Test 1 Ch 1-4 Flashcards
Three steps of the Management Process
Planning, Controlling, Decision Making
Management Process- Planning
Setting Objectives, Identifying ways to achieve the objectives.
Example: Budgets
Management Process- Controlling
Monitoring a plan’s information, Feedback, reacting to feedback.
Example: Performance reports
Management Process- Decision Making
Choosing among competing alternatives
Example: deciding the selling price of products.
What is Feedback?
What 3 things can a manager do with Feedback?
Feedback- Information used to evaluate or correct implementation of a plan.
- Continue the implementation as originally planned
- Take corrective action if needed
- Modify the plan
Managerial Accounting Information Systems
what is the Target User, Restrictions, Types of information, Time orientation, Aggregation, Breadth
- -Target User- Internal Users, Managers
- -Restrictions- No mandatory rules for preparing reports.
- -Type of information- Financial and non financial
- -Time Orientation- Emphasize the future
- -Aggregation- Detailed information about product line, departments, etc.
- -Breadth- Broad and multidisciplinary.
Role of Managerial Accountant
- The role of managerial accountants in an organization is one of support.
- They assist those individuals who are responsible for carrying out and organizations basic objectives.
Line Positions
Positions that have direct responsibility for the basic objectives of an organization.
Staff Positions
Positions that are supportive in nature and have only indirect responsibility for and organizations basic objective.
Controller
Supervises all accounting functions and reports directly to the General Manager and Chief Operation Officer.
Treasurer
Responsible for the finance function.
In large companies, the controller is seperate from the treasury department.
Ethical Behavior
Involves choosing actions that are right, proper, and just.
4 areas of Certification in Management Accounting
1) economics,finance, and management.
2) financial accounting and reporting.
3) management reporting, analysis, and behavioral issues.
4) decision analysis and information systems
Cost
The cash (or cash equivalent) sacrificed for goods or services that are expected to produce current or future benefits.
- Expenses are expired costs
Cost object
Any item such as products, departments, customers, and activities for which costs are measured and assigned.
Examples of each:
- Product- BMW X5 sports activity vehicle
- Service- Dealer-support telephone hotline.
- Project- R&D project on DVD system enhancement.
- Customer- Herb Chambers Motors, a dealer that purchases a broad range of BMW vehicles.
- Activity- Setting up production machines
- Department- Environmental, Health and Safety.
How does a cost system determine the costs of a cost object?
-Cost accumulation- A collection of costs data in an organized manner.
- Cost assignment- A general term that includes gathering accumulated costs to a cost object. This includes:
- – Tracing accumulated costs with a direct relationship to the cost object
- – Allocating accumulated costs with an indirect relationship to a cost object.
What are Direct Costs?
Name some examples
- Can be conveniently and economically traced (tracked) to a cost object.
- Assignment of direct costs to a cost object is called Cost Tracing.
Examples: Parts, assembly line wages
What are Indirect Costs?
Name some examples
- Cannot be conveniently or economically traced (tracked) to a cost object.
- Assignment of Indirect costs to a cost object is called Cost Allocation.
Examples: Electricity, rent, property taxes, depreciation
What are the 3 factors affecting Direct/Indirect Cost Classification?
- Cost Materiality- the more immaterial the cost, the less likely it is economically feasible to track the cost.
- Availability of Information-Gathering Technology- The use of computers makes it easier to track costs as direct costs.
- Operation Design- Facility layout may make it easier to assign direct costs.
Variable Cost (definition and formula)
- Changes in total proportion to changes in the related level of activity or volume.
- TVC= # produced x cost per unit
Fixed Cost (definition and formula)
- Remain unchanged in total regardless of changes in the related level of activity or volume.
- FC= TFC / # produced
Cost Driver
A variable that causally affects costs over a given time span.
Example:
- Number of vehicles determines the total steering wheel costs.
- Setup hours determine setup costs
Opportunity Costs
The benefit given up or sacrificed when one alternative is chosen over another.
Product Cost
Product manufacturing costs.
