Chapter 1 Flashcards
What is Managerial Accounting?
Provides internal information for planning, control, and decision-making within an organization.
What is Financial Accounting?
Reports financial information to external parties like stockholders, creditors, and regulators.
What is Cost Classification?
Assigns costs to cost objects, accounts for costs in manufacturing, prepares financial statements, predicts cost behavior, and makes decisions.
What are Direct Costs?
Costs easily traced to a unit of product or cost object, e.g., direct material and direct labor.
What are Indirect Costs?
Costs that cannot be easily traced to a unit of product or cost object, e.g., manufacturing overhead.
What are Common Costs?
Indirect costs supporting multiple cost objects, untraceable to any individual cost object.
What are Direct Materials?
Raw materials integral to the product, conveniently traced directly to it, e.g., a seat in an aircraft.
What is Direct Labor?
Labor costs easily traced to individual units of product, e.g., wages for automobile assembly workers.
What is Manufacturing Overhead?
All manufacturing costs except direct material and direct labor, including indirect materials and labor, e.g., depreciation, utility costs.
What are Prime Costs?
Direct materials and direct labor costs.
What are Conversion Costs?
Direct labor and manufacturing overhead costs.
What are Product Costs?
Costs attached to a unit of product, include all costs in acquiring or making a product, remain attached to each unit in inventory.
What are Period Costs?
Costs not attached to units of product, expensed in the period incurred, e.g., selling and administrative expenses.
What are Variable Costs?
Costs that vary in total in direct proportion to changes in activity, e.g., cost of ice cream at a shop.
What are Fixed Costs?
Costs that remain constant in total regardless of changes in activity, e.g., rental cost of office space.
What are Mixed Costs?
Costs that contain both variable and fixed elements, e.g., utility costs with a fixed monthly charge and variable cost per kilowatt hour.
What are Relevant Costs?
Costs influencing decisions, including differential costs and revenues, opportunity costs, and sunk costs.
What is an Activity Base?
A measure of whatever causes the incurrence of a variable cost.
What are Administrative Costs?
All executive, organizational, and clerical costs associated with the general management of an organization rather than with manufacturing or selling.
What are Committed Fixed Costs?
Investments in facilities, equipment, and basic organizational structure that can’t be significantly reduced even for short periods of time without making fundamental changes.
What is the Contribution Approach?
An income statement format that organizes costs by their behavior. Costs are separated into variable and fixed categories rather than being separated into product and period costs for external reporting purposes.
What is Contribution Margin?
The amount remaining from sales revenues after all variable expenses have been deducted.
What is Cost Behavior?
The way in which a cost reacts to changes in the level of activity.
What is a Cost Object?
Anything for which cost data are desired.
