Ch 1 - Managerial Acct Basics Vocab Flashcards
Managerial accounting
area of accounting aimed mainly at serving the decision-making needs of internal users; also called management accounting
Planning
process of setting goals and preparing to achieve them
Control
process of monitoring planning decisions and evaluating the organization’s activities and emploees
continuous improvement
concept requiring every manager and employee continually to look to improve operations
controllable or not controllable cost
costs that a manager does not have the power to control or strongly influence
conversion costs
expenditures incurred in converting raw materials to finished goods; includes direct labor costs and overhead costs
cost object
product, process, department, or customer to which costs are assigned
customer orientation
company position that its managers and employees be in tune with the changing wants and needs of consumers
cycle efficiency (CE)
measure of production efficiency, which is defined as value-added (process) time divided by total cycle time
cycle time (CT)
measure of time to produce a product of service, which is the sum of process time, inspection time, move time, wait time,
also called throughput time
direct costs
costs incurred for the benefit of one specific cost object
direct labor
efforts of employees who physically covert materials to finished product
direct labor costs
wages and salaries for direct labor that are seperately and readily traced through the production process to finished goods
direct material
raw material that physically becomes part of the product and is clearly identified with specific products or batches of product
direct material costs
expenditures for direct material that are separately and readily traced through the production process to finished goods
ethics
codes of conduct by which actions are judged as right or wrong, fair or unfair, honest or dishonest
factory overhead
factory activities supporting the production process that are not direct material or direct labor,
also called overhead and manufacturing overhead
factory overhead costs
expenditures for factory overhead that cannot be separately or readily traced to finished goods;
also called overhead costs
finished goods inventory
account that controls the finished goods files, which acts as a subsidiary ledger (of the inventory account) in which the costs of finished goods that are ready for sale are recorded
fixed cost
cost that does not change with changes in volume of activity
goods in process inventory
account in which costs are accumulated for products that are in the process of being produced but are not yet complete;
also called work in process inventory
indirect costs
costs incurred for the benefit of more than one cost object
indirect labor
efforts of production employees who do not work specifically on converting direct materials into finished products and who are not clearly identified with specific units or batches of product
indirect labor costs
labor costs that cannot be physically traced to production of a product or service;
included as part of overhead
indirect material
material used to support the production process but not clearly identified with products of batches of product
Institute of Management Accountants (IMA)
professional association of mgmt accountants
internal control system
all policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies
Just-in-time (JIT) manfacturing
process of acquiring or producing inventory only when needed
Lean business model
practice of eliminating waste while meeting customer needs and yielding positive company returns
managerial accounting
area of accounting aimed mainly at serving decision-making-needs of internal users;
aka: mgmt accounting
manufacturing statement
report that summarizes the types and amounts of costs incurred in a company’s production process for a period;
also called COGS manufacturing statement
non-value-added time
portion of cycle time that is not directed at producing a product or service;
equals the sum of inspection time, move time, and wait time
opportunity cost
potential benefit lost by choosing a specific action from two or more alternatives
out-of-pocket cost
cost incurred or avoided as a result of mgmt’s decisions
period costs
expenditures identified more with a time period than with finished product costs;
includes spelling and general admin expenses
planning
process of setting goals and preparing to achieve them
prime costs
expenditures directly identified with the production of finished goods;
include direct materials costs and direct labor costs
product costs
costs that are capitalized as inventory because they produce benefits expected to have future value;
include direct materials, direct labor, and overhead
raw materials inventory
goods a company acquires to use in making products
sunk cost
cost already incurred and cannot be avoided or changed
total quality management (TQM)
concept calling for all mgrs and employees at all stages of operations to strive toward higher standards and reduce number of defects
value-added time
portion of cycle time that is directed at producing a product or service;
equals process time
value chain
sequential activities that add value to an entity’s products or services;
includes design, production, marketing, distribution, and service
variable cost
cost that changes in proportion to changes in activity output volume
