Manager and Management Accounting Flashcards
Measures, analyzes, and reports financial and nonfinancial information that helps managers make decisions to fulfill organizations goals.
Management Accounting
Need not to be GAAP compliant.
Management Accounting
Managers use this to develop, communicate, and implement strategies, coordinate product design, production, and marketing decisions and evaluate a company’s performance.
Management Accounting Information
It focuses on reporting financial information to external parties such as investors, government agencies, banks, and suppliers, based on GAAP.
Financial Accounting
Measures, analyzes and reports financial and nonfinancial information related to the costs of acquiring or using resources in an organization.
Cost Accounting
It part of the information collected to make management decisions.
Cost Information
The purpose of information is to help managers make decisions to fulfill an organization’s goals.
Management Accounting
The primary users of management accounting are:
Managers of the organization
The focus and emphasis of management accounting is..
It is future-oriented.
The rules and measurement of reporting for management accounting is..
Internal measures and reports do not have to follow GAAP.e
The internal measures and reports of management accounting are based on..
Cost-benefit analyses
The time span of reports management accounting use…
Varies from hourly information to 15 to 20 years.
The type of reports management accounting use
Financial and nonfinancial reports on products, departments, territories, and strategies.
The behavioral implications of management accounting is..
Designed to influence the behavior of managers and employees
Its purpose is to communicate an organization’s financial position to investors, banks, regulators, and other external parties.
Financial accounting
Its external users are investors, banks, regulators, and suppliers.
Financial Accounting
It is past-oriented. Reports on 2016 performance prepared in 2017.
Financial Accounting
It must be prepared in accordance with GAAP.
Financial AccountingF
Financial accounting reporting must be certified by?
External, independent auditors
How are the financial reports of financial accounting are prepared?
Annually and quarterly reports, primarily on the company as a whole.
It primarily reports economic events but also influences behavior because manager’s compensation is often based on reported financial results.
Financial Accounting
It specifies how an organization matches its own capabilities with the opportunities in the marketplace
Strategy
What are the two broad strategies?
Cost leadership and product differentiation
It describes cost management that specifically focuses on strategic issues
Strategic Cost Management
It helps managers formulate strategy by answering questions like who are the company’s most important customers, what is the bargaining power of both supplier and customers, what substitute products exist and how do they differ, and if how the strategy is to be funded.
Management accounting information
Creating _______ is an important part of planning and implementing strategy.
Value
It is the usefulness a customer gains from a company’s product or service.
Value
It determines the value a customer derives from a product.
Customer experience
It is the sequence of business functions by which a product is made progressively more useful to customers.
Value Chain
Which of the following is consist the value chain?
i. Research and Development
ii. Design of Products and Processes
iii. Marketing
iv. Distribution
v. Customer Service
All of the above
It deals with generating and experimenting with ideas related to new products, services, or processes.
Research and Development
It is the detailed planning, engineering, and testing of products and processes.
Design of products and processes
It is the procuring, transporting and storing and coordinating and assembling resources to produce a product or deliver a service.
Production
It is a term for the procuring, transporting, and storing resources.
Inbound Logistics
It is the coordinating and assembling of resources to produce a product or deliver a service.
Operations
It includes promoting and selling products or services to customers or prospective customers.
Marketing
It is providing after-sales services to customers
Customer Service
The processing of orders and shipping products or services to customers.
Distribution
The processing of orders and shipping products or services to customers in the distribution function of the business is also called?
Outbound Logistics
It is a strategy that integrates people and technology in all business functions to deepen relationships with customers, partners, and distributors.
Customer Relationship Management
It is a strategy that profit and grow by providing quality products or services at low prices and by judiciously managing their costs.
Cost Leadership Strategy
It is a strategy that generate profits and growth by offering differentiated or unique products or services that appeal to their customers and are often priced higher than competitors.
Product Differentiation Strategy
CRM initiatives use of __________ to coordinate all customer-facing activities and design and production activities necessary to get products to customers.
Technology
Parts of the value chain associated with producing and delivering a product or service.
Production and Distribution
Production and distribution function together are known as the…
Supply Chain
It describes the flow of goods, services, and information from the initial source to their delivery regardless of whether the activities occur in one or multiple organizations.
Supply Chain
What are the five key success factors?
Cost and efficiency, quality, time, innovation, and sustainability
To achieve _______ managers eliminate some activities and reduce costs of performing other activities in all value-chain functions.
Target cost
It is the reduction of overall costs and improving efficiency to generate more income.
Cost and efficiency
An integrative philosophy of management for continuously improving the quality of products and processes.
Total Quality Management
It has many dimensions.
Time
The time it takes for companies to create new products or services and bring them to the market.
New-product Development Time
It describes the speed at which an organization respond to customer requests.
Customer-response Time
It is the primary cause of delays.
Bottlenecks
A point of congestion in a production system that prevents it from functioning at full speed.
Bottleneck
It when the work to be performed on a machine or facility exceeds its available capacity.
Bottleneck
Its constant flow is the basis for the ongoing success of a company.
Innovation
It is applying the key success factors of cost and efficiency, quality, time and innovation to promote ___________.
Sustainability
The development and implementations of strategies to achieve long-term financial, social, and environmental goals.
Sustainability
It serves as a benchmark managers use to continuously improve their operations.
Competitive Information
The Five-Step Decision-Making Process.
A. Identify the problem and uncertainties
B. Obtain Information
C. Make predictions of the future
D. Make decisions by choosing among the alternatives
E. Implement the decision, evaluate performance, and learn
It consists of selecting an organization’s goals and strategies.
Planning
It predicting results under various alternative ways of achieving those goals.
Planning
It is communicating the goals and how to achieve them to the entire organization.
Planning
They serve as business partners in these planning activities because they understand key success factors and what creates value.
Management Accountant
What is the role of the five-step decision-making process?
Planning and control of operations and activities
How do management accountants help firms make strategic decisions?
By providing information about the sources of competitive advantage
The quantitative expression of a proposed plan of action by the management and is an aid to coordinating what needs to be done to execute the plan.
Budget
The most important planning tool when implementing strategies.
Budget
It comprises taking actions that implement the planning decision, evaluating past performance, and providing feedback and learning.
Control
Helps management accountants provide the most value to the strategic and operational decision making of their companies.
Management Accounting Guidelines
Compares the benefits of an action/purchase to the costs. The benefits should exceed the costs.
Cost-benefit Approach
Recognizes that management is primarily a human activity that should focus on encouraging individuals to do their jobs better.
Behavioral and technical considerations
Managers use alternative ways to compare costs in different decision-making situations because there are ________.
Different costs for different purposes
Helps managers make wise economic decisions by providing desired information in an appropriate format and at a preferred frequency.
Technical considerations
Are directly responsible for achieving the goals of the organization.
Line Management
Provides advice, support, and assistance to line management.
Staff Management
Includes production, marketing and distribution management.
Line Management
Includes management accountants, information technology, and human resource management.
Staff Management
The chief financial officer is also called the _______.
Finance Director
He is responsible for overseeing the financial operations of an organization.
Chief Financial Officer
What are the six responsibilities of a CFO?
Controllership
Tax
Treasury
Risk Management
Investor Relations
Strategic Planning
Provides financial information for reports to managers and shareholders and oversees the overall operations of the accounting system.
Controllership
Plans income taxes, sales taxes, and international taxes.
Taxes
Oversees banking and short and long-term financing, investments, and cash management.
Treasury
Manages the financial risk of interest and exchange rate changes and derivatives management.
Risk Management
Communicates with, responds to, and interacts with shareholders.
Investor Relation
Defines strategy and allocates resources to implement strategy.
Strategic Planning
The controller is also known as?
Chief Accounting Officer
The financial executive primarily responsible for management accounting and financial accounting.
Controller
The controller exercises control by?
By reporting and interpreting relevant data
A staff manager that reports to the CEO
CFO
Value is quickly destroyed by?
Unethical behavior
True or False. The statement of ethical professional practice
stipulates that members of IMA shall behave ethically. A commitment to the ethical professional practice includes overarching principles that express our values, and standards that guide our conduct.
True
It was passed in the United States as a response to a series of corporate scandals.
Sarbanes-Oxley legislation 2002
The Sarbanes-Oxley legislation authorizes this to oversee, review, and investigate the work of auditors.
Public Company Accounting Board
Employees that report violations of illegal and unethical acts are called?
Whistleblowers
The four overarching principles are?
Honesty, Fairness, Objectivity, and Responsiblity
The Standards of Ethical Behavior are?
Competence, Credibility, Confidentiality, and Integrity
The act Sarbanes-Oaxley focuses on improving?
Internal Controls
Corporate Governance
Monitoring of Managers
Disclosure Practices of Public Companies
A single database that collects data and feeds them into applications that support a company’s business activities.
ERP System
All businesses are concerned about?
Cost and revenues
A resource sacrificed to achieve a specific objective.
Cost
Usually measures as a monetary amount that must be paid to acquire cost of goods sold.
Cost
Cost incurred that is considered historical or past cost.
Actual Cost
A predicted, forecasted cost.
Budgeted Cost
Anything for which a measurement is desired.
Cost Object
A cost system determine the costs of various cost objects in two stages:
Accumulation followed by Assignment
The collection of cost data in some organized way by mean of an accounting system
Cost Accumulation
Favorable means?
Not exceeding the budget.
Unfavorable means?
Exceeding the budget.
Related to the particular cost object and can be traced to it.
Direct Costs
Used to describe the assignment of direct costs to a particular cost object.
Cost Tracing
Related to the particular cost object but cannot be traced to it.
Indirect Costs
Used to describe the assignment of indirect costs to a cost object.
Cost Allocation
General term that encompasses both tracing and allocation of direct and indirect costs.
Cost Assignment
What are the factors affecting direct and indirect costs?
Materiality of the cost
Available information-gathering technology
Design of Operations
The smaller the amount of the cost, the less likely it is cost-effective to trace it.
Materiality Of the Cost
Improvements in information-gathering technology make it possible to consider more and more costs as ___________.
Direct costs, availability of information-gathering technology
Classifying a cost as direct is easier if the facility is used exclusively for a specific cost object.
Design of Operations
Can maybe both direct cost of one cost object and indirect cost to another.
Specific Cost
The classification depends on the?
Choice of cost object.
Records the cost of resources acquires and track how those resources are used to produce and sell products/services.
Costing System
Changes in total proportion and is constant in a per unit basis.
Variable Costs
Two ways which costs behave:
Variable and Fixed
It is used to describe the variable cost behavior.
Strictly variable or Proportionately variable
Always focus on the _________ when considering both variable and fixed costs.
Total Costs
Reducing fixed costs requires __________ on the part of managers.
Active Intervention
Cost that has both variable and fixed elements.
Mixed or Semivariable Costs
A variable, such that level of activity or volume, that casually affects costs over a given time span.
Cost Driver
An event, task, unit of work with a specified purpose - designing, testing, setup.
Activity
There is a cost driver in variable costs and only in the long run for fixed costs. True or False.
True
Activity-based Costing Systems
Costing systems that identify the cost of each activity.
The band or range of normal activity or volume in which there is a specific relationship between level of activity and the cost in question.
Relevant Range
Variable costs only change proportionately with changes in volume outside the relevant range. True or False?
False
Also called an average cost.
Unit Cost
Three types of manufacturing inventories.
Direct Materials Inventory
WIP inventory
Finished-Goods Inventory
The merchandising only holds on type of inventory which is?
Merchandise Inventory
What are the three manufacturing costs?
Direct Materials
Direct Labor
Manufacturing Overhead or Indirect Manufacturing Overhead Costs
What are considered prime costs?
Direct Materials and Direct Labor
What are considered conversion costs?
Direct Labor
Factory Overhead Costs
All costs of the product that are considered assets in a company’s balance sheet when costs are incurred and expensed as COGS when product is sold.
Inventoriable Costs
Inflows of assets received for products customers purchase.
Revenue
Includes all manufacturing costs to produce them.
Cost of Goods Sold
All costs in the income statement other than the cost of goods sold.
Period Costs
Refers to the cost that are treated as expenses of the accntng period in which they are incurred. E.g. Design, marketing, and customer service cost.
Period Costs
In manufacturing companies, what is considered period costs?
All nonmanufacturing costs
In merchandising sectors, what is considered period costs?
All costs not related to Cost of Goods Purchased for Sale
It is a key driver of success.
Innovation
Are research and development costs inventoriable or period costs?
Period cost
What are the four steps for the flow and of revenue and costs for a manufacturing company?
- Cost of Direct Materials Used
- Total Manufacturing Costs Incurred
- Cost of Goods Manufactured
- Cost of Goods Sold
Refers to the cost of goods brought to completion, whether they were started before or during the period.
Cost of Goods Manufactured
It is the cost of finished-goods inventory sold to customers during the current period.
Cost of Goods Sold
The equation Revenues - Cost of COGS give rise to?
Gross Margin or Gross Profit
What is the equation for Operating Income?
Total Rev - COGS - Operating Expenses = Operating Income
All direct manufacturing costs are called?
Prime Costs
It represents all manufacturing costs incurred to convert direct materials into finished goods.
Conversion Costs
Measuring costs require?
Judgment
Overtime and Idle time pay are considered manufacturing overhead or manufacturing labor?
Manufacturing Overhead
It is the wage rate paid to workers in excess of their straight-time wage rates.
Overtime Premium
Refers to the wages paid for unproductive time caused by lack of orders, machine or computer breakdowns, work delays, and the like.
Idle Time
It includes employer payments for employee benefits.
Payroll Fringe Costs
Is payroll fringe cost a direct or indirect labor?
Direct Labor
It is the time spent by direct laborers for correcting errors.
Rework Labor
It is the sum of the costs assigned to a product for a specific purpose.
Product Cost
For the purpose of making decisions about pricing and promoting products that generate the most profits.
Product and product-mix decisions
A contract such as this is referred to as a cost-plus agreement.
Reimbursement under government contracts
Are typically used for services and development contracts.
Cost-plus agreement.
What are the three framework for cost accounting and cost management?
- Calculating cost of products, services, and other cost objects.
- Obtaining information for planning and control and performance evaluation.
- Analyzing relevant information for making decisions.
Is the most commonly used tool for planning and control.
Budgeting
It forces managers to look ahead, to translate a company’s strategy into plans.
Budget
An analysis used to study the behavior and relationship among these elements as changes occur.
Cost-Volume-Profit Analysis
The difference between total revenues and total variable costs.
Contribution Margin
A useful tool for calculating contribution margin and operating income.
Contribution Margin Per Unit
The quotient between contribution margin and revenues.
Contribution margin percentage
A useful tool for calculating how a change in revenues changes contribution margin.
Contribution margin percentage
A widely used technique to evaluate how sales fluctuations affect profitability.
Contribution Margin Analysis
Three ways to express CVP relationships.
Equation method, contribution margin method, and graph method
The number of units sold is the only cost driver in CVP relationship. True or False
True
Total costs can be separated into two components, what are these two?
Fixed and variable component
A variable, such as volume, that casually affects revenues.
Revenue Driver
The quantity of outputs sold at which total revenue equal total cost - 0 result of operating income.
Breakeven Point
A graph that shows how changes in quantity of units sold affect operating income.
PV graph
Is operating income plus nonoperating income minus nonoperating costs minus income taxes.
Net Income
Three ways to use CVP Analysis in decision making includes decision to advertise, decision to reduce selling price, and determining target price.
True or False?
True
Decisions that entail risk.
Strategic decisions
A what-if technique managers use to examine how an outcome will change if the original predicted data are not achieved.
Sensitivity Analysis
Answers the what-if question and an important aspect of sensitivity analysis.
Margin of Safety
It gives managers a good feel for a decision’s risk.
Sensitivity Analysis
The possibility that an actual amount will deviate from an expected from an expected amount.
Uncertainty
Use CVP analysis to plan variable and fixed costs to compare risk of losses versus higher returns. True or False
True
Operating leverage is the measure of ___________ across alternative cost structures.
Risk-return tradeoff
Describes the effects that fixed costs have on changes in operating income.
Operating Leverage
The quantities of various products that constitutes a company’s total unit sales.
Sales Mix
Sales mix of products remains constant as total units sold changes. True or False?
True
When applying CVP in service and not-for-profit orgs one should define appropriate?
Cost measures
What is the difference between contribution margin and gross margin?
CM provides data for CVP and risk analysis while GM is a measure of competitiveness.
It includes all variable manufacturing costs and all fixed costs.
Cost of Goods Sold
In merchandising, gross margin is equal to contribution margin. True or False
True
It measures how much a company can charge for its products over and above cost of acquiring/producing them.
Gross Margin
It indicates how much of a country’s revenues are available to cover fixed costs.
Contribution Margin
In case of manufacturing, cost of goods sold is equal to the variable cost of goods purchased making both gross margin and contribution margin identical.
False. Its only in the merchandising sector that that is the case.
The possibility that an actual amount will deviate from an expected amount.
Uncertainty
A possible relevant occurrence.
Event
An objective that can be quantified, such as maximize income or minimize costs. Also used by managers to choose the best alternative action.
Choice Criterion
It is the likelihood or chance that an event will occur.
Probability
Describes the likelihood, or the probability, that each of the mutually exclusive and collectively exhaustive set of events will occur.
Probability Distribution
In terms of the choice criterion, it is the predicted economic results of the various possible combinations of actions and events.
Outcomes
A summary of the alternative actions, events, outcomes, and probability.
Decision Table
Weighted average of the outcomes, with the probability of each outcome serving as the weight.
Expected Value
It means that the event becomes known.
Uncertainty Resolved
Good decisions and good outcome can exist without the other one. True or False?
True
Decisions could only be made based on the information that is only available at the time of evaluating and making decision. True or False?
True
It is anything for which a measurement of costs is desired.
Cost Object
A grouping of individual indirect cost items.
Cost Pool
A systematic way to link an indirect cost or group of indirect costs to cost objects.
Cost-allocation base
Two criterions for allocating costs:
Benefits Received
Ability to Bear Costs Allocated
The cost object is a unit or multiple units of a distinct product or service is called a?
Job
The cost objects are heterogenous and the cost objects are distinct.
Job-Costing System
The cost object is masses of identical or homogenous products.
Process-Costing System
It is used to cost a distinct product.
Job-Costing System
It is used to cost masses of similar or identical units.
Process-Costing System
A costing system that traces direct costs to a cost object based on actual direct-cost rates times the actual quantities of direct-cost inputs.
Actual Costing
What are the two time periods used to compute indirect cost rates?
Numerator Reason
Denominator Reason
A costing system that traces direct costs to a cost object by using actual direct-cost rate times the actual quantities of direct-cost inputs and allocates indirect costs based on the budgeted indirect-cost rates times the actual quantities of cost-allocation bases.
Normal Costing
An original record that supports journal entries in an accounting system.
Source Document
It is used to record and accumulate all costs assigned to a specific job, starting when work begins.
Job-Cost Sheet or Job-Cost Record
It contains information about the cost of direct materials used on a specific job and department.
Materials-requisition record
A source document that contains the amount of labor time used for a specific job and department.
Labor-time Sheet
It presents the total of separate jobs-cost records pertaining to all unfinished jobs.
Work-in-Process Control
When jobs are completed or sold they are recorded in?
Finished-Goods Control
Under normal costing, it is the amount of manufacturing overhead costs allocated to individual jobs based on the budgeted rate.
Manufacturing Overhead Allocated or Manufacturing Overhead Applied
It is the contra account of manufacturing overhead control account.
Manufacturing Overhead Applied
It gives the birds eye view of the costing system.
General Ledger
It gives the worm’s eye view of the costing costing system and contains the underlying details.
Subsidiary Ledgers
This subsidiary ledger is used to continuously record the quantity of materials received.
Materials Records by Type of Material
This subsidiary ledger is used to trace costs of direct manufacturing labor to individual jobs and to accumulate costs of indirect manufacturing labor.
Labor Records by Employee
It makes up the subsidiary ledger for the Manufacturing Overhead Control account and shows details of different categories of overhead costs.
Manufacturing Department Overhead Records by Month
It occurs when the allocated amount of indirect costs in an accounting period is less than the actual amount
Underallocated Indirect Costs
Occurs when the allocated amount of indirect costs in an accounting period is greater than the actual amount.
Overallocated Indirect Costs
This approach restates all overhead entries in the general ledger and subsidiary ledgers using actual cost rates rather than budgeted cost rates.
Adjusted Allocation-rate Approach
This approach spreads under or overallocated amounts among ending WIP inventory, Finished Goods Inventory and Cost of Goods Sold.
Proration Approach
In this approach, the total under or overallocated manufacturing overhead is included in the COGS.
Write-off to COGS Approach
