Chapter 2 Flashcards

1
Q

Cost

A

a measure of a resource being sacrificed

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2
Q

Expense

A

resource being sacrificed IN THIS period

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3
Q

costs with future benifit

A

Asset - prepaid expenses inventory other current assets

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4
Q

Expenses (this period)

A

COGS R and D SG&A

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5
Q

Gross Profit

A

on income statement = revenue - COGS

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6
Q

Product costs

A

incurred to make the product. DM, DL, MOH IC. Everything after the manufacturing to include costs to sell and deliver are period costs

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7
Q

Period costs

A

no future benefit expensed in the current period. SG&A costs AKA operating expenses

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8
Q

Cost object

A

the thing we are applying costs to

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9
Q

Direct costs

A

product cost and can be easily traced to a product or service

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10
Q

Indirect costs/MOH

A

product costs but less obvious in final product (same as MOH). Fixed and variable costs are a part of MOH

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11
Q

Prime costs

A

Prime costs = Direct material + Direct Labor

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12
Q

Conversion costs

A

Conversion costs = DL + MOH cost to convert raw material into a product

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13
Q

Variable costs

A

constant cost per unit that change in total with volume
variable cost per unit X Volume of cost driver - change as you make more

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14
Q

capacity

A

upper limit on space

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15
Q

fixed costs

A

fixed in total and do not change as more units are produced within the available capacity. cost still vary per unit up to the capacity (rent of factory) - stay the same up to capacity

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16
Q

relevant range

A

range of units that can be produced from 0 to a company’s capacity

17
Q

Inventory on the balance sheet

A

short term asset

18
Q

Categories of inventory

A

Raw materials, WIP, Finished Goods

19
Q

Materials requisition

A

shows type of materials and quantities requested

20
Q

Sub categories of Raw materials

A

direct materials and indirecct materials

21
Q

Direct materials used calculation

A

DMU = Beginning DM inventory + DM purchases - Ending DM inventory

22
Q

What costs are added to WIP

A

Direct materials, MOH, DL. All costs are added to WIP

23
Q

what costs are added to finished goods

A

none that’s why they are finished

24
Q

formula for COGM

A

COGM = Beginning WIP + Total manufacturing costs - ending WIP the journal entry crediting WIP and debiting FG. COGM IS THE CREDIT SIDE OF WIP

25
Q

formula for COG available for sale

A

COGAS = beginning FG inventory + COG manufactured

26
Q

gross margin

A

sales - Cost of Good sold. on a traditional income statement. grouped by function (product vs period)

27
Q

contribution margin

A

CM = sales - total variable costs. on contribution margin income statement not GAAP used for internal decision making. behavior based can more easily change sale price or production level to see the impact
Contribution Margin Income Statement
Revenue $ 21,000
Less: Variable costs 7,500
Contribution margin 13,500
Less: Fixed costs 3,900
Operating income $ 9,600

28
Q

Formula for operating income

A

Sales-COGS-SG&A

29
Q

Sunk cost

A

occurred in the past

30
Q

fixed costs for concert are 100 per person with 100 attendees how much per person costs for 200 attendees

A

50 per person TOTAL does not change. 100 X 100 = 10,000 / 100 = 100
10,000/200 = 50

31
Q

what is vertical analysis

A

way to assess operations. All items of the financial statements are calculated as a percentage of sales (income statement) Total assets (balance sheet)

32
Q

Three types of companies

A

manufacturing (ford, nike). Merchandising (target) Service sector (accounting firm) no inventory

33
Q

what costs change and stay the same with variable costs

A

cost per unit stays the same total cost changes

34
Q

what costs change and stay the same with fixed costs

A

cost per unit changes total cost stays the same. If you but one coffee maker that cost 200. The cost of that coffee machine does not change in total but cost per cup changes up to the relevant range. 1 cup would cost 200 per cup. 100 would be 1 per cup.

35
Q
A
35
Q

operating income

A

revenue-COGS = Gross Margin. - SG&A = Operating income

35
Q
A
36
Q
A