Ch 4 :Managerial Accounting and Cost Concepts Flashcards

1
Q

financial accounting rules

A

external
historical perspective
emphasis on verifiability
emphasis on precision
company wide reports
must follow GAAP
mandatory

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2
Q

Purpose of managerial acting

A

To teach measurement skills that managers use to support planning, controlling, and decision-making

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3
Q

managerial

A

Users-internal managers
emphasis on relevance
emphasis on timeliness
focus is on segment reports
not bound by GAAP
Requirement- Not mandatory

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4
Q

functions of management

A

planning , controlling, decision making

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5
Q

Planning

A

Establishing goals and specifying how goals will be achieved
Develop budgets

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6
Q

what are budgets

A

detailed plans for future expressed in formal quantitative terms

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7
Q

Controlling

A

Gathering feedback to ensure plans are being followed

Feedback in the form of performance reports compare actual results with the budgets

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8
Q

decision making

A

Involves making a selection among competing alternatives

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9
Q

examples of cost object

A

Products, customers, plants, departments, office locations

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10
Q

direct costs

A

Cost that can be easily and conveniently traced to a specific cost object

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11
Q

indirect cost

A

A cost that cannot be easily and conveniently traced to a specific cost object

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12
Q

what are the 3 manufacturing costs

A

direct mats, direct labor, manufacturing overhead

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13
Q

direct mats

A

raw mats that become a part of the product and can be traced to it

(materials that go into the final product)

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14
Q

direct labor

A

labor costs that can be easily traced to individual units of a product

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15
Q

manufacturing overhead

A

all manufacturing costs expect direct mats and labor

includes indirect mats, indirect labor, factory overhead

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16
Q

examples of indirect mats

A

glue, screws, bolts

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17
Q

examples of indirect labor

A

-factory janitors, supervisors, security gaurds

18
Q

prime cost formula

A

direct mats + direct labor

19
Q

conversion costs

A

direct labor + manufacturing overhead

20
Q

selling costs

A

costs incurred to secure customer orders and deliver the product

21
Q

general and administrative expenses

A

costs associated w general management of an org rather manufacturing and selling

22
Q

matching principle

A

based on the accrual concept that costs incuyrred to generate a particular revenue should be recognixefd as expenses in the same period that revenue is recognized

(means costs incurred to make smth that will evntually be sold will only be recognized when the sale takes place (product costs))

23
Q

product costs

A

-costs involved in acquiring/making a product
-attached to a unit until its sold
-also known as inventorial costs
-balance sheet inventory

24
Q

period costs

A

includes all costs that are not product costs (selling and general expenses

-expensed on income statement

25
what is cost behavior
refers to how a cost reacts to changes in level of activity
26
3 cost classifications
variable fixed mixed
27
variable costs
-cost that varies in proportion to changes in activity level -variable cost per unit is constant -ex labor, mats
28
activity base
measure of whatever causes the incurrence of variable cost ( cost driver)
29
fixed costs
Cost that remains constant in total, regardless of changes in the level of activity Average fixed cost per unit decreases as activity increase tho bc its constant
30
differential/incremental cost
the difference in cost btw any 2 alternatives (can be fixed or variable)
31
differential revenue
a diff in revenue btw 2 alternatives (relevant benefit)
32
Irrelevant costs or benefits
any future cost or benefit that does not differ btw alternatives should be ignored
33
Opportunity cost
the potential benefit given up when one option is chosen over another (relevant) (ex lost wages while on vacay)
34
Traditional format
organizes costs into either Cost of Goods Sold or Selling, General, and Administrative expenses Sales - cost of goods sold = gross margin Cost of goods sold = the product costs attached to the merchandise sold Selling, general, and administrative expenses are period costs expensed as incurred
34
Sunk cost
a cost that has already been incorrect and cannot be changed by any decision made in the future (Irrelevant) (ex machinery purchased a year ago) (depreciation)
35
Contribution format
Organizes costs into either variable or fixed expenses Sales- variable costs= contribution margin Helps managers organize data pertinent to decisions (product-line analysis, pricing, make or buy analysis)
36
contribution margin formula
sales-variable expenses
37
direct manufacturing cost
-direct labor -direct mats
38
total manufacturing cost
-direct labor -direct mats -overhead
39
cogs formula
beg inventory + purchases- ending inventory
40
how to find net operating income
sales - cogs (beginning in + purch-ending inv) - selling-admin=net operating income