Chapter 9: Management Accounting and Cost Concepts Flashcards
Systematic planning for long-term investments in operating asset
Capital Budgeting
Implementing management plans and identifying how plans compare with actual performance
Controlling
Techniques for determining how changes in revenues, costs, and level of activity affect the profitability of an organization
Cost-Volume-Profit (C-V-P) Analysis
Future costs that change as a result of a decision; also called incremental or relevant costs
Differential Costs
Costs that are specifically traceable to a unit of business or segment being analyzed
Direct Costs
Wages paid to those who physically work on direct materials to transform them into a finished product and are traceable to specific products
Direct Labor
Materials that become part of the product and are traceable to it
Direct Materials
Analyzing results, rewarding performance, and identifying problems
Evaluating
Costs that remain constant in total, regardless of activity level, over a certain range of activity
Fixed Costs
Costs normally incurred for the benefit of several segments within the organization; sometimes called common costs or joint costs
Indirect Costs
Labor that is necessary to a manufacturing or service business but is not directly related to the actual production of the product
Indirect Labor
Materials that are necessary to a manufacturing or service business but are not directly included in or are not a significant part of the actual product
Indirect Materials
All costs incurred in the manufacturing process other than direct materials and direct labor
Manufacturing Overhead
Managerial planning decisions regarding current and immediate future (one year or less) operations that are characterized by regularity and frequency
Operational Budgeting
The benefits lost or forfeited as a result of selecting one alternative course of action over another
Opportunity Costs
Costs that require an outlay of cash or other resources
Out-of-Pocket Costs
Costs not directly related to a product, service, or asset. They are charged as expenses to the income statement in the period in which they are incurred
Period Costs
Outlining the activities that need to be performed for an organization to achieve its objectives
Planning
Costs associated with products or services offered
Product Costs
Management continual evaluation of various product lines and divisions’ profitability in order to analyze and identify opportunities to improve profits
Production Prioritizing
A measure of operating performance and efficiency in utilizing assets; computed in its simplest form by dividing net income by average total assets (aka return on assets or ROA)
Return on Investment
Broad-long range planning usually conducted by top management
Strategic Planning
Costs that are past costs and do not change as a result of a future decision
Sunk Costs
Costs that change in total in direct proportion to changes in activity level
Variable Costs
