Topic 1: Cost Accounting Flashcards
(16 cards)
What are the three key components of product costs?
1) Direct Materials
-Direct materials relate to the product costs. Those direct materials are a part of COGS, but they are not all of COGS.
2) Direct Labour
-This refers to the cost of the labourers who are making the product, or the store people.
3) Overhead Costs
-This includes SG&A, as well as a indirect labour and indirect materials. Indirect labour would be supervisors salary(even within the factory). Indirect materials could be stationary supplies within an office.
What are management control systems?
Management control systems are the way we evaluate whether employees are doing whatever they can to contribute to the company’s success.
In order for information to be considered relevant, what are the necessary conditions?
1) The information must be in the future
2) There must be clear differences between the two options.
What are the three key components of managerial accounting?
1) Cost Accounting
2) Decision-Making: Relevant Information
3) Performance Evaluation
How does managerial accounting and financial accounting differ in terms of restrictiveness.
Financial accounting is highly structured, and must be guided by Financial Reporting standards. On the other hand, managerial accounting is far more discretionary.
What is the difference between the restrictiveness of financial accounting and managerial accounting?
Financial accounting is highly structured, and must be guided by Financial Reporting standards. On the other hand, managerial accounting is far more discretionary.
What time period does financial accounting look at? What about managerial accounting?
Financial reporting is past oriented entirely. Managerial accounting is more future looking, where you make decisions for the future–although you often use financial accounting information to inform that decision making.
How regulated is financial accounting to managerial accounting?
-Financial accounting is structured and guided by IFRS, while managerial accounting is more flexible.
-Financial accounting information takes far longer to become available, because it requires an audit.
-On the other hand, because managerial accounting is only for internal use, it can be usable right away.
How are the tasks different between financial accounting, managerial accounting, and cost accounting?
-Financial accounting involves financial statement preparation and analysis, fulfilling regulatory requirements, consulting or planning, and forensic criminal investigation.
-Managerial accounting includes: general accounting, cost accounting, budgeting, internal audit, management advisory services.
-Cost accounting includes accumulating cost information, C-V-P Analysis, costing systems, and operation and investment decisions.
How does financial accounting differ from management accounting in terms of time dimension and timeliness?
Financial accounting is past oriented, while managerial accounting is future oriented and involves projections, budgets, planning and control.
How is the nature of the information and the focus of the information different between financial accounting and managerial accounting?
-Financial accounting solely uses monetary information. Managerial accounting uses mostly monetary information, but some non-monetary information.
-Financial accounting places emphasis on the whole organization. On the other hand, managerial accounting places emphasis on the project, processes, and segments of an organization.
What are the goals of management control systems?
1) Clearly communicate the organization’s goals.
2) Ensure that every manager and employee understand the specific actions required to acheive organizational goals
3) Communicate results of actions across the organization
4) Ensure that the management control system adjusts to changes in the environment
How is the management control system structured?
1) The company determines key success factors and company vision
2) Set Goals, Measures, and Targets. This involves the 3M’s which are measure, monitor, and motivate.
3) Then we enter the planning stage, which does lead us to make our budgets, and it also creates decision-making and implementation.
4) Finally, they set into place the controls and the evaluation.
5) After we’ve evaluated our outcome, that gives us feedback and learning, and we then circle back to the planning stage.
What are direct costs, and what are indirect costs?
-A direct cost is a cost that can be directly traced to a specific product
-An indirect cost cannot be traced to making one specific product. Maybe it can traced to making many different products.
What are product costs, and what are period costs?
-Product costs are costs involved in manufacturing the products. These costs are often recorded as inventory on the balance sheet.
-Period costs are not tied directly to production, and are often expensed in the period incurred.
What are variable costs, and what are fixed costs?
-Variable costs change with the level of production.
-Fixed costs remain the same regardless of output level.
