Chapter 1 Flashcards
Summary of economic events during a period of time Shows Revenues generated by operations Expenses matched to those revenues Any gains and losses attributed to the period
Income Statement
A summary of resource inflows and outflows stated in terms of cash Summarizes cash from Operating activities Investing activities Financing activities
Statement of Cash Flows
A picture of the economic position of an organization at a specific time Shows Assets Claims on assets
Balance Sheet
Primary focus is to assist management in decision making Provides management A framework to organize and evaluate data The information for decision making. Emphasis on achieving a company’s organizational goals
The focus of Managerial Accounting
Consists of a blending of three themes: Strategic Position Analysis Cost Driver Analysis Value Chain Analysis
Strategic Cost Management
The examination of a company’s basic way of competing to sell
Strategic Position Analysis
The study of factors that cause or influence costs
Cost Driver Analysis
The study of value-producing activities, from raw materials to consumers
Value Chain Analysis
The basic purpose toward which a company’s activities are directed
Mission
A definable measurable target or objective. Provides an organization with an identity and unifying purpose to ensure that all employees head in the right direction.
Goals
A course of action that will assist in achieving one or more goals
Strategy
Strategic Position Analysis
Michael Porter identified three possible strategic positions that lead to business success:
Low costs creates higher profits at the same selling price as competition, or companies pursue aggressive price competition while remaining competitive
Cost Leadership
Creates a perception of uniqueness and worth a premium price
Product or Service Differentiation
Focusing on a specific market niche, such as a buyer group, segment of the product, or geographic market
Market Niche
Managerial accounting supports the achievement of goals Careful budgeting Cost control Frequent and detailed performance reports
Managerial Accounting and Goal Attainment Managerial accounting supports the achievement of goals Careful budgeting Cost control Frequent and detailed performance reports
Initial purchase price plus subsequent operating and maintenance costs
Price/Cost
Degree to which products or services meet the customer’s needs
Quality
Effects such as timely delivery, helpfulness of sales personnel, and subsequent support.
Service
Managing activities requires understanding how costs respond to cost drivers
Activities Performance consumes resources that cost money
Cost drivers are factors that influence costs
Costs Respond to cost driver
A key determinant of success
Profit Increases when costs are lower
Structural Cost Drivers Organizational Cost Drivers Activity Cost Drivers
Types of Cost Drivers
Infrequent and difficult to change
Structural Cost Drivers
