The-Toplist

1. What are your earliest memories of money? How did your family or caregivers talk about money? How do you think these early experiences have shaped your relationship with money today? 2. What are your current beliefs about money? Do you believe that money is a scarce resource, or that there is enough to go around? Do you believe that money is hard to come by, or that it is easy to earn and manage? 3. How do you feel about spending money? Do you feel guilty or anxious when you spend money, or do you feel confident and in control? What are the emotions that come up for you when you think about spending money? 4. What are your financial goals? What do you want to achieve with your money, and why? How do your current beliefs about money support or hinder you from achieving these goals? 5. What are some money habits that you would like to change? What steps can you take to create new, more positive habits around money? 6. How do you talk about money with others? Do you feel comfortable di...

Section 3.) Special Order Pricing Decision Another decision that managers need to make on occasion is the decision as to whether to accept a special order. For our purposes, these “special orders” are orders that are outside of the standard customer base, and they are usually proposals for a short term deeply discounted price. For example, a customer from out of town may propose to buy 1,000 units of the company’s product at a rate of $18, even though the current market rate is much higher (e.g., $30.) In most cases, the price difference is severe enough to cause a student to question right off the bat whether the order makes any sense at all. Of course, the main determining factor as to whether to accept the special offer is simply whether doing so will increase profit or not. This type of decision focuses heavily on relevant costs. We must review all the costs that are given in the problem to determine which ones are relevant. For example, differential costs will be relevant because ...

Section 1.) Standard Costing - Overview Last week we talked about the concept of budgeting. A company needs to generate a budget to be able to control and predict costs. This is also used to determine accountability for the various managers that are in charge of certain items. When setting standards, the first thing that needs to be considered is how they are going to be set in the first place. There are a variety of philosophies and methodologies for determining standards as discussed below. Ideal Standard – This standard is set based on a perfect scenario of everything going according to plan. In other words, all machines work as expected at 100% capacity. Nothing ever breaks down. All staff are at full productivity 100% of the time; no one ever calling in sick or just slowing down a bit due to a bad day. All materials are always immediately available. Although this is certainly a challenging standard to set, it is very seldom going to be accomplished and as a result it could demoti...

Section 3.) Production/Purchase Budget The goal of this budget is to determine how many units we must produce to meet our expected sales, based on the inventory we currently had from prior months as well as any required ending inventory levels based on company policy. Most companies strive for a certain ending inventory level at the end of the month to assist with sales to made in the next month. In other words, a company doesn’t want to start the month out with zero inventories, because they run the risk of not being able to fill sales as they come in. On the other hand, a company does not want to have too much inventory on hand due to the risk of loss and obsolescence, as well as the cost of storing inventory. Companies may express this requirement in terms such as 70% of expected sales for next month. The purchases or production that we need to meet will equal: Quantity Sold (or expected to be sold this month) + Ending Inventory (we want to build back to this level, so this adds t...

Section 2.) Direct vs. Indirect and Traditional Overhead Allocation You will find that one of the most prominent topics within cost and managerial accounting is overhead and the allocation of it. Costs like direct materials and direct labor are relatively easy because you can identify specifically how many pounds of material go into a product or how many hours of direct labor were used. It is not so easy to identify how much utility cost or supervisor cost goes to one particular unit though. These types of overhead cost are considered to be “indirect.” The direct vs. indirect cost classification relates to the cost relationship to the product or activity. If we can identify exactly how much of a particular cost goes to the product, it is said to be direct. This would include things like direct materials and direct labor. There are some materials and labor that we either cannot directly identify as being used by one product, or it is of such a small amount that it doesn’t make sense to ...

Section 2.) Cost Classifications One of the most important concepts to understand in managerial accounting is that of cost. Much of managerial accounting is understanding what cost is, how it can be classified, how it behaves, and how to make decisions about it. First of all, what exactly is cost? One definition is that cost is “the expenditure of something, such as money, time, or labor, necessary for the attainment of a goal.” It is important to understand that “cost” is not the same thing as expense. A cost often time leads to an expense when whatever you purchased is used up. However, that is not always the case. For example, there is a cost incurred in purchasing land, but that land will never be depreciated, thus never converted to an expense. Using that definition, cost and expense are mainly separated by time. Using an example from financial accounting, inventory has a cost when it is first purchased, but it is not recognized as an expense until that inventory is later sold. In...