Module 1: Introduction to Cost Accounting Flashcards
Job Costing System:
A system for assigning costs to products or services that differ in the amount of materials, labor and overhead required.
Direct Labor:
The labor cost of employees who convert raw materials into finished products.
Direct Materials:
Materials that become a physical part of a finished product and whose costs are easily traced to the finished product.
Manufacturing Overhead (MOH):
All manufacturing costs other than direct materials or direct labor; also called factory overhead and indirect manufacturing cost.
Why is managerial accounting important?
Managerial accounting helps managers to make operational decisions; intended to help increase the company´s operational efficiency, which also helps in making long-term investment decisions.
What are the focuses as well as the uses for both financial accounting and cost accounting?
- Financial Accounting:
- > Focus: To provide information to external decision-makers.
- > Uses: To prepare financial statements and report monetary transactions.
- Cost Accounting:
- > Focus: To provide information to internal decision-makers.
- > Uses: To help managers make decisions for the company´s success.
What is a service business? Provide some examples:
Service companies are those that do not sell a physical product but instead provide services to their customers.
Examples: banks, accounting firms, and educational firms.
What is a merchandising business? What are its subdivisions?
Merchandising companies are those that sell products but do not manufacture them. Merchandising companies are broken down into the following types:
- Retailers
- Wholesalers
What are retailers? Provide some examples:
Retailers buy smaller amounts of bulk goods from wholesalers or distributors and resell them to the end customers.
Examples: Walmart, Best Buy, and Target
What are wholesalers? Provide some examples:
Wholesalers buy bulk goods from manufacturers or distributors and store them in order to sell them at a later date to retailers.
Examples: eBay
What is a manufacturing business? Provide some examples:
Manufacturing companies are companies that transform raw materials into end products.
Examples: Volkswagen, Siemens, and Monster Beverages
Company´s Organizational Chart:
Helps on showing the relationship between departments and divisions as well as the managers responsible for each section.
Board of Directors:
- Responsible for Developing the strategic goals of the corporations.
- Elected by the shareholders.
Chief Executive Officer (CEO):
- Has the ultimate responsibility
- Implements the company´s short- and long-term goals
Line Positions:
Directly involved in providing goods and services to the customers.
Staff positions:
-Responsible for supporting the line positions.
What are the 3 managerial accounting functions?
- Planning
- Operational planning
- Strategic Planning
Planning:
Setting goals and deciding how to achieve them.
What is operational planning´s focus? What is its time period? Provide one example:
- Focus: short-term action, dealing with the day-to-day operations of a company.
- Time period: <= 1 year
- Example: Budgeting and projected sales for the current year.
What is strategic planning´s main focus? What is its time period? Provide an example:
- Focus: long-term goals
- Time period: 3 to 10 years into the future
- Example: Moving from a service company into a manufacturing company.
What is the purpose of Directing? Provide some examples:
-Running the day-to-day operations of a business
Examples:
-> The production manager ensures that we have enough materials to produce tablets
-> The marketing manager ensures that we have an advertising plan for our tablets.
Controlling:
Monitoring the day-to-day operations and keeping the company on track.
When will a product be able to leave the balance sheet and go to the income statement?
Only when a product is sold is when it leaves the balance sheet and goes to the income statement to become reported as an expense.
In which financial statements do the following items belong into?
- Unused raw materials
- Unfinished work-in-progress
- Unsold finished goods inventory
- Finished goods sold
- Balance sheet
- Balance sheet
- Balance sheet
- This inventory account is reported in the income statement as an expense
What is the flow of costs through inventory accounts?
Direct Materials Inventory -> Work-in-Progress Inventory -> Finished Goods Inventory
What is usually the largest expense in a manufacturer´s income statement?
The cost of goods manufactured is usually a manufacturer´s largest expense in the income statement.
Raw Materials:
Materials used to manufacture a product.
Work in Process:
Goods that have been started in
manufacturing process but not yet complete.
Finished Goods:
Completed goods that have not yet been
sold.
What are the inventories that a manufacturing company carries?
- Raw materials inventory
- Work-in-progress inventory
- Finished goods inventory
Direct cost:
It can be easily and cost-effectively traced to a cost object.
Indirect cost:
It cannot be easily and cost-effectively traced to a cost object.
Cost object:
A cost object is often a product or department for which costs are accumulated or measured.
Ex: A product is the cost object for direct materials.
Define the following manufacturing overhead (MOH) costs:
- Indirect materials
- Indirect labor
- The raw materials used in production that are difficult or not cost-effective to trace.
- The cost of labour in the factory for persons not directly producing that product.
Define the following types of costs:
- Period costs
- Product costs (Manufacturing costs)
- Non-manufacturing operating costs.
- Costs of making a product(DL, DM, MOH)
What type of company carries 3 different inventory accounts on the balance sheet?
Manufacturing company.
Total Quality Management (TQM):
TQM is a philosophy of continuous improvement in products and processes.
Value chain:
Each step adds value to the end product, and this is referred to as the value chain.
What are the steps of a value chain?
- R&D
- Design
- Production
- Marketing & Sales
- Distribution
- Customer Support
Triple bottom line:
The economic, social, and environmental impact of doing business
