Chapters 1 & 2 Flashcards
theory of constraints
method to continuously improve manufacturing activities and nonmanufactured activities
just-in-time manufacturing
produce only when needed or demanded
lean manufacturing
pursuit and elimination of waste (which does not add value to the customer)
computer-integrated manifacturing
automation of manufacturing allowing firms to reduce inventory, increase productive capacity, improve quality and service, decrease processing time, and increase output
Planning
detailed formulation of future actions to achieve a particular end
Controlling
monitoring a plan’s implementation and taking corrective action
Continuous improvement
relentless pursuit of improvement in the delivery of value to customer (required to remain competitive or to establish a competitive advantage
Decision making
process of choosing among competing alternatives
Financial Accounting Info System
Primarily concerned with producing outputs for external users
inputs: well-specified economic events
processes: rules and conventions established by the SEC, FASB, and IASB
outputs: financial statements for external users
cost management info system
Primarily concerned with producing outputs for internal users
inputs and processes: set by management to satisfy their objectives not bound by externally imposed criteria
provides information for three broad objectives:
–cost products, services and/or other objects
–planning and control
–decision making
value chain
set of activities required to design, develop, produce, market, deliver, and provide post-sales service
integrated cost management system
receives info from and provides info to all operational systems
ERP
Enterprise Resource Planning System:
integrative, cross-functional systems that coordinate info to facilitate timely and accurate reporting and decision making
cost accounting
assigns costs to individual producers, services, and other objects of interest to managers
ideally, producers product costs that are accurate (for management purposes) and satisfy financial reporting rules
–otherwise should produce two sets of product costs
–>for costing, planning, control
operational control
provides accurate and timely feedback concerning the performance of managers and others relative to their planning and control of activities
- -objectives to improve value to customer and increase profits
- ->for decision-making
cost
cash or cash equivalent value sacrificed for goods and services that are expected to bring a current or future benefit
expenses
expired (used up) costs that are deducted from revenues
loss
cost that expires without producing any revenue benefit
assets
unexpired costs, appear on the balance sheet
cost objects
things for which costs are measured and assigned
- -includes products, customers, departments, projects, activities, etc.
- -activities are basic units of work performed within a firm
- ->aggregation of actions useful for planning, control and decision-making
tangible products
goods produced by converting raw materials into finished products
services
tasks or activities performed for a customer using an organization’s products or facilities
- -intangibility
- -perishability
- -inseparability
production costs
(or product costs)
costs associated with manufacturing goods or providing services
nonproduction costs
costs associated with the functions of selling and administration
direct materials
materials traceable to the goods or services being produced
direct labor
labor that is traceable to the goods or services being produced
overhead
production costs other than direct materials and direct labor
prime costs
direct materials cost + direct labor cost
conversion cost
direct labor cost + total overhead cost
absorption-costing income or full-costing income
all manufacturing costs are fully assigned to the product
- -expenses are separated according to function and then deducted from revenues to arrive at operating income
- -two major functional categories of expense are cost of goods sold and operating expenses
COGM
cost of goods manufactured
–represents the total manufacturing cost of goods completed during the current period
COGS
manufacturing cost of the units that were sold during the period
traceability
ability to assign cost directly to a cost object
direct tracing
process of identifying and assigning costs to a cost object that are specifically or physically associated with the cost object
driver tracing
use of drivers to assign costs to cost objects
- -drivers are factors that cause changes in resource usage, activity usage, costs, and revenues
- -cause and effect relationship
traditional cost accounting
assumes that all costs can be classified as fixed or variable with respect to changes in the units or volume
–uses only unit-based activity drivers to assign costs
traditional cost control
assigns costs to organizational units
holds the organizational unit manager responsible for controlling the assigned costs
traces costs to individuals who are responsible for costs
activity-based cost accounting
emphasizes tracing over allocation
uses both unit- and non-unit-based activity drivers
activity-based cost control
focuses on accountability for activities rather than costs
activity-based management focuses on improving customer value
product costs
ex. direct materials, direct labor, overhead
period costs
ex. general and administrative expenses, like office supplies
direct costs
costs that can be traced easily or accurately to a cost object
indirect costs
costs that cannot be traced easily or accurately to a cost object
allocation
assignment of indirect costs to cost objects