Flashcards in Exam 1 Ch1-3 Deck (47):
Financial Accounting Key Uses
Reports to those outside the organization(owners, creditors, tax authorities, regulators). EMPHASIS historical perspective, on objectivity and verifiability, precision. Primary focus on company-wide reports. Must follow GAAP/IFRS. And mandatory for external reports.
Managerial Accounting Key Uses
Managers who plan and control organization. EMPHASIS on future, relevance, timeliness. Focus on segment reports. Not bound by GAAP/IFRS or any prescribed format. And Not Mandatory.
Is a part or activity of an organization about which managers would like cost, revenue, or profit data.
What are the three main functions of management?
Planning, Controlling, and Decision Making.
Involves establish goals and specifying how to achieve them.
Involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change.
Involves selecting a course of action from competing alternatives.
A detailed plan for the future that is usually expressed in formal quantitative terms.
Compares budgeted data to actual data in an effort to identify and learn from excellent performance.
Importance of Ethics in Accounting
W/O Ethical Standards in business, the economy and all of us who depend on it for jobs, goods and services would suffer.
Abandoning ethical standards would lead to lower quality of life with less desirable goods and higher prices.
Is a "game plan" that enables a company to attract customers by distinguishing itself from competitors.
Corporate Social Responsibility (CSR)
Is a concept whereby organizations consider the needs of all stakeholders when making decisions. --extends beyond legal compliance to include voluntary actions that satisfy stakeholder expectations.
Is a series of steps that are followed in order to carry out some task in a business.
Consists of the major business functions that add value to a company's products and services. ---Every step in the process that adds value.
Lean Production or Just in Time (JIT)
Is a management approach that organizes resources such as people and machines around the flow of business processes and that only produces units in response to customer orders.
Is anything for which cost data are desired- including products, customers, jobs, and organizations subunits. Any part of the business for which cost can be accumulated and reported.
Costs that can be easily and conveniently traced to a unit of product or other cost object. Ex. Direct Materials and direct labor.
Costs that cannot be easily and conveniently traces to a unit of product or other cost object. Ex. Manufacturing overhead.
Indirect costs incurred to support a number of cost objects. These cannot be traced to any individual cost object. Ex. CEO salary.
The materials that go into the final product.
Direct Materials (DM)
Are those materials that become an integral part of the finished product and whose costs can be conveniently traced to the finished product. Ex. Radio or windshield installed directly in an automobile.
Indirect Materials (IM)
Not worth the effort to trace the costs of relatively insignificant materials. Ex. Solder, glue, nails. Part of manufacturing overhead.
Direct Labor (DL)
Labor costs that can be easily traced to individual units of product. Also called touch labor.
Indirect Labor (IL)
Labor costs that cannot be physically traced to particular products. Part of manufacturing overhead. Ex. Janitors, Supervisors, security guards.
Manufacturing Overhead (MOH)
Manufacturing costs that cannot be easily traced directly to specific units produced. Ex. Indirect Materials used to support the production process and Indirect Labor like wages paid to employees whoa re not directly involved in production work.
Selling Costs and Administrative Costs
Costs necessary to secure the order and deliver the product. Selling costs can be either direct or indirect costs.
All executive, organizational, and clerical costs. Can be either direct or indirect.
Include all costs involved in acquiring or making a product. include Direct materials, direct labor, and manufacturing overhead.
Are all the costs that are not product costs. All selling and administrative costs.
Is the sum of direct materials cost and direct labor cost.
Is the sum of direct labor cost and manufacturing overhead cost.
Refers to how cost reacts to changes in the level of activity. Common classifications are: Variable costs, Fixed costs, and mixed costs.
Varies, in total, in direct proportion to changes in the level of activity.
Cost Driver (or activity base)
A measure of whatever causes the incurrence of a variable costs. Common activity bases are Direct Labor Hours (dLH), Machine Hours (dMH), units produced, and units sold.
Is a cost that remains constant, in total, regardless of change in the level of activity. Ex. Include straight line depreciation, insurance, property taxes, rent supervisory salaries, admin salaries, and advertising.
Committed Fixed Costs
Represent organizational investments with a multi year planing horizon.
Discretionary Fixed Costs
Usually arise from annual decisions by management to spend on certain fixed cost items.
The range of activity within which a company is willing and able to operate.
Contain both variable and fixed cost elements.
High-Low Method of Estimating total mixed costs:
The amount remaining from sales revenues after variable expenses have be deducted. This amount contributes toward covering fixed expenses and then toward profits for the period.
A difference in costs between any to alternatives.
A difference in revenues between any two alternatives.
The potential benefit that is given up when on e alternative is selected of another.
A cost that has already been incurred and that cannot be changed by any decision made now or in the future.
Job Order Costing
Used in situations where many different products, each with individual and unique features, are produced each period.