OPERATION MANAGEMENT Flashcards
MANAGEMENT ACCOUNTING
Is the process of measuring and using information for the following purposes:
- Management planning, decision making and control
- Reporting assets and COGS for FS and income taxes
- Reporting of costs under cost-based contracts
ASSIGNMENT OF COSTS TO COST OBJECTS
Cost assignment is the process of tracing direct costs and allocating indirect/common costs to cost objects.
COST OBJECT
is an item or activity for which a separate and discrete measurement of costs is desired, such as a product, function, dept, division, contract or service
COST FOR EXTERNAL REPORTING
is the financial accounting purpose of reporting the value of inventory so that the COGS and income can be determined. Costs are classified based on their attachability to inventory
PRODUCT COSTS
Direct costs can be attached to inventory based on associating cause and effect. Indirect costs are attached by systematic and rational allocation
-Are DM, DL and mfg OH
PERIOD COSTS
These costs are not attached to inventory, but are recognized immediately
- No associated with mfg process
- Are selling, general or admin expenses
DIRECT MATERIALS
Raw material costs that can be reasonably traces to a product on a per-unit basis
DIRECT LABOR
Wages relating to employees who work directly on the product (ie hands on) that can be reasonably traced to a product on a per-unit basis
INDIRECT MATERIALS
These are costs incurred in the mfg process, but either they do not become part of the product (ie machine oil) or they are not reasonably traceable to the product (eg paint, varnish, glue). Such costs become of factory overhead and are attached to the product through an allocation process
INDIRECT LABOR
This incorporates factory labor costs for personnel who do not work directly on the product and whose costs cannot be reasonably traced on a per-unit basis. These costs become part of factory OH and are attached to the product through an allocation process
FACTORY OH
Aka: mfg OH, factory burden, or simply OH. It includes all costs except direct labor and direct materials that are part of making the product, but which are not directly traced to a specific product. Costs are accumulated in factory OH accounts. They may either vary with production (variable costs) or not (fixed Costs). The costs are traditionally allocated to each unit produced on some basis such as $ per direct labor hour, per direct labor costs, or per machine hour
PRIME COSTS
Direct materials and direct labor together
CONVERSION COSTS
All factory costs other than direct materials are called conversion costs; they are required to convert materials into a finished product. Include DL and F/OH
RELEVANT COSTS
Are those expected to differ among alt future courses of action. AKA: incremental costs or differential costs
OPPORTUNITY COSTS
Are those revs that will be lost if one action is chosen over another
RAW MATERIALS
This inventory includes anything tangible that becomes part of the product or its packaging. Raw mat are held in inventory until requisitioned by the production department. In the just-in-time (JIT) production system, raw materials are not stored in inventory, because they are not delivered to the factory until they are needed in production.
What is the general inventory reconciliation formula?
Beg Inventory +Purchase - uses = End Inventory
Companies in what type of industry may use a standard cost system for cost control?
Both mass production and service industries
-Historically, Std cost systems have been mainly used by companies involved in mass production of products. There is no inherent reason by Std cost system would not work equally well for service-oriented companies
JOB COSTING OR JOB ORDER COSTING
Is a tracking system used for customized products or services
JOB COST RECORDS
Costs are accumulated by the job, or job lot, and are recorded on job cost records as work progresses. Entries are made into the WIP ledger account for mfg inputs from the job cost records. The job cost records make up a subsidiary ledger that supports the control account WIP
VALUE-ADDING COSTS
Are those costs that are necessary to production and add value to the product.
PROCESS COSTING
is used for products whose individual units are indistinguishable from other units (eg sugar, corn flakes, textiles, paint).
- Costs are accumulated by process, then applied to the units processed using an avg cost for input units. There is a separate WIP account for each dpt or process which the units flow
- End of each period, costs are allocated b/n the units completed and transferred to the next dept and the unfinished units remaining in the EI based on equivalent finished units
