Chapter 15 Flashcards
What is the key difference between financial and managerial accounting?
Financial accounting provides reports for external users (e.g., investors, creditors), while managerial accounting focuses on internal decision-making.
What are the four main financial statements?
Income Statement
Retained Earnings Statement
Balance Sheet
Statement of Cash Flows
Do managerial accounting reports have to follow GAAP?
No, they are prepared based on management needs and do not have to follow GAAP.
What is the difference between a line department and a staff department?
Line Department: Directly involved in production or sales (e.g., manufacturing, sales).
Staff Department: Supports line departments with services (e.g., HR, IT, Accounting).
Who is the controller in a company?
The chief management accountant responsible for accounting, taxes, systems, and procedures.
What are the five steps in the management process?
Planning: Setting goals and strategies.
Directing: Managing daily operations.
Controlling: Comparing actual vs. expected results.
Improving: Continuous process improvement.
Decision-Making: Making choices at every step.
What is the difference between direct costs and indirect costs?
Direct Costs: Can be traced to a cost object (e.g., raw materials).
Indirect Costs: Cannot be directly traced (e.g., factory supervisor salary).
What are the three main types of manufacturing costs?
Direct Material Costs – Raw materials used in production.
Direct Labour Costs – Wages of workers making the product.
Factory Overhead – Indirect costs (e.g., rent, maintenance).
What are prime costs and conversion costs?
Prime Costs = Direct Materials + Direct Labour
Conversion Costs = Direct Labour + Factory Overhead
How do product costs and period costs differ?
Product Costs: Costs involved in making products (DM, DL, FOH).
Period Costs: Selling & administrative costs, not related to production.
What is the role of the Sustainability Accounting Standards Board (SASB)?
It develops accounting standards for sustainability reporting.
What does cost behavior mean in managerial accounting?
It describes how costs change in response to activity levels.
What is the relevant range?
The activity range within which cost behavior remains predictable.
What is a cost in managerial accounting?
A cost is a payment of cash or a commitment to pay cash in the future to generate revenue.
What is a cost object?
A cost object is anything for which costs are measured, such as a product, sales territory, department, or activity.
What is the difference between direct and indirect costs?
Direct Costs: Can be traced directly to a cost object (e.g., materials for a product).
Indirect Costs: Cannot be traced directly to a cost object (e.g., factory supervisor salaries).
What is direct material cost?
The cost of raw materials that become an integral part of the finished product (e.g., wood in a guitar).
What is direct labour cost?
The wages of employees who work directly on manufacturing a product (e.g., workers assembling guitars).
What is factory overhead cost?
All manufacturing costs except direct materials and direct labor, such as utilities, rent, and indirect labor.
What are prime costs?
Direct Materials + Direct Labour. These are the main costs of production.
What are conversion costs?
Direct Labour + Factory Overhead. These costs are needed to convert raw materials into finished products.
What is the difference between product and period costs?
Product Costs: All costs related to manufacturing (Direct Materials, Direct Labour, Factory Overhead).
Period Costs: Non-manufacturing costs like selling and administrative expenses.
What are some examples of period costs?
Marketing expenses, sales commissions, and administrative salaries.
