having greater salaries and wages expense. A Sources: Req. S Req. Both companies end their fiscal years near January 31 because to avoid the weeks surrounding December 31, which are the busiest of the year.
The majority of sales returns are completed during the first weeks of January, making January 31 an ideal time to end the fiscal year. However, we cannot determine the propriety of the payments from the limited information available. First, stockholders should ensure that the managers of the business are accountable for their actions.
The most common way of doing this is to appoint a board of directors who are independent of top management. These directors should review and challenge the actions taken by management and require that the financial statements disclose significant transactions with related parties.
Second, stockholders should read the financial statements, including any notes describing related party transactions. This is the best way to ensure that the financial statements are complete, are free from bias, and conform with GAAP.
Also, he does not appear independent because he is related to the stockholder who prepares the financial statements, resulting in a potential conflict of interest.
An audit by an uncle would not meet these requirements. Two balance sheets are presented below, one based on historical costs similar to GAAP and one based on fair values similar to a personal financial planning approach. Notes for these balance sheets also are presented, along with a conclusion about which individual is better off. The fair value balance sheets are based on the estimated current values of assets, some of which are greater and others less than their cost.
There may be situations where the company receives an offer from a customer for a one-time deal to provide products at a reduced price.
The cost accountant provides input into whether or not this will be a good deal for the company. Many companies still base their prices on costs incurred, with a profit margin added. In these situations, the cost accountant likely controls a substantial recordkeeping system that accumulates direct costs and allocates overhead costs in detail.
Many governments order items on a cost-plus basis, where the supplier is reimbursed for all costs incurred, plus a reasonable profit. This situation arises when the government orders completely unique items that suppliers are uncomfortable setting a price for such as in military equipment contracting. In this situation, the cost accountant must learn the intricate government costing rules, create a system that can verifiably accumulate the correct costs, and properly allocate approved overhead costs.
A government auditor may reject certain costs, in which case the cost accountant must also prepare a justification for why the company is applying for cost reimbursement. Thus far, we have focused on reports and analyses that other parties have asked the cost accountant to complete. The cost accountant also has an ongoing obligation to investigate costs throughout the company, to decide if those costs are reasonable, and to report back to management when he sees an opportunity to reduce costs.
Here are some tools to use in the cost investigation role:. Review the efficiency of the workplace. The name of this analysis is derived from S orting through all items in the workplace to dispose of unneeded items, S traightening furniture and equipment to improve the process flow, S crubbing the area, S ystematizing the operation to ensure ongoing cleaning activities, and S tandardizing the 5S system so that it is used in all company operations.
Examine the option of expending more on various fixed costs in order to spend less on variable costs such as when funds are invested in production line automation. Work with the engineering staff to reduce the variety of parts used in products. By designing the same components into multiple products, a company can achieve higher component purchasing volumes, which leads to higher volume discounts.
Work with the purchasing staff to summarize purchasing information by supplier and by commodity, and use the information to concentrate purchases with a small number of suppliers to achieve volume purchasing discounts. Also, compare the contractual prices that suppliers have committed to charge the company to their actual billings, and apply for pricing reductions where necessary. Identify various types of waste throughout the organization for elimination.
This can include non-value-added activities, errors and defects that must be researched and repaired, any type of inventory, excess employee motion, the production of excessive quantities, the transport of materials over excessive distances, and excessive employee wait times. Determine which costs are directly traceable to individual employees, such as their wages, payroll taxes, benefits, stock grants, and so forth, and have this information available when management needs to conduct a workforce reduction.
This may involve a further analysis of what services will be eliminated or reduced as a result of the reduction. It may also be necessary to review alternatives to a workforce reduction, such as delaying new hires, delaying pay raises, cutting pay, reducing the work week, and reducing staff through attrition. Cost reduction alone can easily be a full-time job, even in a smaller company.
The tools noted here can be used anywhere; it is perfectly acceptable to investigate costs in all departments, both in the production and administrative sides of a business. The cost accountant is probably not responsible for creating the annual corporate budget, but he is certainly involved in supplying a large amount of the information used in the budget.
The following information may be supplied or at least reviewed by the cost accountant:. Supply estimated materials, labor, and overhead costs. Also, comment on the validity of budgeted overtime, labor utilization, machine utilization, and efficiency. If there is a capacity planning page in the budget, comment on whether the company has the capacity to achieve its budgeted goals.
It may be necessary to derive estimated costs for any department, or to at least comment on the budgets proposed by department managers. A step cost is a fixed cost that does not change within a specific range of utilization levels.
Once utilization shifts outside of that range, additional costs must be incurred for increased utilization levels or can be eliminated for decreased utilization levels. The true level of profitability of the typical organization is driven by its bottleneck operation, which is also known as its constrained resource.
The cost accountant should know exactly where this constrained resource is located, and have an excellent knowledge of how that resource can be maximized, such as through the positioning of an inventory buffer in front of it to ensure the smooth inflow of materials, using excess staffing on the equipment, or implementing a quick changeover study to create faster setups.
This crucial topic is addressed further in the Constraint Analysis chapter. An immensely important item that tends to be ignored is the type of system that a company uses to accumulate costs. This system is grounded on the types of analyses that are needed to properly steer a company into profitability. It also pays late, at inconsistent intervals. Since late payments vary, he elects to manually calculate the interest cost of these payments, and add it to the results of the cost accumulation system.
It is particularly important to have a robust cost accumulation system if a company does business with government entities, since they may require detailed cost information if they are paying under cost-plus arrangements. Another cost accumulation issue is how to properly structure overhead allocation systems.
Allocation of overhead is the process of assigning overhead costs to products or services based on some relevant measure of activity. Though overhead allocation is not relevant in many decision-making situations see the Direct Costing chapter , it is still important in cost-plus reimbursement contracts and for financial reporting to have a justifiable reason for allocating overhead to a product or service.
Accordingly, the cost accountant needs to periodically verify which costs are defined as overhead, how they are being accumulated for allocation, and the basis upon which those allocations are calculated.
Much of the discussion in this chapter makes the cost accountant look like a glorified financial analyst who also happens to have a deep grounding in cost accounting. That impression is largely correct — the cost accountant is indeed the nearest thing to a financial analyst in many companies, since a multitude of analyses require a deep knowledge of cost data and how to manipulate it. The cost accountant then converts his findings into a report, along with an action recommendation.
Cost accounting is a considerably more interesting area than financial accounting.
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