Finance summary
Chapter 15
A line department is directly involved in providing goods or services to the customers of the
company.
A staff department provides services, assistance, and advice to the departments with line or
other staff responsibilities.
The management process has the following 5 basic phases
Planning
Directing
Controlling
Improving
Decision making
Strategic planning develops long-term actions to achieve the company’s objective. These
actions are called strategies.
Operational planning develops short-term actions for managing the day-to-day operations
of the company.
Directing
The process by which managers run day-to-day operations.
Controlling
Monitoring operation results and comparing expected results with actual results.
Improving
Continuous process improvement is the philosophy of continually improving employees,
business processes and products.
Decision making
In managing a company, management must continuously decide among alternative actions.
Manufactering operations
A cost is a payment of cash or the commitment to pay cash in the future for the purpose of
generating revenues.
Costs are often classified by their relation to a segment of operations, called a cost object.
This can be a product, sales territory, department or an activity.
Direct costs are identified with and can be traced to a cost object.
, Indirect costs can’t be identified with or traced to a cost objective.
There are 3 types of manufacturing costs
Direct materials
These are raw materials. It needs to be an integral part of the finished product. It needs to
be a significant portion of the total cost of the product.
Direct labor
The cost of employee wages that is an integral part of the finished product. It needs to be an
integral part of the finished product. It needs to be a significant portion of the total cost of
the product.
Factory overhead
Costs other than direct materials and direct labor that are incurred in the manufacturing
process. These are all indirect cost of the product.
This could be
-Heating & lighting of the factory
-Repairing and maintaining factory equipment
-Property taxes on factory budlings
-Insurance of factory buildings
But also
-glue
-sandpaper
-power to run the machines
-salaries of production supervisors
Prime costs and conversion costs
Prime costs
Direct materials and direct labor costs
Conversion costs
Direct labor and factory overhead costs.
Product costs
Direct materials, direct labor and factory overhead.
Period costs
Consists of selling and administrative expenses.
Chapter 15
A line department is directly involved in providing goods or services to the customers of the
company.
A staff department provides services, assistance, and advice to the departments with line or
other staff responsibilities.
The management process has the following 5 basic phases
Planning
Directing
Controlling
Improving
Decision making
Strategic planning develops long-term actions to achieve the company’s objective. These
actions are called strategies.
Operational planning develops short-term actions for managing the day-to-day operations
of the company.
Directing
The process by which managers run day-to-day operations.
Controlling
Monitoring operation results and comparing expected results with actual results.
Improving
Continuous process improvement is the philosophy of continually improving employees,
business processes and products.
Decision making
In managing a company, management must continuously decide among alternative actions.
Manufactering operations
A cost is a payment of cash or the commitment to pay cash in the future for the purpose of
generating revenues.
Costs are often classified by their relation to a segment of operations, called a cost object.
This can be a product, sales territory, department or an activity.
Direct costs are identified with and can be traced to a cost object.
, Indirect costs can’t be identified with or traced to a cost objective.
There are 3 types of manufacturing costs
Direct materials
These are raw materials. It needs to be an integral part of the finished product. It needs to
be a significant portion of the total cost of the product.
Direct labor
The cost of employee wages that is an integral part of the finished product. It needs to be an
integral part of the finished product. It needs to be a significant portion of the total cost of
the product.
Factory overhead
Costs other than direct materials and direct labor that are incurred in the manufacturing
process. These are all indirect cost of the product.
This could be
-Heating & lighting of the factory
-Repairing and maintaining factory equipment
-Property taxes on factory budlings
-Insurance of factory buildings
But also
-glue
-sandpaper
-power to run the machines
-salaries of production supervisors
Prime costs and conversion costs
Prime costs
Direct materials and direct labor costs
Conversion costs
Direct labor and factory overhead costs.
Product costs
Direct materials, direct labor and factory overhead.
Period costs
Consists of selling and administrative expenses.
