106 Cards in this Set
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What is the difference between managerial and financial accounting?
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Managerial is concerned with providing info to managers while financial is concerned wt providing info to stockholders, creditors and others
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_______ is a "game plan" that enables a company to attract customers by distinguishing itself from competitors
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Strategy
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Customer value propositions tend to fall into three broad catagories, what are they?
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Customer intimacy, operational excellence, and product leadership
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______ involves establishing a basic strategy, selecting a course of action, and specifying how the action will be implemented
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Planning
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________ involves ensuring that plans are actually carried out and is appropriately modified as circumstances change
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Controlling
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Budgets are usually prepared under the direction of the ______
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controller, (manager in charge of accounting department)
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This form of accounting emphasizes consequences of past activities
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Financial accounting
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This form of accounting emphasizes decisions affecting the future
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Managerial accounting
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This form of accouting emphasizes precision
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Financial
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This form of accounting emphasizes timeliness
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Managerial accounting
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This form of accounting must follow GAAP
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Financial accounting
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This form of accounting does not have to follow GAAP
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Managerial accounting
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Which form of accounting is required?
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Financial
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What is decentralization?
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The delegation of decision-making authority throughout an organiztion by giving managers the authority to make decisions relating to their area of responsibility
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_______ is the member of the top management team who is responsible for providing timely and relevant data to support planning and control activities and for preparing financial statements for external users
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The Chief Financial Officer (CFO)
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What is a business process?
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A series of steps that are followed in order to carry out some task in a business
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What is a value chain?
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Consists of the major business functions that add value to a company's products and services
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What are some problems with the push system of production?
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-Results in large inventories of raw materials, work in process, and finished goods
-Leads to sloppy work
-Results in defects
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What is the push system of production?
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Work is pushed through the system in order to produce as much as possible and to keep everyone busy- even if products cannot be immediately sold
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What are raw materials?
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Materials used to make a product
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Who is credited with the insight that large inventories often create many more problems than they solve and for pioneering the the method known as LEAN PRODUCTION>
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Toyota
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What is the lean thinking model?
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Five step management approach that organizes resources such as people and machines around the flow of business processes and that pulls units through these processes in response to customer orders (pull method)
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What are the steps of the lean thinking model (pull system)
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1) Identify value in specific products/services
2) Identify the business process that delivers value
3) Organize work arrangements around the flow of the business process
4) Create a pull system that responds to customer orders
5) Continuously pursue perfection in the business…
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The lean thinking model is oftern called ____ ____ ___ production
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Just-in-time production, or JIT for short
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_______ is commonly used to refer to the coordination of business processes across companies to better serve end consumers
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supply chain management
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What is a constraint?
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Anything that prevents you from getting more of what you want
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What is the Theory of Constraints (TOC)
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based on the insight that effectively managing constraints is the key to success
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______ is a process improvement method that relies on customer feedback and fact based data gathering and analysis techniques to drive process improvement
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Six Sigma
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What are two companies closely identified with the emergence of the Six Sigma movement
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Motorola and General Electric
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______ refers to a process that generates no more than 3.4 defects per million opportunities
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Six Sigma
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Because the rate of defects is so low, Six Sigma is sometimes associated with the term _____
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Zero defects
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Activities that customers are not willing to pay for because they add no value are known as ____?
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non-value-added activities
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What is an enterprise system?
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Integrates data across an organization into a single software system that enables all employees to have simultaneous access to a common set of data
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What is corporate governance?
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The system by which a company is directed and controlled
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This Act was intended to protect the interests of those who invest in publicly traded companies by improving the reliability and accuracy of corporate financial reports and disclosures
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Sarbanes-Oxley Act of 2002
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What are direct materials?
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Materials that beome an integral part of the finished product and whose costs can be conveniently traced to the finished product
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What are indirect materials?
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Materials such as solder and glue are indirect materials
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Indirect materials are included as part of ________
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Manufacturing overhead
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_______ consists of labor costs that can be easily traced to individual units of product
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Direct labor
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Labor costs that cannot be physically traced to the creation of products, or that can be traced only at great cost and inconvenience are termed ________
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Indirect labor
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This cost includes all costs of manufacturing except direct materials and direct labor?
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Manufacturing overhead
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Manufacturing overhead includes all costs of manufacturing except what
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direct labor and direct materials
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____ includes all costs that are incurred to secure customer orders and get the finished product to the customer
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Selling costs
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_____ includes all executive, organizational, and clerical costs associated with the general management of an organization
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Administrative costs
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What is the difference between product costs and period costs?
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Product costs include all costs involved in acquiring or making a product while period costs are all the other costs such as sales commissions and the rental costs of offices
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Advertising, executive salaries, sales commissions, public relations, and other nonmanufacturing costs are all examples of what type of costs?
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Period costs
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Since product costs are initially assigned to inventories, they are also known as ______
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Inventoriable costs
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What is prime cost?
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The sum of direct materials cost and direct labor cost
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What is conversion cost?
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The sum of direct labor cost and manufacturing overhead cost----(b/c these costs are incurred to convert materials into the finished product)
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Manufacturing costs include ____ ____ and _____
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Direct materials, direct labor and manufacturing overhead
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Nonmanufacturing costs include ____ and ____
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Selling costs and administrative costs
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What is the basic equation for Inventory accounts?
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Beginning balance + additions to inventory = ending balance + withdrawals from inventory
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How do you determine cost of goods sold for a merchandising company?
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Cost of goods = Beginning merchandise inventory + purchases - ending merchandise inventory
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The cost of goods manufactured consists of what?
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The manufacturing costs associated with goods that were finished during the period
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_____ refers to how a cost reacts to changes in the level of activity
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Cost behavior
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What is a variable cost?
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A cost that varies, in total, in direct proportion to changes in the level of activity
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_____ is a cost that remains constant, in total, regardless of changes in the level of activity
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Fixed cost
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____ is the range of activity within which the assumptions about variable and fixed costs are valid
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Relevant range
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How does fixed cost per unit respond to increases in the level of activity?
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Fixed cost per unit decreases
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How does fixed cost per unit respond to decreases in the level of activity?
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Fixed cost increases
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How does total fixed cost respond to increases or decreases in the level of activity?
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Total fixed cost is not affected by activity level
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How does variable cost per unit respond to changes in activity level?
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Variable cost per unit remains constant
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How does total variable cost respond to changes in activity level?
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Total variable cost increases and decreases in proportion to the changes
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What is a direct cost
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cost that can be easily and conveniently traced to a specific cost object
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What is an indirect cost?
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A cost that cannot be easily traced to a specific cost object
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A difference in costs between any two alternatives is known as _______
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Differential cost
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A difference in revenues between any two alternatives is known as ______
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Differential revenue
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A differential cost is also known as an _____
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Incremental cost
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What is a sunk cost?
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A cost that has already been incurred and cannot be changed by any decision made now or in the future
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Costs that are incurred to identify defective products before the products are shipped to customers
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Appraisal costs
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Costs that are incurred when a product or service that is defective is delivered to a customer
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External failure costs
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Costs that are incurred as a result of identifying defective products before they are shipped to customers
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Internal failure costs
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Quality control requirements issued by the International organization for standardization that relate to products sold in European countries
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ISO 9000 standards
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Costs that are incurred to keep defects from occurring
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Prevention costs
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Small groups of employees that meet on a regular basis to discuss ways of improving quality
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Quality circles
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Costs that are incurred to prevent defective products from falling into the hands of customers or that are incurred as a result of defective units
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Quality cost
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What is a quality cost report
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A report that details prevention costs, appraisal costs, and the costs of internal and external failures
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What is quality of conformance?
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The degree to which a product or service meets or exceeds its design specifications and is free of defects
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A costing method that includes all manufacturing costs- direct materials, direct labor, and both variable and fixed manufacturing overhead- in the cost of a product
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Absorption costing
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What is a allocation base?
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A measure of activity such as direct labor-hours or machine-hours that is used to assign costs to cost objects
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A document that shows the quantity of each type of direct material required to make a product
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Bill of materials
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What is a cost driver?
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A factor, such as machine-hours, beds occupied, computer time, or flight-hours, that causes overhead costs
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What is included in a job cost sheet?
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The materials, labor, and manufacturing overhead costs charged to that job
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A costing system used in situations where many different products, jobs, or services are produced each period
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Job-order costing system
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______ is a document specifying type and quantity of materials to be drawn from storeroom and job to be charged
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Materials requisition form
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Costing system w/t multiple overhead cost pools and different predetermined overhead rate for each
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Normal cost system
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This occurs when there is a credit balance in the manufacturing overhead account that occurs when overhead applied to work in process exceeds amount of actual overhead
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Overapplied overhead
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The process of charging manufacturing overhead cost to job cost sheets and to the work in process account
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Overheadd application
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A single predetermined overhead rate that is used throughout a plant
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Plantwide overhead rate
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How is a predetermined overhead rate calculated?
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Divide estimated total manufacturing overhead cost for period by estimated allocation base for period
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_____ is a costing system used in situations where a single, homogeneous product is produced for long periods of time
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Process costing system
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When there is a a debit balance in the manufacturing overhead account at the end of the period overhead is said to be _____?
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Underapplied
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When there is a credit balance in the manufacturing overhead account at the end of the period overhead is said to be _______?
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Overapplied
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When amount of actual overhead cost exceeds amount of overhead cost applied to work in process during a period, overhead is said to be ________?
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Underapplied
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A method for analyzing cost behavior in which an account is classified as either variable or fixed based on the analyst's prior knowledge
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Account analysis
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What is an activity base?
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A measure of whatever causes the incurrence of a variable cost
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If the total cost of X-ray film in a hospital will increase as the number of X-rays taken increases, what is the activity base that explains the total cost of X-rays?
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The number of X-rays taken
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Investments in facilities and equipment that cant be reduced without making fundamental changes are referred to as _______?
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Committed fixed costs
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An income statement format that organizes costs by their behavior (split into variable and fixed)
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Contribution approach
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What is a contribution margin?
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The amount remaining from sales revenue after all variable expenses have been deducted
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Amount remaining from sales revenue after all variable expenses have been deducted
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contribution margin
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How do you calculate contribution margin?
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Sales revenue - variable expenses
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The relative proportion of fixed, variable, and mixed costs in an organization
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Cost structure
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Fixed costs that arise from arise from annual decisions by management to spend on certain fixed cost items such as advertising and research
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Discretionary fixed costs
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Method of separating a mixed cost into its fixed and variable elements by analyzing change in cost between high and low activity levels
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High-low method
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What is a step-variable cost
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Cost of resource obtainable only in large chunks and that increases and decreases only in response to fairly wide changes in activity
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Study Guide