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C. Dave’s Guide To Accounting > Managerial accounting > Flashcards

Managerial accounting Flashcards

(88 cards)

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1
Q

What’s the difference between job costing and process costing?

A

Job costing is for unique products, custom-made, etc.

Process costing is for standardized products made in large numbers

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2
Q

In a cost volume profit analysis, how do you calculate the contribution margin?

A

Revenue - variable costs

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3
Q

What is the break even point in a cost volume profit analysis?

A

The level of sales where total revenue = total costs

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4
Q

Directing (manager function)

A

Running the day-to-day operations of a business

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5
Q

Controlling (manager function)

A

Monitoring operations and keeping the company on track

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6
Q

Efficiency

A

Using the smallest amount of resources to complete a task

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7
Q

Line position

A

A job that is directly involved in providing goods or services to customers

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8
Q

Operational planning

A

Short term actions that focus on the company’s daily operations

Essentially the opposite of strategic planning

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9
Q

Planning (manager function)

A

Developing long-term strategies to achieve the companies goals

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10
Q

How does managerial accounting differ from financial accounting regarding the parts of the company they support?

A

Financial accounting relates to the whole company

Managerial accounting focuses on parts or segments of the company

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11
Q

What are the four main types of internal management decisions?

A

Financial
Resource allocation
Production
Marketing

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12
Q

Does managerial accounting need to comply with GAAP?

A

No

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13
Q

Comparing time frames, what do managerial and financial accounting cover?

A

Financial accounting covers the past

Managerial accounting orients towards the future

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14
Q

When was the Public Company Accounting Oversight Board established?

A

With Sarbanes Oxley

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15
Q

Controller

A

Head of the accounting department who overseas and manages the financial affairs of the business

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16
Q

CFO

A

A senior level manager who monitors the cash flows in plans for the future financial aspects of the organization

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17
Q

CIA

A

Certified Internal Auditor

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18
Q

What kinds of things does a Certified Management Accountant specialize in?

A

Budgeting
Forecasting
Planning
Analysis
Risk management
Internal controls
Performance management

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19
Q

What’s the most widely held accounting certification in the world?

A

Charger Global Management Accountant

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20
Q

What does the CFA specialize in?

A

Investment analysis
Wealth management

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21
Q

What is the ACFE?

A

Association of Certified Fraud Examiners

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22
Q

What is the ACCA?

A

Association of Chartered Certified Accountants

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23
Q

What is the fraud triangle?

A

Shows the conditions that increase the likelihood of fraud

Opportunity
Motive or pressure
Rationalization

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24
Q

What are internal controls?

A

Policies and procedures used to:

protect assets

ensure reliable accounting

maintain company policies

promote efficient operations

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25
What are examples of internal controls?
Dividing duties between people Locking cash in a safe Providing training and dox so employees are aware of what is acceptable Securing financial data
26
What are the four elements of an internal control system?
Environmental control Risk assessment Monitoring Information about controls
27
What is the most common type of fraud?
Premature recording of revenues
28
Direct labor
the labor costs of all employees who physically convert materials—such as trees—to finished products—such as lumber. The direct labor costs of a product include only those labor costs that are clearly traceable to the finished product.
29
In the manufacturing process, what are the three component's of a product's cost?
Direct materials Direct labor Mfg Overhead
30
What is manufacturing overhead?
Anything that's not direct labor or direct materials Think of it as indirect labor and materials
31
What are indirect materials?
Used in the mfg process but cannot be easily traced back to the product that is being manufactured (screws, glue, grease). Within a manufacturing process, it is not cost-beneficial to trace the costs of each of these components to individual products
32
What are the three types of inventory for manufacturers? And which of these appear on balance sheets?
Raw materials inventory WIP (Work-In-Progress) inventory Finished Goods inventory All appear on the balance sheet
33
Raw material inventory includes both direct and ________ materials.
indirect
34
What is the formula for Cost of Goods Available for Sale?
Beginning Finished Goods Inventory + Cost of Goods Manufactured
35
What is the formula for Cost of Goods Sold?
COG Available for Sale - Ending Finished Goods Inventory
36
What's the formula for Cost of Goods Manufactured (COGM)
Total Manufacturing Costs + Beginning WIP Inventory - Ending WIP Inventory
37
What are the four parts of the COGM?
Direct materials Direct labor Overhead Computation of COGM (The sum of the first three = Total Manufacturing Costs)
38
What's the formula for Total Manufacturing Costs?
Direct materials used during period Direct labor used during period Overhead during period
39
Where would the COGM show up in the financial statements?
The COGS section of the income statement Often, it's its own statement too: Schedule of Cost of Goods Manufactured
40
merchandiser
a business that sells merchandise or goods to customers, such as a bookstore or a grocery store.
41
The operating cycle of a merchandiser begins when__________
the company purchases inventory
42
Merchandise Inventory
The products that a merchandising company buys and sells. Unlike manufacturers, they only have this one type of inventory
43
What are three common dichotomies used to classify costs?
fixed vs. variable direct vs. indirect period vs. product
44
Two types of fixed costs
total fixed costs (eg. rent or insurance; not affected by amount produced) fixed costs per unit
45
Examples of variable costs
For a mfg company: direct materials For a merchandiser: CC fees For a service co.: sales commissions
46
For fixed costs, the total fixed costs stay the same but the fixed cost per unit changes (because it's a ratio and the number of units is the denominator) For variable costs, the variable cost per unit stays the same but the total variable costs changes
47
cost object
a process, product, department, or other item for which costs are assigned. Can be classified as either a direct cost or an indirect cost.
48
What's an example of a direct cost for a service firm?
a lawyer’s salary that can be directly traced to a specific case.
49
An example of a cost that is direct to one cost object but indirect to another.
The salary of a department manager may be a direct cost of a given manufacturing department but an indirect cost of one of the products manufactured by that department. In this example, the department and the product are two distinct cost objects.
50
Period costs
nonproduction costs that are linked to a time period rather than to completed products.
51
What's the difference between indirect costs and period costs?
Period costs are matched with the revenue of a specific time period and expensed in the same accounting period.
52
Prime Costs
The “primary” costs of a product, I.e. direct material costs and direct labor costs.
53
Conversion Costs
The combination of direct labor and overhead In other words, the costs to convert materials into a finished product
54
55
services-in-process inventory
consists of the services that have started but have not been completed.
56
For service companies, once the service is completed and sold, the cost is transferred to cost of services, which is the equivalent of the cost of goods sold for a manufacturing company.
57
service companies do/ do not have a finished goods inventory
service companies do not have a finished goods inventory since they are not completing a product.
58
Disadvantage of job order costing
disadvantage is that employees are required to track the materials that are used in the process and the amount of labor that they perform in the process.
59
What is a costing system? examples.
A method for measuring costs Ex: Job order costing Process costing Activities based costing
60
What types of industry use job order costing?
Mainly mfg, but increasingly service companies use it too.
61
What constitutes a “job” when a service company is using job order costing?
Usually each client. (But a plumber, for example, might call each incident a job.)
62
Job Cost Sheet
The cost record that is kept for each job.
63
Subsidiary Ledger
A ledger that stores the details for a general ledger control account.
64
Subsidiary Ledger
A ledger that stores the details for a general ledger control account. Ex: a raw materials subsidiary ledger contains the details of the raw materials inventory, including a separate record for each type of material that was purchased. The subsidiary records show the raw materials purchased, the raw materials used, and the balance of these materials on hand.
65
production costs (when job order costing is used)
direct materials direct labor overhead
66
Subsidiary Ledger
A ledger that stores the details for a general ledger control account.
67
Which source document is used to record the materials received in the raw materials subsidiary ledger and the GL?
The receiving report
68
Materials requisition
a document that requests the transfer of raw materials to the production floor.
69
Materials requisition
a document that requests the transfer of raw materials to the production floor.
70
In order to assign labor costs to individual jobs, companies use __________, or time cards, to track the labor hours for each employee used for each job
time tickets
71
The four steps that are used to account for overhead costs are:
Step 1: set the predetermined overhead rate Step 2: apply the estimated overhead Step 3: record the actual overhead Step 4: adjust the overhead.
72
Allocation Base
The factor that overhead costs are linked to. AKA Cost Driver
73
Cost Driver
The main factor that causes a cost to increase or decrease. AKA (?) Allocation Base
74
Over(under)allocated Overhead
Occurs when more (less) overhead is applied than is actually incurred
75
Overhead Allocation
The distribution of indirect costs.
76
Predetermined Overhead Allocation Rate
The formula that we use to estimate overheads before the period.
77
Formula for allocating the overhead
78
Predetermined overhead allocation rate
79
Process costing
designed for companies that mass-produce large quantities of similar products costs to produce a product are calculated according to the processes or departments a product goes through in the production process.
80
job cost systems use just one work-in-process inventory account. Process cost systems, on the other hand, have a work-in-process inventory account for each process.
81
With the job order costing system, job sheets are used to report costs; while for process costing, the cost production report is used to report costs.
82
Some service companies do have partially completed work at the end of the period. Certain types of dry cleaning and photo processing may still be in process at the end of a period. When calculating production costs for service companies that use process costing, materials can be substituted for any significant supplies, and conversion costs can be substituted for service labor and overhead.
83
One of the most important trends is that more service-based businesses are using process costing
84
just-in-time production, which is a production system in which items are created at the time of customer demand.
85
The disadvantages of this costing method include the possibility of errors and complicated calculations.
86
87
Cost per Equivalent Unit
The combined cost of converting direct materials into finished products.
88
Equivalent Unit
In process costing: the number of units that could have been started and completed given the costs incurred during the period. A way to measure partial units: 200 units that are 40% complete = 80 equivalent units

C. Dave’s Guide To Accounting (8 decks)

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