Chapter 1 Flashcards
What is managerial accounting?
Focuses on information used by executives, managers and employees who work inside the business
Why do we need managerial accounting?
Internal users need information to plan, direct and control business operations
Who needs the information?
Senior executives and middle managers
What are the components of product cost?
Direct materials, direct labour and overhead costs
How do you calculate the average cost per unit?
Total costs/number of units
What are product costs?
They are assets in balance sheet but they go under COGs in income statement when there is a sale
Costs related to manufacturing a product intended for sale
What are period costs?
They are an expense and are also known as selling and administrative costs
What are SG&A costs?
Costs apart from product costs
What is the flow of labour costs?
Production wages go under inventory in balance sheet and COGS in income statement
Selling and administrative salaries go under salaries expense in income statement
What is the flow of depreciation costs?
Depreciation on manufacturing equipment go under inventory in balance sheet and COGS in income statement
Depreciation on office furniture go under depreciation expense in income statement
What is the schedule of inventory costs?
DM+DL+OH = PC
- COGS
Ending inventory
How do you calculate ending balance?
Beginning balance+net income-dividends
What are types of overhead costs?
Depreciation on manufacturing assets
Manufacturing supervisors’s salary
Factory utilities
What are upstream costs?
Incurred before the manufacturing process begins
eg. R&D and product design
What are midstream costs?
Incurred during the manufacturing process
eg. DL, DL, OH
What are downstream costs?
Incurred after the manufacturing process
eg. marketing, distribution, customer service
What do service companies do?
Provide products to customers that are consumed immediately
What are merchandising companies?
Sell products other companies make
What is JIT inventory?
Reduce costs by making products available just in time
What are types of obvious inventory holding costs?
Supervision, theft, financing and warehouse space
What are types of hidden inventory holding costs?
Sloppy work, increased production time, decreased motivation
What are types of strong financials?
Promotions, pay raises, bonuses
What are types of weak financials?
Passed over promotions, demoted, fired
What is the fraud triangle?
Pressure, opportunity, rationalization
