Chapter 1: Managerial Accounting and Cost Concepts Flashcards
What is an Activity Base?
A measure of what causes variable costs.
What is an example of an activity base?
Total cost of gloves in a hospital will increase as surgeries increase.
Administrative costs include any:
Executive, Orginization, and Clerical costs
What are committed Fixed Costs?
Investments that cannot be reduced without a fundamental change
What are common costs?
Cost incurred to support cost objects that cannot be traced to a single individual
What is a Contribution Approach?
An income statement organized by variable and fixed cost behavior
What is a Contribution Margin?
The remaining money from sales revenue after variable expenses have been deducted
Conversion Cost
Direct Labor + Manufacturing Overhead
What is Cost Behavior?
How product costs react to various activity levels
Describe a cost object
Anything for which cost data is desired such as product, customer or geographic data.
Cost Structure
How many fixed, variable, and mixed costs are found in an organization
Differential cost
Future costs that differ between two different products
Differential Revenue
Revenue that differes between two different products
Direct Labor
Easy to Trace Costs
Direct Labor
Easy to trace
Direct Materials
Materials used to manufacture a finished product
Discretionary Fixed Costs
Fixed costs from managerial decisions within a company
Financial Accounting
Reporting historical financial information to stockholders, creditors, and regulatiors
Finished Goods
Unsold completed products
Fixed Cost
Cost that stay the same regardless of how activity levels change
Incremental Costs
Increase in cost between two alternatives
Indirect Costs
Costs the cannot be traced to a specific cost object
Indirect Labor
Salaries of janitors, supervisors, materials handlers, and other factory workers
Indirect materials
Small items such as glue or nails
Inventoriable costs
“Product Costs”
Managerial Accounting
Accounting Providing information to managers
Manufacturing Overhead
Manufacturing costs outside of Direct Materials and Direct Labor
Mixed Cost
Costs with both variable and fixed factors
Period Costs
Cost taken directly to the income statement as expenses
Prime Costs
Direct Materials + Direct Labor
Raw Materials
Wood, Metal, Glass etc
Relevant Benefit
Benefits that should be considered when making a decision
Relevant Range
The range of activity wher assumptions of variable and fixed cost behavior are valid
Selling Costs
Costs incurred to secure an order and get finished goods sent out
Sunk Costs
Costs that cannot be changed by any decision
Variable Cost
A cost that varies in relation to activity level
Work in Process
Units of product that are partially complete and not ready to sell
What are the five-types of Cost Classification?
(1) Assigning Costs to Cost Objects, (2) Accounting for Cost in Manufacturing, (3) Prepping Financial Statements, (4) Predicting Cost Behavior, (5) Making Decsisions
Examples of Direct Costs
Making a product
What are the three types of Manufacturing Costs?
(1) Direct Materials, (2) Direct Labor, (3) Manufacturing Overhead
What is Manufacturing Overhead?
Things such as solder, glue, janitors, depreciated equipment, utility costs, taxes, and premiums
What are cost of goods sold?
Beginning Inventory + Purchases - Ending Inventory
