8/28 Chapter 2 Flashcards
strategy
game plan, the focal point of a strategy should be its target customers
ex: differentiation,
work of management
planning
directing and motivating
controlling
Planning
1identify alternatives
2select alternative that does the best job of furthering organization’s objectives
3develop budget
Directing and motivating
day to day activities
Controlling
ensures that plans are being followed, compares actual to budget
Financial VS Managerial
different
Financial
External users
Historical perspective
Emphasis on verifiability
Emphasis on precisions
Managerial
Emphasis on relevance regardless of if it complies with GAAP
Decentralization
the delegation of decision making authority throughout an organization
Line Position
directly related to achievement of the basic objectives of an organization
staff position
supports the line positions
CFO
top management team, provides info for users
Chapter 2
learn well
Direct Materials
plastic actual things made
Raw Materials-part of the product that can be conveniently traced directly to it
Direct labor
work done by people
Manufacturing Overhead
utilities, maintenance, things that are not on a specific product or object
Indirect labor - employees not directly involved in production and
indirect materials- used to support the production process
things that can’t be directly traced to
Raw Materials
part of the product that can be conveniently traced directly to it
Economically Feasible
pertaining to money or finances, reasonable to trace it to a job
Selling Costs
costs necessary to get the order and deliver the product
administrative costs
all executive, organizational, and clerical costs
Product costs
include direct materials, direct labor, and manufacturing overhead
Period Costs
include all selling costs and administrative costs
Prime cost
direct materials and direct labor
Conversion cost
Direct Labor and manufacturing overhead
Merchandisers
by finished goods sell finished goods
Manufacturers
buy raw materials produce and sell finished goods
Merchandiser balance sheet
current assets
cash receivables, prepaid expenses
merchandise inventory
Manufacturer
current assets
cash, receivables, prepaid expenses, inventories
raw materials - materials
work in process - goods in process,
finished goods - ready to sell
Inventory Equation
Beginning Balance + Additions to inventory = Ending balance + withdrawals from inventory
Variable Costs
change with the level of production
per unit cost is not changed
Fixed Costs
do not change the amount of production
per unit cost is lower with more units
Direct costs
Costs that can be easily traced to a unit of product
indirect costs
costs that are not easy to trace
Opportunity Cost
the potential benefit that you lose from doing one thing
Sunk Costs
Costs that have already been incurred and cannot be changed, these are ignored when we make a decision
Product Costs
Direct - only when it is directly related to production
Indirect - (Rent, Indirect Mat, Labor)manufacturing OH
Period Cost
Selling, General, and Administrative
