43 Cards in this Set
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Managerial Versus Financial Accounting
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Managerial: provides information to people within an organization
Financial: accounting is mainly for those outside it, such as shareholders
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Product Costs
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Costs that attach to a specific product. Examples are material, labor, and overhead. Companies carry product costs into future periods if they recognize the revenue from the product in subsequent periods.
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Period Costs
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Costs incurred to sell a product and operate the business. These costs are expensed when the cost is incurred.
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Direct Costs
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Costs that can be specifically identified with a particular project or activity.
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Indirect Costs
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Costs that are the result of a firm's general operations and are not directly tied to any specific cost object
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Variable Cost Behaviors
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Constant per units.
Total amount increases as activity increases.
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Fixed Cost Behaviors
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Constant in total.
Cost per unit as activity increases/decreases.
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Mixed Cost Behaviors
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Not constant either way.
Cost per unit ins't constant.
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Job Costs
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the total direct material, direct labor, and support costs for a job
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the total direct material, direct labor, and support costs for a job
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Estimated Manufacturing Overhead / Estimated Direct Labor Hours
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Contribution Margin
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Revenues - Variable Expenses
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Contribution Margin Per Unit
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Sales Price Per Unit - Variable Expense Per Unit
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Contribution Margin Ratio
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Contribution Margin / Sales Revenue
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Break-Even Point In Units
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Fixed Expenses / CM Per Unit
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Break-Even Point In Dollars
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Fixed Expenses / CM Ratio
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Break-Even Point In Dollars
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Breakeven in units X Sales price per unit
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Target Profit In Units
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(Fixed Expenses + Target Profit) / CM Per Unit
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Target Profit in Dollars
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(Fixed Expenses + Target Profit) / CM Ratio
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Target Profit in Dollars
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Target Profit in Units X Sales Price Per Unit
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Variable Costing
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A costing method that includes only variable manufacturing costs - direct materials, direct labor, and variable manufacturing overhead - in unit product costs.
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Absorption Costing
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A method of costing where all the fixed costs (overheads) generated by the production of the good are 'absorbed' into an individual cost centre. For example, labor expenses may be split according to the number of people working on the production of each good.
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Segment Reporting
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Required for all Public entities
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Traceable Fixed Costs
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Fixed costs that are directly traceable to a specific center. These costs usually would be eliminated if the center were discontinued.
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Common Fixed Costs
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a fixed cost that supports more than one business segment, but is not traceable in whole or in part to any one of the business segments
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Master Budget
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A presentation of an organization's operational and financial budgets that represents the firm's overall plan of action for a specified time period
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Flexible Budgets
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Budgets that take differences in spending owing to volume differences out of the analysis by budgeting for labor (and other costs) based on the actual number of units produced
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Return on Investment
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Calculation used to determine the relative profitability of a product; profit divided by investment
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Residual Income
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Operating income minus the minimum acceptable operating income given the size of the division's assets. Shows whether the division is earning income above or below management's expectations.
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Relevant Costs
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Future costs that will change as a result of a decision
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Irrelevant Costs
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costs which do not differ between alternatives-or-Sunk Costs:costs to be incurred in the past which cannot be changed
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High/Low Method
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(Cost at High Volume-Cost at Low Volume)/(High Volume-Low Volume)
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Return on Investment
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Net Operating Income / Avg. Operating Assets
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Residual Income
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Net Operating Income - (Avg. Operating Assets x Minimum Required Return)
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Product Cotsting
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DM + DL + OH
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Absorption Costing
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DM + DL + FOH + VOH
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Variable Costing
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DM + DL + VOH
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Materials Price Variance
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(SP - AP) x AQ Purchased
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Materials Quantity Variance
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(SQ - AQ Used) x SP
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Labor Rate Variance
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(SR - AR) x AH
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Labor Efficiency Variance
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(SH - AH) x SR
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Cost Centers
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A segment whose manager has control over costs, but not over revenues or investment funds.
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Investment Centers
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A segment whose manager has control over costs, revenues, and investments in operating assets.
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Profit Centers
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A segment whose manager has control over both costs and revenues, but no control over investment funds.
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ACT 220: EXAM 1