First Exam Flashcards
Financial Accounting
Services investors’ (owners and creditors) informational needs for:
–Resource allocation: for the investing or lending decision
–Monitoring and Contracting: between investors and the firm’s board and management
Managerial Accounting
Services managers’ informational needs for:
–Resource allocation within the firm
–Operational control
–Management control
Is NOT externally regulated
Cost Object
A product/service or segment of the organization that a cost is assigned to
Activity Cost
An activity that a cost is assigned to
Direct Cost
Related cost that can be uniquely traced to that cost object, ex) direct materials and direct labor
Indirect/Common Cost
Costs that are not directly accountable to a cost object. Can become direct costs as one goes up the hierarchy
Fixed Cost
Remains constant in total over a time horizon regardless of the volume of activity. Can be variable over longer horizons
Variable Cost
Changes in total over a time horizon with the volume of activity. Can be variable with respect to one activity but fixed with respect to another
Period Cost
Expensed in the period incurred regardless of the volume of production
Product Cost
“Attaches” to a product and moves with the product as it is inventoried and expensed when sold
Differential Costs
Difference between the cost of 2 alternative decisions/output levels
Relevant Costs
Avoidable costs only incurred when making specific decisions
Sunk Costs
Costs that have been incurred and cannot be recovered
Committed Costs
Investments that have been made and cannot be recovered
Opportunity Costs
Loss of potential gain from other alternatives when one alternative is chosen
