Chapter 1: Flashcards
Is concerned with reporting financial information to external parties. (Stockholders, creditors, & regulators).
Financial Accounting
is concerned with providing information to managers within an organization so that they can formulate plans, control operations, and make decisions.
Managerial Accounting
five types of cost classifications
(1) for assigning costs to cost objects,
(2) for manufacturing companies,
(3) for preparing financial statements,
(4) for predicting cost behavior, and
(5) for making decisions.
What are Manufacturing Costs?
- Direct Materials
- Direct Labor
- Manufacturing Overhead
The materials that go into the final product
Raw materials
refers to raw materials that become an integral part of the finished
product and whose costs can be conveniently traced to the finished product.
Direct materials
consists of labor costs that can be easily traced to individual units of product. Is sometimes called “touch labor”.
Direct Labor
is the sum of direct materials cost and direct labor cost.
Prime Costs
the third manufacturing cost category, includes all manufacturing costs except direct materials and direct labor. For example, manufacturing overhead includes a portion of raw materials known as indirect materials, as well as indirect labor.
Manufacturing Overhead
refers to employees, such as janitors, supervisors, materials handlers, maintenance workers, and night security guards, that play an essential role in running a manufacturing facility; however, the cost of compensating these people cannot be easily or conveniently traced to specific units of product.
Indirect Labor
refers to the sum of direct labor and manufacturing over-
head.
Conversion Cost
Nonmanufacturing costs are often divided into two categories:
1.) Selling Costs
2.) Administrative Costs
include all costs associated with the general management of
an organization rather than with manufacturing or selling.
Administrative costs
include all costs that are incurred to secure customer orders and get the finished product to the customer.
Selling Costs
is based on the accrual concept that costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized.
Matching Principle
include all costs involved in acquir-
ing or making a product. It “attach” to a unit of product as it is purchased or manufactured and they stay attached to each unit of product as long as it remains in
inventory awaiting sale.
Product Costs
are initially assigned to inventories, they are also known as inventoriable costs.
Product Costs
A manufacturer’s product costs flow through three inventory accounts on the balance sheet
1.) Raw Materials
2.) Work in Process
3.) Finished Goods
consists of units of product that are only partially complete and will require further work before they are ready for sale to the customer.
work in process
consist of completed units of product that have not yet been sold to customers.
Finished Goods
All selling and administrative
expenses are treated as
Period Costs
varies, in total, in direct proportion to changes in the level of activity.
Variable Costs
is a measure of whatever causes the incurrence of a variable cost.
Activity base
activity base is sometimes referred to as a ______
Cost Driver
