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Cost Management > Test One > Flashcards

Test One Flashcards

1
Q

Management Accounting definition

A

is the process of measuring,
analyzing, and reporting financial and non-financial
information that helps managers make decisions

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2
Q

Financial accounting

A

External
Past-Oriented
GAAP
Quarterly/Annual

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3
Q

Cost accounting

A

Internal
Future-Oriented
Whatever
Whenever

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4
Q

Cost Accounting definition

A

is the process of measuring,
analyzing, and reporting financial and non-financial
information related to the costs of acquiring or using
resources

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5
Q

Cost Management definition

A

is the activities managers take to
use resources in a way that increases a product’s value
to customers and achieves an organization’s goals

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6
Q

Strategy definition

A

is how the organization matches its own
capabilities with the opportunities in the marketplace

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7
Q

Value Chain

A
  1. R&D
  2. Design
  3. Production
  4. Marketing
  5. Distribution
  6. Customer Service
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8
Q

Success Factors

A

Cost & Efficiency
Quality
Time
Innovation
Sustainability

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9
Q

Five-Step Decision Making Process

A
  1. Identify Problem & Uncertainties
  2. Obtain Info
  3. Predict the Future
  4. Choose among alternatives
  5. Implement, Evaluate, Learn
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10
Q

Management Accounting Guidelines

A

Cost-Benefit Approach
Behavioral and Technical Considerations
Different Costs/Different Purposes

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11
Q

Behavioral and Technical Considerations

A

Technical:
Desired Info
Desired Format
Desired Frequency

Behavioral:
Motivation
Rewards
Improvement

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12
Q

Different Costs for Different Purposes

A

Concept that cost concept for external
reporting purposes is not appropriate for
internal purposes

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13
Q

Line Management

A

Directly responsible for achieving goals of the organization

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14
Q

Staff Management

A

Provides advice, support, and assistance to line management

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15
Q

Cost Objects

A

Point between budgeted costs and actual costs

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16
Q

Direct Costs:

A

Costs directly related to cost object and can be clearly traced to object

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17
Q

Indirect Costs:

A

Costs related to object but cannot be easily traced to object

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18
Q

Fixed Costs

A

costs that are unchanged regardless of production

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18
Q

Variable costs

A

costs that vary based on amount produced

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19
Q

Mixed costs

A

combination of both fixed and variable costs

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20
Q

Cost drivers

A

metric that helps allocate costs

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21
Q

Relevant range

A

costs that might be fixed or variable within some range but different outside

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22
Q

Inventory types

A

Service, merchandising, manufacturing

23
Q

Product costs

A

appear on balance sheet as inventory, expensed as sold

24
Q

Period costs

A

every other cost experienced during the period, on income statement not included in COGS

25
Q

Cost of Goods Sold for a Merchandiser

A

Merchandise Inventory is sold and costs are recorded in Cost of Goods Sold

26
Q

Manufacturing inventory types

A

Raw materials, Work in process, finished goods

27
Q

Manufacturing costs

A

Direct materials, direct labor, indirect

28
Q

Cost of Goods Sold for a Manufacturer

A

Raw Materials -> Work in Process -> Finished Goods -> [Sale]->
Cost of Goods Sold
On balance sheet until sold

29
Q

Cost of Goods Sold =

A

Beginning Finished Goods + Cost of Goods Manufactured - Ending Finished Goods

30
Q

Cost of Goods Manufactured =

A

Beginning work in process + Total Manufacturing Costs - Ending work in process

31
Q

Total Manufacturing Costs =

A

Direct Materials + Direct Labor + Manufacturing Overhead

32
Q

Cost Estimation Methods

A

Industrial Engineering
Account Analysis
Conference
Quantitative Analysis

33
Q

Quantitative Analysis

A

1.ChooseDependentVariable
2.IdentifyIndependentVariable(CostDriver)
3.CollectDataonVariables
4.PlotData
5.EstimateCostFunction
6.EvaluateCostDriver

34
Q

High/Low Method =

A

Change in total cost at High vs Low level / High - Low Activity level

35
Q

Direct Material costs =

A

Beginning raw materials + purchases - ending raw materials

36
Q

Mixed cost formula

A

y=a+bx

y=total costs
a=fixed costs
b=variable costs
x=quantity

37
Q

CVP is

A

Cost Volume Profit

38
Q

Regular income Statement

A

Sales
Cost of Sales
Gross Profit
SG&A
Operating Profit
Other income/expense
Net Income

39
Q

CVP income statement

A

Sales
Variable Costs
Contribution Margin
Fixed Costs
Net Income

40
Q

Contribution Margin definition

A

is the difference between
Total Revenues and Variable Costs that goes
toward covering remaining fixed expenses

41
Q

Breakeven Point definition

A

is the quantity sold where total revenues = total expenses Profit = $0
set income equal to 0

42
Q

CVP Equation

A

[(π‘†π‘Žπ‘™π‘’π‘  π‘ƒπ‘Ÿπ‘–π‘π‘’ π‘₯ π‘„π‘’π‘Žπ‘›π‘‘π‘–π‘‘π‘¦) βˆ’ (𝑉𝐢 π‘₯ π‘„π‘’π‘Žπ‘›π‘‘π‘–π‘‘π‘¦) βˆ’ 𝐹𝑖π‘₯𝑒𝑑 πΆπ‘œπ‘ π‘‘ = πΌπ‘›π‘π‘œπ‘šπ‘’
(π‘†π‘Žπ‘™π‘’π‘  π‘ƒπ‘Ÿπ‘–π‘π‘’ βˆ’ 𝑉𝐢) π‘₯ π‘„π‘’π‘Žπ‘›π‘‘π‘–π‘‘π‘¦ βˆ’ 𝐹𝑖π‘₯𝑒𝑑 πΆπ‘œπ‘ π‘‘ = πΌπ‘›π‘π‘œπ‘šπ‘’

43
Q

Target Operating Income definition

A

is the operating income a company wants to generate during a
given time frame

44
Q

Difference between Net Operating Income and Net Income

A

NI includes taxes and interest

45
Q

Sales mix definition

A

the proportion of sales a single product accounts for in a company’s total sales

46
Q

Weighted Average Contribution Margin Formula

A

(Unit 1 CMβˆ— π‘Όπ’π’Šπ’• 𝟏 𝑺𝒂𝒍𝒆𝒔 π‘΄π’Šπ’™)+ (π‘Όπ’π’Šπ’• 𝟐 π‘ͺ𝑴 βˆ— π‘Όπ’π’Šπ’• 𝟐 𝑺𝒂𝒍𝒆𝒔 π‘΄π’Šπ’™) = 𝑾𝑨π‘ͺ𝑴

47
Q

Sales mix with limited resources

A

Choose the option that has the highest contribution margin per limited resource

48
Q

The Margin of Safety definition

A

represents how far revenues can fall below current level (or
budget) before the breakeven point is reached

49
Q

Margin of safety formula

A

π‘€π‘Žπ‘Ÿπ‘”π‘–π‘› π‘œπ‘“ π‘†π‘Žπ‘“π‘’π‘‘π‘¦ = π΄π‘π‘‘π‘’π‘Žπ‘™ 𝐡𝑒𝑑𝑔𝑒𝑑𝑒𝑑 𝑅𝑒𝑣𝑒𝑛𝑒𝑒 βˆ’ π΅π‘Ÿπ‘’π‘Žπ‘˜π‘’π‘£π‘’π‘› 𝑅𝑒𝑣𝑒𝑛𝑒𝑒

50
Q

Margin of safety in units formula

A

π‘€π‘Žπ‘Ÿπ‘”π‘–π‘› π‘œπ‘“ π‘†π‘Žπ‘“π‘’π‘‘π‘¦ 𝑖𝑛 𝑒𝑛𝑖𝑑𝑠 = π΄π‘π‘‘π‘’π‘Žπ‘™ 𝐡𝑒𝑑𝑔𝑒𝑑𝑒𝑑 π‘„π‘’π‘Žπ‘›π‘‘π‘–π‘‘π‘¦ βˆ’ π΅π‘Ÿπ‘’π‘Žπ‘˜π‘’π‘£π‘’π‘› π‘„π‘’π‘Žπ‘›π‘‘π‘–π‘‘π‘¦

51
Q

Operating Leverage definition

A

is the effect fixed costs have on changes in operating income as sales
or contribution margin change
HIGH Fixed Costs β†’ HIGH Operating Leverage

52
Q

Margin of safety % formula

A

π‘€π‘Žπ‘Ÿπ‘”π‘–π‘› π‘œπ‘“ π‘†π‘Žπ‘“π‘’π‘‘π‘¦ % = π‘€π‘Žπ‘Ÿπ‘”π‘–π‘› π‘œπ‘“ π‘†π‘Žπ‘“π‘’π‘‘π‘¦ $ / π΄π‘π‘‘π‘’π‘Žπ‘™ 𝐡𝑒𝑑𝑔𝑒𝑑𝑒𝑑 𝑅𝑒𝑣𝑒𝑛𝑒𝑒𝑠

53
Q

Operating Leverage formula

A

π‘‚π‘π‘’π‘Ÿπ‘Žπ‘‘π‘–π‘›π‘” πΏπ‘’π‘£π‘’π‘Ÿπ‘Žπ‘”π‘’ = πΆπ‘œπ‘›π‘‘π‘Ÿπ‘–π‘π‘’π‘‘π‘–π‘œπ‘› π‘€π‘Žπ‘Ÿπ‘”π‘–π‘›/π‘‚π‘π‘’π‘Ÿπ‘Žπ‘‘π‘–π‘›π‘” πΌπ‘›π‘π‘œπ‘šπ‘’

54
Q

Change in income formula

A

πΆβ„Žπ‘Žπ‘›π‘”π‘’ 𝑖𝑛 πΌπ‘›π‘π‘œπ‘šπ‘’ = π‘‚π‘π‘’π‘Ÿπ‘Žπ‘‘π‘–π‘›π‘” πΏπ‘’π‘£π‘’π‘Ÿπ‘Žπ‘”π‘’ π‘₯ % πΆβ„Žπ‘Žπ‘›π‘”π‘’ 𝑖𝑛 π‘†π‘Žπ‘™π‘’π‘ 

Cost Management (3 decks)

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