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Managerial Accounting > Ch 2 > Flashcards

Ch 2 Flashcards

0
Q

Direct materials

A

Materials that become an integral part of the finished product
And whose costs can be traced to finished product

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1
Q

Raw materials

A

Any materials used in final product

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2
Q

Indirect materials

A

Relatively insignificant materials in finished products
Part of manufacturing overhead
Ex. Glue

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3
Q

Direct labor

A

Labor costs that can easily be traced to individual

Units of product

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4
Q

Indirect labor

A

Labor costs that can’t be physically traced to individual products
Treated as part of manufacturing overhead

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5
Q

Manufacturing overhead

A

Includes all manufacturing costs except direct materials

And direct labor

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6
Q

Selling costs, examples 6?

A

Include all costs incurred to secure customer orders
And get finished product to customer

Ex. Advertising, shipping, sales travel, sales commission,
Sales salaries, cost of finished goods warehouses

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7
Q

Administrative costs, examples 5?

A

Include all costs associated with general management
Of organization

Ex. Executive compensation, general accounting, secretarial,
Public relations, general administrative costs

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8
Q

Product costs AKA Inventoriable costs

A

Include all costs involved in acquiring or making product

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9
Q

Period costs

A

All selling and administrative expenses

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10
Q

Prime cost

A

Prime cost = direct materials cost + direct labor cost

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11
Q

Conversion cost

A

Conversion cost= direct labor cost +manufacturing overhead cost

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12
Q

Cost behavior

A

Refers to how cost reacts to changes in level of activity

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13
Q

Cost structure

A

Relative proportion of each type of cost in organization

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14
Q

Variable cost, examples 4? How is it expressed usually?

A

Varies, in total, in direct proportion to changes in activity level

Ex. Direct materials, direct labor, indirect materials, supplies

Expressed in per unit basis

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15
Q

Activity base AKA cost driver, examples 4? How is it usually expressed in text book?

A

Measure of whatever causes incurrence of variable cost
Ex. # miles driven, labor hours, machine hours, units produced

Usually expressed as total volume of goods and services
Provided by organization

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16
Q

Fixed cost

A

Cost that remains constant despite changes in activity levels

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17
Q

Committed fixed costs, 4 examples?

A

Represent organizational investments with multi year
Planning horizon, which can’t be reduced over short periods of
Time without making significant adjustments

Ex. Investments in facilities/equipment, real estate taxes, insurance expenses, salaries to top management

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18
Q

Discretionary fixed costs, 5 examples?

A

Arise from annual decisions by management to spend
On certain fixed cost items

Ex. Advertising, research, public relations,
management development programs, internships for students

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19
Q

Relevant range

A

Range of activity within which the assumption

That cost behavior is strictly linear is reasonably valid

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20
Q

Mixed costs AKA semi variable costs

A

Contains both variable and fixed cost elements

21
Q

Account analysis of mixed costs

A

Account is classified as either variable or fixed
Based on analyst’s prior knowledge of how
Cost in account behaves

22
Q

Engineering approach

A

Cost analysis involves detailed analysis of what cost
Behavior should be, based on industrial engineer’s
Evaluation of production methods, materials,
labor requirements, equipment usage, production efficiency,
Power consumption, etc

23
Q

Dependent variable

A

Y axis, depends on another activity

24
Q

Independent variable

A

Plotted on X axis, ex. Days, hours

25
Q

Linear

A

Straight line

26
Q

Variable cost

A

Variable cost = slope = change in cost/change in activity

27
Q

High-low method

A

Variable cost = (cost high activity level - cost low activity level)/
(high activity level - low activity level)

Uses 2 dat points based on highest cost. And lowest cost

28
Q

Least squares regression method

A

Y = mx + b

Uses all data points

29
Q

Contribution approach

A

Provides managers with income statement that clearly distinguishes btw fixed and variable costs
Therefor aids in planning, controlling and decision making

30
Q

Contribution margin

A

Amount remaining from sales revenues after variable
Expenses have been deducted

This amount contributes toward covering fixed expenses
Then toward profits for period

31
Q

Cost object

A

Anything for which cost data are desired including

Products, customers, jobs, organizational subunits

32
Q

Direct cost, example

A

Cost that can easily be traced to specified cost object

33
Q

Indirect cost

A

Cost can’t be easily traced to specific cost object

34
Q

Common cost

A

Cost incurred to support number of cost objects,

But can’t be traced to them individually

35
Q

Differential cost AKA Incremental cost

A

Difference in costs between any 2 alternatives

Incremental only refers to increases in cost

36
Q

Differential revenue

A

Difference in revenue btw any 2 alternatives

37
Q

Opportunity cost

A

Potential benefit that is given up when one alternative

Is selected over another

38
Q

Sunk cost

A

Cost has already been incurred and can’t be changed

By any decision made now or in the future

39
Q

R-squared

A

Measures goodness of fit
Tells percentage of variation in dependent variable (cost)
That is explained by variation in independent variable (activity)

40
Q

Quality of conformance

A

Degree to which a product or service meets or exceeds
It’s design specifications and is free of defects or other
Problems that mar its appearance or degrade performance

41
Q

Quality cost

A

Refers to all costs that are incurred to prevent defects

Or result from defects in products

42
Q

Prevention costs

A

Support activities whose purpose is to reduce number of defects

43
Q

Quality circles

A

Small groups of employees that meet on regular basis

To discuss ways to improve quality

44
Q

Statistical process control

A

Technique used to detect whether process is in or
Out of control
Workers use charts to monitor quality of units

Defects are out of control process in which machine
Produces defective units

45
Q

Appraisal costs AKA Inspection costs

A

Are incurred to identify defective products before products

Are shipped to customers

46
Q

Internal failure costs, examples 4?

A

Results from identifying defects before they are shipped to customers
Ex. Scrap, rejected products, reworking defective units,
Downtime caused by quality problems

47
Q

External failure costs,4 examples?

A

Result when defective product delivered to customer
Ex. Warranty repairs, replacement, legal action,
Lost sales arising from reputation for poor quality

48
Q

Quality cost report

A

Provides estimate of financial consequences of
Company’s current level of defects

Details prevention costs, appraisal costs, costs of internal
And external failures that arise from current quality control efforts

49
Q

ISO 9000 standards

A

Quality control requirements issued by International

Organization for Standardization that relate to products sold in European countries

Managerial Accounting (9 decks)

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