Week 5 Flashcards
What is an external user?
Someone who relies on the financial statements and annual reports to access information about a company in order to make more informed decisions.
Examples include creditor, tax authority and regulator, investor, customer, competitor, and others.
What are generally accepted accounting principles (GAAP)?
Common set of rules, standards, and procedures that publicly traded companies must follow when composing their financial statements.
What is a goal in a business context?
What a company expects to accomplish over time.
What is an intangible good?
Good with financial value but no physical presence.
Examples include copyrights, patents, goodwill, and trademarks.
What is an internal user?
Someone inside the company or organization who is responsible for managing the company’s business interests and executing decisions.
Examples include all levels of management, owner, and other employees.
What is managerial accounting?
Process that allows decision makers to set and evaluate business goals by determining what information they need to make a particular decision and how to analyze and communicate this information.
What is an objective in business?
Target that needs to be met in order to meet company goals.
What is planning in a business context?
Process of setting goals and objectives.
What is strategic planning?
Setting priorities and determining how to allocate corporate resources to help an organization accomplish short-term and long-term goals.
What is a tangible good?
Physical good that customers can handle and see.
What is average fixed cost (AFC)?
Total fixed costs divided by the total number of units produced, which results in a per-unit cost.
What is average variable cost (AVC)?
Total variable costs divided by the total number of units produced, which results in a per-unit cost.
What is a cost driver?
Activity that is the reason for the increase or decrease of another cost.
Examples include labor hours incurred, labor costs paid, amounts of materials used in production, units produced, or any other activity that has a cause-and-effect relationship with incurred costs.
What is direct labor?
Labor directly related to the manufacturing of the product or the production of a service.
What are direct materials?
Materials used in the manufacturing process that can be traced directly to the product.
What is a fixed cost?
Unavoidable operating expense that does not change in total, regardless of the level of activity.
What is indirect labor?
Labor not directly involved in the active conversion of materials into finished products or the provision of services.
What are indirect materials?
Materials used in production but not efficiently traceable to a specific unit of production.
What is a manufacturing organization?
Business that uses parts, components, or raw materials to produce finished goods.
What is a merchandising firm?
Business that purchases finished products and resells them to consumers.
What are period costs?
Typically related to a particular time period instead of attached to the production of an asset; treated as an expense in the period incurred.
Examples include many sales and administrative expenses.
What are product costs?
All expenses required to manufacture the product: direct materials, direct labor, and manufacturing overhead.
What is the relevant range?
Quantitative range of units that can be produced based on the company’s current productive assets.
For example, if a company has sufficient fixed assets to produce up to 10,000 units of product, the relevant range would be between 0 and 10,000 units.
What is a service organization?
Business that earns revenue primarily by providing an intangible product.
