Chapters 1 & 2

Question 1

theory of constraints

Answer 1

method to continuously improve manufacturing activities and nonmanufactured activities

Question 2

just-in-time manufacturing

Answer 2

produce only when needed or demanded

Question 3

lean manufacturing

Answer 3

pursuit and elimination of waste (which does not add value to the customer)

Question 4

computer-integrated manifacturing

Answer 4

automation of manufacturing allowing firms to reduce inventory, increase productive capacity, improve quality and service, decrease processing time, and increase output

Question 5

Planning

Answer 5

detailed formulation of future actions to achieve a particular end

Question 6

Controlling

Answer 6

monitoring a plan’s implementation and taking corrective action

Question 7

Continuous improvement

Answer 7

relentless pursuit of improvement in the delivery of value to customer (required to remain competitive or to establish a competitive advantage

Question 8

Decision making

Answer 8

process of choosing among competing alternatives

Question 9

Financial Accounting Info System

Answer 9

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

Question 10

cost management info system

Answer 10

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

Question 11

value chain

Answer 11

set of activities required to design, develop, produce, market, deliver, and provide post-sales service

Question 12

integrated cost management system

Answer 12

receives info from and provides info to all operational systems

Question 13

ERP

Answer 13

Enterprise Resource Planning System:
integrative, cross-functional systems that coordinate info to facilitate timely and accurate reporting and decision making

Question 14

cost accounting

Answer 14

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

Question 15

operational control

Answer 15

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

Question 16

cost

Answer 16

cash or cash equivalent value sacrificed for goods and services that are expected to bring a current or future benefit

Question 17

expenses

Answer 17

expired (used up) costs that are deducted from revenues

Question 18

loss

Answer 18

cost that expires without producing any revenue benefit

Question 19

assets

Answer 19

unexpired costs, appear on the balance sheet

Question 20

cost objects

Answer 20

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

Question 21

tangible products

Answer 21

goods produced by converting raw materials into finished products

Question 22

services

Answer 22

tasks or activities performed for a customer using an organization’s products or facilities

• -intangibility
• -perishability
• -inseparability

Question 23

production costs

Answer 23

(or product costs)

costs associated with manufacturing goods or providing services

Question 24

nonproduction costs

Answer 24

costs associated with the functions of selling and administration

Question 25

direct materials

Answer 25

materials traceable to the goods or services being produced

Question 26

direct labor

Answer 26

labor that is traceable to the goods or services being produced

Question 27

overhead

Answer 27

production costs other than direct materials and direct labor

Question 28

prime costs

Answer 28

direct materials cost + direct labor cost

Question 29

conversion cost

Answer 29

direct labor cost + total overhead cost

Question 30

absorption-costing income or full-costing income

Answer 30

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

Question 31

COGM

Answer 31

cost of goods manufactured

–represents the total manufacturing cost of goods completed during the current period

Question 32

COGS

Answer 32

manufacturing cost of the units that were sold during the period

Question 33

traceability

Answer 33

ability to assign cost directly to a cost object

Question 34

direct tracing

Answer 34

process of identifying and assigning costs to a cost object that are specifically or physically associated with the cost object

Question 35

driver tracing

Answer 35

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

Question 36

traditional cost accounting

Answer 36

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

Question 37

traditional cost control

Answer 37

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

Question 38

activity-based cost accounting

Answer 38

emphasizes tracing over allocation

uses both unit- and non-unit-based activity drivers

Question 39

activity-based cost control

Answer 39

focuses on accountability for activities rather than costs

activity-based management focuses on improving customer value

Question 40

product costs

Answer 40

ex. direct materials, direct labor, overhead

Question 41

period costs

Answer 41

ex. general and administrative expenses, like office supplies

Question 42

direct costs

Answer 42

costs that can be traced easily or accurately to a cost object

Question 43

indirect costs

Answer 43

costs that cannot be traced easily or accurately to a cost object

Question 44

allocation

Answer 44

assignment of indirect costs to cost objects