Midterm exam Flashcards
Distinguish financial accounting vs. managerial accounting
Financial is used primarily for outside use, investors, creditors, reporters. It is past only data, and is regulated by GAAP SEC and FASB. Managerial is past, present and future data that is used by insiders. Such as management, executives and operators. It is not regulated.
Information is factual and is characterized by objectivity, reliability, consistency, and accuracy.
Financial
Information is reported continuously and has a current or future orientation
Managerial
Information is provided to outsiders, including investors, creditors, government agencies, analysts, and reporters
Financial
Information is regulated by the SEC, FASB, and other sources of GAAP
Financial
Information is based on estimates that are bounded by relevance and timeliness
Managerial
Information is historically based and usually reported annually.
Financial
Information is local and pertains to subunits of the organization
Managerial
Information includes economic and nonfinancial data as well as financial data.
Managerial
Information is global and pertains to the company as a whole
Financial
j. Information is provided to insiders, including executives, managers, and employees
Managerial
Product Cost
Product cost is the cost of material labor and other resources to make the product.
Period Cost
Period costs include SG&A: selling costs (such as Cars for sales staff, Advertising costs, Promotion cost); general operating costs, and administrative costs (such as Depreciation on administration building, Research and development costs, Cost to rent office equipment, General office supplies), interest costs, and the cost of income taxes.
Wages of production workers
Product Cost
Advertising costs
SG&A
Production supplies
Production Costs
Research and development costs
SG&A
Utilities used in manufacturing facility
Production Costs
Real estate tax levied on a factory
Production Costs
Just in Time Inventory Pros/Cons
Pros: less waste, more efficient, fresher in some cases, customer satisfaction (fast food) Cons: could possibly not be able to satisfy customer needs/wants. Lose out on profit.
Fixed Cost
Remains the same regardless of production, etc. (rent, utilities, salary)
Variable cost
Variable cost/unit always stays the same. Variable cost total decreases hen production decreases and increases when inventory increases. (materials, labor)
Cost object
is any activity, product, process, or service to which accountants wish to trace costs
Direct Costs
Costs that can be traced to cost objects in a cost-effective manner are called direct costs.
Indirect Costs
Costs that cannot be traced to cost objects in a cost-effective manner are called indirect costs.
Unit Level Activity
Unit-level activities are performed each time a unit is produced. For example, providing power to run processing equipment would be a unit-level activity.
Batch Level Activities
Batch-level activities are performed each time a batch is handled or processed, regardless of how many units are in the batch. For example, setting up equipment and shipping customer orders are batch-level activities.
Product level Activity
Product-level activities relate to specific products and must be carried out regardless of how many batches are run or units produced and sold. For example, designing or advertising a product would be product-level activities.
Facility Level Activities
Facility-level activities are carried out regardless of which products are produced, how many batches are run, or how many units are made. For example, heating a factory and cleaning executive offices are facility-level activities.
What are TWO primary characteristics that distinguish relevant from useless information
- Relevant information differs among the alternatives under consideration.
- Relevant information is future-oriented.
Sunk Cost
has been incurred in a past transaction and cannot be changed. It is not relevant for making current decisions.
Opportunity Cost
An opportunity cost is the sacrifice that is incurred in order to obtain an alternative opportunity.
