Alexandra Keleti Talks About Managerial Accounting
As an IMA Student Ambassador, Alexandra Keleti knows that passing the CMA exam leads to career growth. It shows companies that one is competent in the skills required to work in finance teams. As Keleti has taken several Managerial Accounting courses offered by the University of Kansas, she would like to impart some of her knowledge.
- The primary users of managerial accounting information are within the company itself. Generally, the general public does not use the Managerial Accounting information.
- It is important to be able to differentiate between product and period costs. Product costs are directly related to the product being offered for sale. Period costs are indirect.
- Another important distinction is fixed versus variable costs. Fixed costs remain constant despite changing volume of production. Variable costs, however, increase proportionately with volume.
- Understanding the difference between direct and indirect labor costs is also vital in Managerial Accounting. Direct labor costs can be directly traced to the production of a good or service. Indirect cannot.
- Make sure to understand what goes into manufacturing overhead. Its components include indirect materials used, factory rent, and factory utilities.
- Using the Normal (or Traditional) Costing System, the cost of a job consists of actual direct materials, actual direct labor, and estimated overhead.
- Examples of variable costs include hourly wages, wood (the raw material) used to make furniture, and electricity costs for ovens at a bakery. Straight-line depreciation would clearly not be a variable cost.
- If a truck rental company charges a one-time fee of $30 plus $0.30 per mile driven, this would be a mixed cost. We can’t assume that few miles are driven because this information was not given. Therefore, we must classify this as a mixed, not fixed, cost.
- Some cost classification categories typically used in activity-based costing are unit-level, batch-level, product-sustaining level, and facility-level.
- Words that indicate that a product uses job-order costing are “custom” or “unique”.
- When prorating to allocate over or under-applied overhead, WIP Inventory, COGS, and Finished Goods Inventory are all involved.
- Knowing how to calculate total equivalent units for conversion using the weighted-average method and the FIFO method is necessary.
- The reciprocal method considers all reciprocal flows between service departments through simultaneous methods.
- The dollar contribution margin is selling price minus variable costs. The contribution margin ratio is the contribution margin divided by the selling price.
- The break-even point in sales dollars is calculated by dividing fixed expenses by the contribution margin ratio.
- Safety margin is the difference between the budgeted sales revenue and the break-even sales revenue.
- Multiple regression is when there are two or more cost drivers.
- Degree of operating leverage is contribution margin divided by operating income.
