Module 1 (lesson 1+2) Flashcards
Which different tasks do managers in organizations have?
- Making plans
- Organizing resources
- Directing personnel
- Controlling operations
What is planning?
Planning involves selecting a course of action and specifying how the action will be implemented. Key steps are:
- Identify Alternatives: Consider various options that align with the organization’s goals.
- Evaluate Alternatives: Analyze each option based on its potential to further the organization’s objectives.
- Select the Best Alternative: Choose the course of action that best meets the organization’s goals.
What is directing and motivating?
Directing and motivating involves mobilizing people to carry out plans and run routine operations. We use the information for:
- Set performance targets
- Performance evaluation
- Cost control and efficiency improvements
- Decision-making support
What is controlling?
Controlling involves ensuring that the plan is actually carried out and is appropriately modified as circumstances change. Key to effective control is feedback which tells if the operations are on track and different tools are used:
- Detailed reports
- Performance reports
What is decision making?
Decision making involves selecting a course of action from competing alternatives. Key decision areas
- What to sell: Decisions about products and services offered.
- Who to serve: Decisions about customer segments and market focus.
- How to execute: Decisions about operational processes and resource allocation
What is the difference between Management accounting and Financial accounting?
Management accounting is concerned with providing information to managers
Financial accounting is concerned with providing information to shareholders, creditors and others who are outside an organization
A position on the organization chart that is directly related to achieving the basic objectives of an organization is called…
A line position
A position provides service or assistance to other parts of the organization and does not directly achieve the basic objectives of the organization is called…
A staff position
The delegation of decision-making authority throughout an organization by allowing managers at various operating levels to make key decisions relating to their area of responsibility is called…
Decentralization
A detailed report to management comparing budgeted data against actual data for a specific time period is called…
A Performance report
The manager in charge of the accounting department is generally known as…
Chief Accountant
The accounting and other reports coming to management that are used in controlling the organization are called…
Feedback
Management accounting places less emphasis on … and more emphasis on … than financial accounting.
Precision and non-monetary
What is cost?
Cost refers to the monetary value of resources used or spent to acquire goods or services. Cost is crucial in determining pricing, profitability, and financial performance within a business. Cost classification is an essential concept in accounting and finance, allowing businesses to organize and analyze expenses in ways that facilitate decision-making, budgeting, and financial reporting. Classification based on
- Nature or element
- Behaviour
- Function
- Traceability
- Relevance
- Ability to control
- Normalcy
- Timeframe
- Ability to measure
- Ability to make decisions
What is manufacturing costs and what categories are there?
Manufacturing Costs are the costs involved only in the production process. They are essential for creating the product but don’t cover anything beyond that. Manufacturing costs are divided into three categories:
- Direct materials: Direct materials are those materials that become an integral part of the finished product and that can be physically and conveniently traced to it
- Direct labour: Direct labour is sometimes called touch labour, since direct labour workers typically touch the product while it is being made.
- Manufacturing overhead: Manufacturing overhead includes all costs of manufacturing except direct materials and direct labour. Costs that cannot be traced to specific units
What is non-manufacturing costs and what categories are there?
Non-manufacturing costs are divided into two categories
- Marketing or selling costs: Include all costs necessary to secure customer orders and get the finished product or service into the hands of the customer.
- Administrative costs: These are the expenses related to the overall management and operation of the business. They are not tied to making or selling the product but are necessary for running the company.
What is the difference between product costs and period costs?
- Product Costs are broader and include all costs associated with getting a product ready for sale. Costs that are associated with the production of goods. These costs are inventoried and expensed and afterwards as cost of goods sold (COGS) when the product is sold.
- Period costs are all the costs that are not included in product costs. Instead, these costs are related to running the business, and they are recorded as expenses in the period they happen.
What is a financial statement and what types are there?
Financial reports are for creditors, shareholders and other stakeholders to show the financial condition of the firm and the firm’s earnings performance over some specified interval. There are three types of financial statement
- Income statement (Profit and loss statement)
- Balance sheet
- Cash flow statement
What types of inventories do manufacturing companies have?
- Raw materials inventory: Include raw materials purchases
- Work in progress inventory: Consists of goods that are only partially completed. Includes direct labour and manufacturing overhead
- Finished goods inventory: Consists of goods that are ready to be sold
What is cost behaviour?
- Cost behaviour means how a cost will react or respond to changes in the level of business activity. As the activity level rises and falls, a particular cost may rise and fall as well – or it may remain constant. Cost behavior is relevant for decision making using absorption costing
What types of cost behaviours are there?
- Variable cost: Costs that vary directly with the level of production or sales. Examples include raw materials, direct labor, and sales commissions
- Fixed cost: Costs that remain constant regardless of the level of production or sales volume. Examples include rent, salaries, and insurance.
- Semi-Variable (or Mixed) Costs: Costs that contain both fixed and variable components. An example might be a utility bill that has a fixed monthly charge plus a variable charge based on usage.
What is cost object and why do companies assign them?
- A ost object is anything a business wants to know the cost of. Examples are product, customer, project etc.
- They are assigned due to reasons such pricing, profitability or spending control
How can a cost object be assigned?
They can be assigned as:
- Direct cost: Expenses that can be easily and directly linked to a specific item or activity.
- Indirect cost: Expenses that can’t be traced directly to a specific item or activity. They are shared among different items or activities.
What is absorption costing?
Absorption costs captures all costs related to the production (manufacturing) of a product:
- Fixed cost
- Variable cost
- Direct cost
- Indirect cost
What is relevant costs?
Costs that will be affected by a decision and should be considered when making that decision
What is irrelevant costs?
Costs that will not be affected by a decision and, therefore, should not be considered
What is controllable costs?
Costs that can be influenced or controlled by a specific manager within a given period. For example hire and fire
What is uncontrollable costs?
Costs that cannot be influenced by a manager, often because they are set at a higher organizational level
What is normal costs?
Costs that are expected to occur under normal operating conditions
What is abnormal costs?
Costs that are not expected to occur under normal operating conditions
What is capital costs?
Big, long-term investments in assets
What is revenue costs?
Regular, short-term expenses for daily operations
What is actual costs?
Actual costs are the real expenses that occur during a specific time period.
What is standard costs?
Are estimated or planned costs set in advance. They represent what you expect to pay under normal conditions
What is opportunity costs?
The potential benefit that is given up when one alternative is selected over another
What is sunk costs?
Expenses that have already been spent and cannot be changed or recovered, no matter what decisions you make in the future
What is differential costs?
It is the extra or reduced cost you get when you choose one option over another
What is marginal costs?
It is the cost of producing one additional unit of a product
