Chapter 1 Flashcards
Managerial accounting
is an activity that provides financial and nonfinancial information to
an organization’s managers and other internal decision makers.
Managerial Accounting 3 goals
1) identifying
2) recording
3) communicating
purpose of Managerial Accounting
1) external users
2) internal users
Three functions of managerial accounting
1) planning
2) managing
3) control
planning
is the process of setting goals and making plans to achieve them.
Managing
is process of setting policies to achieve goals.
Control
is the process of monitoring planning decisions and evaluating an organization’s activities and employees.
lean business model circle
1) inner circle customer orientation
2)then continues improvement
3) outer circle just in time manufacturing and total quality management
Lean business model definition
whose goal is to eliminate waste while “satisfying the customer” and “providing a positive return” to the company.
Lean business model goals
1) minimize waste
2)manage inventory
3) quality improvement
4) lower defects
5) time management
Continuous improvement
t rejects the notions of “good enough” or “acceptable” and challenges employees and managers to continuously experiment with new and improved business practices.
Total quality management
focuses on quality improvement and applies this standard to all aspects of business activities. In doing so, managers and employees seek to uncover waste in business activities including accounting activities such as payroll and disbursements
Just-in-time manufacturing
is a system that acquires inventory and produces only when needed. This means that processes must be aligned to eliminate any delays and inefficiencies including inferior inputs and outputs.
Lean practices
1)Quality improvement
applied to all aspects of
business activities.
2) Seek and uncover
waste.
3) Employees encouragedto try new methodsto improve quality.
4) Company emphasizes value of quality through quality awards.
Ethics
are beliefs that distinguish right from wrong. They are accepted standards of good and bad behavior
Fraud
involves the use of one’s job for personal gain through the deliberate misuse of the employer’s assets
Managerial cost classify on basis of their
(1) behavior,
(2) traceability,
(3) controllability,
(4) relevance, and
(5) function.
Classification by behavior
At a basic level, a cost can be classified as fixed or variable.
A fixed cost
does not change with changes in the volume of activity (within a range of activity known as an activity’s relevant range).
variable cost
changes in proportion to changes in the volume of activity.
how a cost will react to changes in the level of business activity.
1) “Total fixed costs” do not change when activity changes.
2) “Total variable costs” change in proportion to activity changes.
Classification by Traceability
1) Direct costs are those traceable to a single cost object
2) Indirect costs are those that cannot be easily and cost–beneficially traced to a single cost object.
Classification by Controllability
Classification by Controllability
Classification by Relevance
1) “A sunk cost” has already been incurred and cannot be avoided or changed. It is irrelevant to future decisions.
2) “An out-of-pocket cost” requires a future outlay of cash and is relevant for decision making. Future purchases of equipment involve out-of-pocket costs. A discussion of relevant costs must also consider opportunity costs.
3) “An opportunity cost” is the potential benefit lost by choosing a specific action from two or more alternatives.
