ACT 4A Exam 1 Flashcards
A profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting.Managerial Accounting
Managerial Accounting
producing annual and quarterly consolidated financial statements that will be used by investors and creditors to make investment and lending decisions
Financial accounting system
Internal managers with the accounting information needed to plan, direct, and control operations.
Managerial accounting system
.100-year-old professional association for management accountants. developing, certifying, connecting, and supporting accounts and financial professionals.
IMA- Institute of Management Accountants
Competence-Maintain their professional competence
Preserve the confidentiality of the information they handle.
Uphold their integrity
Perform their duties with credibility
IMA Ethics
Perform professional duties in accordance with relevant laws, regulations, and technical standards. Clear accurate, concise, timely.
Competence
Inform all relevant parties regarding the appropriate use of confidential information. Monitor to ensure compliance. Confidentiality
Confidentiality
Avoid apparent conflicts of interest. Advise all parties of any potential conflicts of interest.
Abstain from engaging in or supporting any activity that might discredit the profession.
Integrity
Provide a relevant information that could reasonably be expected to influence an intended user’s understanding of the reports, analyses, or recommendation
Creditbility
Raw materials inventory
Work in process inventory
Finished goods inventory
Types of Inventory
Toyota is in business to sell completed cars, not work in process. Once the vehicles are completed, they are no longer considered work in process, but rather become part of finished goods inventory.
Finished goods inventory
Service Companies, Merchandising Companies, Manufacturing Companies.
Types of companies
A cost that can be traced to the cost object, meaning the company can readily identify associate the cost with the cost object
Direct Cost
is a cost that relates to the cost object but cannot be trace specifically to it.
Indirect Cost
direct material, direct labor, and manufacturing overhead.
Types of Manufacturing costs
Single units or small batches with large differences between jobs.
costs are average over the small number units in a job.
Job Costing
Large quantities of identical units
More averaging-cost are average over the thousands or millions of identical units that pass through each process.
Process Costing
Total estimated manufacturing overhead costs/Total estimated amount of the allocation base.
Predetermined MOH rate
Overhead allocated to job is more than the amount of manufacturing overhead costs actually incurred; jobs overcost
Overallocated Manufacturing Overhead
Less than the amount of manufacturing overhead costs.
Underallocated Manufacturing Overhead
Life Fitness had estimated $1,000,000 of MOH for the year and 62,500 DL hours, resulting in a predetermined MOH rate of $16/DL hour. By the end of the year, the company had actually incurred $975,000 of MOH costs and used a total of 60,000 DL hours on jobs. By how much had Life Fitness overallocated or under allocated?
estimated Moh/Toal aloc base= 1,000,000/62,500DL= $16/DL Compare actual MOH $975,000 vs allocated MOH $16/DL x 60,000 DL) 960,000 =15,000 =Under allocated
In a job costing system, which of the following statements about materials is not correct?
Materials used during production are always classified as direct materials
Predetermined overhead rate times the estimated amount of the allocation base used by the specific job.
The formula to calculate the amount of manufacturing overhead to allocate to jobs is
STEP 1: the company first identifies its primary activities and then estimates the total manufacturing overhead costs associated with each activity. these are known as activity cost pools.
STEP 2: the company selects an allocation base for each activity and estimates the total amount that will be used during the year.
STEP 3; the company calculates its activity cost allocation rates using the information estimated in Steps 1 and 2.
STEP 4: the company allocates some manufacturing overhead from each activity to the individual jobs that use the activities.
Steps of ABC’s
Cost Levels
Unit-level activities—activities and costs incurred for every unit. Examples include inspecting and packaging each unit the company produces.
Batch-level activities—activities and costs incurred for every batch, regardless of the number of units in the batch. One example would be machine setup. Once the machines are set up for the specifications of the production run, the company could produce a batch of 1, 10, or 100 units, yet the company only incurs the machine setup cost once for the entire batch. Product-level activities—activities and costs incurred for a particular product, regardless of the number of units or batches of the product produced. One example would be the lease payments on equipment used solely for manufacturing a particular product.
Facility-level activities—activities and costs incurred no matter how many units, batches, or products are produced in the plant. An example is facility upkeep: the cost of depreciation, insurance, property tax, and maintenance on the entire production plant.
are costs incurred to avoid producing poor-quality goods or services. Often, poor quality is caused by the variability of the production process or the complexity of the product design.
Prevention Cost
