Midterm Flashcards
ABC
method of allocating overhead based on each product’s use of activities in making the product using cost drivers
Balanced Scorecard
performance-measurement approach to evaluate a company’s operations
Controller
financial officer responsible for a company’s accounting records, internal control, fin statements and TR’s
COGM
(total cost of WIP) - (Ending WIP inventory)
Direct Labor
work directly related to converting raw materials to finished goods
Enterprise Resource Planning
comprehensive software to manage all business processes
JIT Inventory
goods are manufactured or purchased just in time for sale
Line Positions
jobs directly involved in primary revenue-generating operating activities
Manufacturing Overhead
costs indirectly associated with the manufacture of the finished product
Period Costs
matched with revenue of specific time period and charged to expense as incurred
SOX Act
intended to reduce unethical corporate behavior
Staff Positions
jobs that support effort of line employees
Total Cost of WIP
beginning WIP + total manufacturing costs of current period
Total Manufacturing Costs
direct materials, direct labor, manufacturing overhead incurred in period
Triple Bottom Line
evaluation of company’s social responsibility
WIP Inventory
partially completed manufactured units
Cost Accounting
measuring, recording, and reporting product/service costs
Job Cost Sheet
used to record the costs chargeable to specific job and determine total/unit costs of the completed job
Job Order Cost System
system where costs are are assigned to each job or batch
Overapplied Overhead
overhead applied to WIP is greater than overhead incurred
Predetermined Overhead Rate
rate based on relationship between estimated annual overhead and estimated annual operating activity, expressed by common base
Process Cost System
used when company manufactures large amount of similar products
Activity Cost Pool
overhead cost attributed to distinct type of activity
Batch-Level Activities
performed for each batch of products rather than each unit
Cost Driver
factor or activity that has a direct cause/effect relationship with resources consumed
Facility-Level Activities
required to support entire production process
Non-Value-Added Activity
if eliminated, would not reduce perceived value of product
Product-Level Activities
support of an entire product line but not for every unit or batch
Unit-Level Activities
performed for each unit of production
Activity Index
activity that causes changes in the behavior of costs
Break-Even Point
total revenue = total costs
CM
revenue - variable costs
CM Ratio
% of each dollar sales available to apply to fixed costs and contribute to net income; CM/Selling Price
CVP Analysis
effects on changes in costs and volume on profits
CVP Income Statement
for internal use (not GAAP) classifies costs as F or V, reports CM in body of statement
High-Low Method
uses total costs incurred at high and low levels of activity to classify mixed costs into fixed and variable components
Margin of Safety
difference between actual/expected sales and sales at break-even point
Mixed Costs
contain both a variable and fixed element; do not change proportionately with activity level
Regression Analysis
estimates cost equation by employing information from all data; minimizes sum of squared distances from the line to the data points
Relevant Range
range of activity index over which the company expects to operate during the year
Target Net Income
objective set by management
Unit CM
revenue - VC
Absorption Costing
all manufacturing costs are charged to the product
Cost Structure
proportion of fixed versus variable costs that a company incurs
Degree of Operating Leverage
measure of extent to which a company’s net income reacts to a change in sales; CM/NI
Theory of Constraints
used to identify and manage constraints in order to achieve goals
Variable Costing
only variable manufacturing costs are product costs, and fixed manufacturing costs are period costs
Participative budgeting
each level of management participates
Budgetary slack
when managers intentionally underestimate revenues or overestimate expenses to achieve goals easier.
Long-range planning is usually at least __ years.
5
Master budget contains what two classes of budgets?
Operating and financial
Operating budget
result in preparation of budgeted income statement. Sales and Production
Financial budget
cash resources; capital expenditure budget, cash budget, budgeted balance sheet
Sales budget
prepared first, from sales forecast
Production budget
number of units to produce to meet sales demand
Direct materials budget
quantity and cost of direct materials to be purchased
Direct labor budget
quantity (hours) and cost of labor to meet production requirements
Manufacturing overhead budget
distinguished between variable and fixed costs, per labor hours
Selling & Admin expense budget
combines operating expenses. Variable separate from fixed
Budgeted Income Statement
end-product. Expected profitability for time period.
Cash budget
anticipated cash flows (receipts, disbursements, and financing)
Budgeted balance sheet
Assets and Liabilities
