Front Back
What is the difference between managerial and financial accounting?
Managerial is concerned with providing info to managers while financial is concerned wt providing info to stockholders, creditors and others
_______ is a "game plan" that enables a company to attract customers by distinguishing itself from competitors
Strategy
Customer value propositions tend to fall into three broad catagories, what are they?
Customer intimacy, operational excellence, and product leadership
______ involves establishing a basic strategy, selecting a course of action, and specifying how the action will be implemented
Planning
________ involves ensuring that plans are actually carried out and is appropriately modified as circumstances change
Controlling
Budgets are usually prepared under the direction of the ______
This form of accounting emphasizes consequences of past activities
This form of accounting emphasizes consequences of past activities
Financial accounting
This form of accounting emphasizes decisions affecting the future
Managerial accounting
This form of accouting emphasizes precision
Financial
This form of accounting emphasizes timeliness
Managerial accounting
This form of accounting must follow GAAP
Financial accounting
This form of accounting does not have to follow GAAP
Managerial accounting
Which form of accounting is required?
Financial
What is decentralization?
The delegation of decision-making authority throughout an organiztion by giving managers the authority to make decisions relating to their area of responsibility
_______ 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
The Chief Financial Officer (CFO)
What is a business process?
A series of steps that are followed in order to carry out some task in a business
What is a value chain?
Consists of the major business functions that add value to a company's products and services
value chain
"- R&D - product design - manufacturing - marketing - distribution - customer service"
What are some problems with the push system of production?
"-Results in large inventories of raw materials, work in process, and finished goods -Leads to sloppy work -Results in defects"
What is the push system of production?
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
What are raw materials?
Materials used to make a product
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>
Toyota
What is the lean thinking model?
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)
What are the steps of the lean thinking model (pull system)
"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 proces…
The lean thinking model is oftern called ____ ____ ___ production
Just-in-time production, or JIT for short
_______ is commonly used to refer to the coordination of business processes across companies to better serve end consumers
supply chain management
What is a constraint?
Anything that prevents you from getting more of what you want
What is the Theory of Constraints (TOC)
based on the insight that effectively managing constraints is the key to success
______ is a process improvement method that relies on customer feedback and fact based data gathering and analysis techniques to drive process improvement
Six Sigma
What are two companies closely identified with the emergence of the Six Sigma movement
Motorola and General Electric
______ refers to a process that generates no more than 3.4 defects per million opportunities
Six Sigma
Because the rate of defects is so low, Six Sigma is sometimes associated with the term _____
Zero defects
Activities that customers are not willing to pay for because they add no value are known as ____?
non-value-added activities
What is an enterprise system?
Integrates data across an organization into a single software system that enables all employees to have simultaneous access to a common set of data
What is corporate governance?
The system by which a company is directed and controlled
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
Sarbanes-Oxley Act of 2002
What are direct materials?
Materials that beome an integral part of the finished product and whose costs can be conveniently traced to the finished product
Direct Materials 
"Raw materials that become an integral part of the product and that can be conveniently traced directly to it. Ex: The cost of an aluminum mast installed in a sailboat."
Direct Materials
All the materials that are directly involved in the production of the product
What are indirect materials?
Materials such as solder and glue are indirect materials
Indirect materials are included as part of ________
Manufacturing overhead
_______ consists of labor costs that can be easily traced to individual units of product
Direct labor
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 ________
Indirect labor
This cost includes all costs of manufacturing except direct materials and direct labor?
Manufacturing overhead
Manufacturing overhead includes all costs of manufacturing except what
direct labor and direct materials
____ includes all costs that are incurred to secure customer orders and get the finished product to the customer
Selling costs
_____ includes all executive, organizational, and clerical costs associated with the general management of an organization
Administrative costs
What is the difference between product costs and period costs?
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
Advertising, executive salaries, sales commissions, public relations, and other nonmanufacturing costs are all examples of what type of costs?
Period costs
Since product costs are initially assigned to inventories, they are also known as ______
Inventoriable costs
What is prime cost?
The sum of direct materials cost and direct labor cost
What is conversion cost?
The sum of direct labor cost and manufacturing overhead cost----(b/c these costs are incurred to convert materials into the finished product)
Conversion costs
The sum of direct labor cost and manufacturing overhead
conversion costs
direct labor cost + manufacturing overhead cost
Manufacturing costs include ____ ____ and _____
Direct materials, direct labor and manufacturing overhead
Nonmanufacturing costs include ____ and ____
Selling costs and administrative costs
What is the basic equation for Inventory accounts?
Beginning balance + additions to inventory = ending balance + withdrawals from inventory
How do you determine cost of goods sold for a merchandising company?
Cost of goods = Beginning merchandise inventory + purchases - ending merchandise inventory
The cost of goods manufactured consists of what?
The manufacturing costs associated with goods that were finished during the period
_____ refers to how a cost reacts to changes in the level of activity
Cost behavior
What is a variable cost?
A cost that varies, in total, in direct proportion to changes in the level of activity
Variable Cost
"*The change in cost divided by the change in hours Ex: High-(850,9800) Low-(450,7400) Variable Cost = 9800-7400/850-450 = 2400/400 = $6.00/hour"
_____ is a cost that remains constant, in total, regardless of changes in the level of activity
Fixed cost
____ is the range of activity within which the assumptions about variable and fixed costs are valid
Relevant range
How does fixed cost per unit respond to increases in the level of activity?
Fixed cost per unit decreases
How does fixed cost per unit respond to decreases in the level of activity?
Fixed cost increases
How does total fixed cost respond to increases or decreases in the level of activity?
Total fixed cost is not affected by activity level
How does variable cost per unit respond to changes in activity level?
Variable cost per unit remains constant
How does total variable cost respond to changes in activity level?
Total variable cost increases and decreases in proportion to the changes
What is a direct cost
cost that can be easily and conveniently traced to a specific cost object
What is an indirect cost?
A cost that cannot be easily traced to a specific cost object
A difference in costs between any two alternatives is known as _______
Differential cost
A difference in revenues between any two alternatives is known as ______
Differential revenue
A differential cost is also known as an _____
Incremental cost
Differential Cost
"Example: You have a job paying $1,500 per month in your hometown. You have a job offer in a neighboring city that pays $2,000 per month. The commuting cost to the city is $300 per month. * Differential revenue: $2,000 – $1,500 = $500 *Differential cost: $300"
Differential cost
"a difference in cost between any two alternatives -aka incremental cost"
What is a sunk cost?
A cost that has already been incurred and cannot be changed by any decision made now or in the future
Sunk Cost
"*Costs that have already been incurred and cannot be changed now or in the future. *These costs should be ignored when making decisions."
Costs that are incurred to identify defective products before the products are shipped to customers
Appraisal costs
Costs that are incurred when a product or service that is defective is delivered to a customer
External failure costs
Costs that are incurred as a result of identifying defective products before they are shipped to customers
Internal failure costs
Quality control requirements issued by the International organization for standardization that relate to products sold in European countries
ISO 9000 standards
Costs that are incurred to keep defects from occurring
Prevention costs
Small groups of employees that meet on a regular basis to discuss ways of improving quality
Quality circles
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
Quality cost 
What is a quality cost report
A report that details prevention costs, appraisal costs, and the costs of internal and external failures
What is quality of conformance?
The degree to which a product or service meets or exceeds its design specifications and is free of defects
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
Absorption costing
What is a allocation base?
A measure of activity such as direct labor-hours or machine-hours that is used to assign costs to cost objects
A document that shows the quantity of each type of direct material required to make a product
Bill of materials
What is a cost driver?
A factor, such as machine-hours, beds occupied, computer time, or flight-hours, that causes overhead costs
What is included in a job cost sheet?
The materials, labor, and manufacturing overhead costs charged to that job
A costing system used in situations where many different products, jobs, or services are produced each period
Job-order costing system
______ is a document specifying type and quantity of materials to be drawn from storeroom and job to be charged
Materials requisition form
Costing system w/t multiple overhead cost pools and different predetermined overhead rate for each
Normal cost system
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
Overapplied overhead
The process of charging manufacturing overhead cost to job cost sheets and to the work in process account
Overheadd application
A single predetermined overhead rate that is used throughout a plant
Plantwide overhead rate
How is a predetermined overhead rate calculated?
Divide estimated total manufacturing overhead cost for period by estimated allocation base for period
_____ is a costing system used in situations where a single, homogeneous product is produced for long periods of time
Process costing system
When there is a a debit balance in the manufacturing overhead account at the end of the period overhead is said to be _____?
Underapplied
When there is a credit balance in the manufacturing overhead account at the end of the period overhead is said to be _______?
Overapplied
When amount of actual overhead cost exceeds amount of overhead cost applied to work in process during a period, overhead is said to be ________?
Underapplied 
A method for analyzing cost behavior in which an account is classified as either variable or fixed based on the analyst's prior knowledge
Account analysis
What is an activity base?
A measure of whatever causes the incurrence of a variable cost
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?
The number of X-rays taken
Investments in facilities and equipment that cant be reduced without making fundamental changes are referred to as _______?
Committed fixed costs
An income statement format that organizes costs by their behavior (split into variable and fixed)
Contribution approach
What is a contribution margin?
The amount remaining from sales revenue after all variable expenses have been deducted
Contribution Margin
"sales-variable cost Ex: 100,000-60,000 = 40,000"
Amount remaining from sales revenue after all variable expenses have been deducted
contribution margin
How do you calculate contribution margin?
Sales revenue - variable expenses
The relative proportion of fixed, variable, and mixed costs in an organization
Cost structure
Fixed costs that arise from arise from annual decisions by management to spend on certain fixed cost items such as advertising and research
Discretionary fixed costs
Method of separating a mixed cost into its fixed and variable elements by analyzing change in cost between high and low activity levels
High-low method
What is a step-variable cost
Cost of resource obtainable only in large chunks and that increases and decreases only in response to fairly wide changes in activity
Principal Activities of Management
"*Planning: setting goals *Controlling: gathers feedback from performance reports *Decision Making - Losing money may be good for advertising"
Principal activities of management
planning, controlling, decision making
Performance Report
comparing actual results with budget
performance report
compares budgeted data to actual data
Strategy
"a ""game plan"" that enables a company to attract customers by distinguishing itself from competitors *Customer Intimacy, Operational Excellence (Walmart), & Product Leadership (Apple)"
strategy
game plan for attracting customers by distinguishing itself from competitors
Steps of the Value Chain
"1. R&D 2. Product Design 3. Manufacturing 4. Marketing 5. Distribution 6. Customer Service "
Lean Production aka Just In Time Production
Products are only made in response to customer orders
Corporate Social Responsibility
A concept whereby organizations consider the needs of all stakeholders when making decisions.
corporate social responsibility
company considers needs of all the stakeholders, not just stockholders
Direct Labor
"Those labor costs that can be easily traced to individual units of product. Ex: The wages of employees who build the sailboats."
Direct labors
The labor that directly goes into the production of the product. Touch labor
Manufacturing Overhead
"Manufacturing costs that cannot be easily traced directly to specific units produced. Ex: The wages of the assembly shop’s supervisor, Rent on the boathouse, Depreciation on power tools, production equipment, heat & light, plant security"
Manufacturing Overhead 
All the cost that are not included in direct labor or direct materials
Product Cost (Inventoriable cost)
"Direct materials, direct labor, and manufacturing overhead. Ex: electrical costs to light the production facility, rent"
Period Cost
"All selling & administrative costs. Ex: Property taxes on corporate headquarters, sales commissions, wages to the bookkeeper, rent"
Period Cost
all the costs that are not product cost
period cost
selling or administrative cost - costs taken directly to income statement
Variable Cost/Unit 
Remains constant
Variable cost per unit
The changing base cost of increasing the activity. 
Total Variable Cost
Increases and decreases in proportion to changes in the activity level
Total Variable Cost
Is directly proportional to activity level changes. 
Fixed Cost Per Unit
Decreases as the activity level rises and increases as the activity level falls
Fixed Cost per unit. 
A standard cost that is the same no matter the activity level
Total Fixed Cost
Not affected by changes in the activity within the relevant range
Total Fixed Cost
Remains constant for large variations in the level of activity.  
Relevant Range
"*the range of activity within which the assumptions made about cost behavior are valid *for a fixed cost: the range of activity over which the graph of the cost is flat"
Relevant Range
It is the specific range in activity within the assumption that cost behavior is strictly linear and reasonably valid. 
relevant range
the range of events where total fixed costs and variable cost per unit stays the same
Opportunity Cost
"The potential benefit that is given up when one alternative is selected over another. Ex: Giving up earning $15000 to attend college"
Opportunity cost
the potential benefit of choosing one alternative over another. 
Opportunity Cost
what you give up to get an item
Fixed Cost
"*Total Cost - Total Variable Cost *Ex: 9800 - ($6/hr*850) = 9800 - 5100 = $4700"
How do you calculate total cost?
Plug x (the amount of activity completed) into the cost formula Y=a+bX
Predetermined Overhead Rate (POHR)
"Estimated total manufacturing overhead cost for the coming period/Estimated total units in the allocation base for the coming period"
POHR Example
"*estimated 160,000 direct labor-hours to meet the coming period’s estimated production level *estimated total fixed manufacturing overhead at $200,000 *variable manufacturing overhead costs of $2.75 per direct labor hour. *POHR= $640,000 estimated total manufacturing overhead/160,000 …
Work in Process
Debited when purchased raw materials are put into production
Underapplied Manufacturing Overhead
"Ex: Actual Cost - 70,000; Applied OH - 60,000 Cost of Goods Sold is debited & Manufacturing Overhead is credited 10,000 *Results in overstated net income"
Journal Entry for  Manufacturing Overhead
"Ending W/P - 30000 - 30% Ending Finished Goods - 40000 - 40% Cost of Goods Sold - 30000 - 30% Results in… Debit Credit Work in Progress 3000 Finished Goods 4000 Cost of Goods Sold 3000 Manufacturing Overhead 10000 …
Contribution Margin Ratio
"contribution margin per unit divided by selling price Ex: 40,000/100,000 = 40%"
The principle activities of management
Planing, Controlling, Decision Making
What is the name of the report that compares budgeted date to actual data?
Performance Report
Know the definition of Strategy
It is the businesses game plan that helps it attract customers and separate it from others firms.
What are the steps of the value change
Research and development, product design, manufacturing, marketing, distribution, Customer service 
Another name for lean production
just in time production
What is the name of the concept where a company considers the needs of all the stakeholders, not just the stockholders, 
Corporate social responsibility
Product Cost 
is all the costs involving making and acquring a product
product cost
all costs involved in acquiring or making a product
Variables in the cost formula 
Y = total cost, A = fixed cost, B = variable cost, x = number of units
predetermined overhead rate =
estimated total manufacturing overhead cost / estimated total amount of the allocation base

Access the best Study Guides, Lecture Notes and Practice Exams

Login

Join to view and access 3M+ class-specific study document.

or
We will never post anything without your permission.
Don't have an account?
Sign Up

Join to view 2 2 and access 3M+ class-specific study document.

or

By creating an account you agree to our Privacy Policy and Terms Of Use

Already a member?