Managerial Accounting Essay

346 WordsApr 15, 20122 Pages
Actual Product Costs are Purchases, Freight In, Merchandise- end of year Goods available for sale only includes the items actually PURCHASED AND FREIGHT Costs of Goods sold is Goods available MINUS merchandise at the end of the year Sales Revenue- Product Costs = Gross Margin Gross Margin= Sales- CGM&S Period costs= expenses incurred except FREIGHT IN, costs of goods sold and purchases Gross Margin-Period Costs = Net Operating Income TO CALCULATE NET OPERAING INCOME Finished Goods Beginning + Cost of Goods Manufactured- Finished Goods Ending= CGM&S Sales- CGM&S= Gross Margin Period Costs= Selling Costs + General and Administrative Costs Gross Margin- Period Costs= Net Operating Income Are direct materials an expense? No. It’s an expense when it is sold. Calculate direct material cost= Beginning Inventory + Purchases of Direct Materials Now subtract the ending inventory To calculate total manufacturing costs =Direct materials used, overhead, direct labor 3 inventory accounts Direct or raw materials Work in process finished goods 3 manufacturing accounts Direct materials used Overhead Costs of goods manufactured= total manufacturing costs = begging balance WIP then subtract ending balance WIP Costs of goods manufactured and sold= cost of goods available for sale =CGM + Finished Goods beginning. You then take the CGAS – Finished goods ending inventory. Treated as an expense Two Step Income Statement All the costs associated with the products sold become an expense this is then subtracted from the sales revenue= gross margin Product costs cross from Balance Sheet asset to Income Statement expense PERIOD COSTS- advertising, front office salaries, accountant wages DIRECT COSTS- raw materials, assembly wages INDIRECT COSTS (overhead)- depreciation, utilities, maintenance, machinery repairs,

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