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88 Cards in this Set
- Front
- Back
market price
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an asset's price in a fair market
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market value
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true underlying value
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asset
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economic resources; ownership of value
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cost object
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a tangible input with an associated monetary cost
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indirect costs
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not directly accountable to a cost object; fixed or variable overhead
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Business/ACC cost
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money that has already been used to produce something
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ECN cost
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an alternative that was given up
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Michael Porter popularized what concept in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance?
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Value chain
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value chain
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a chain of activities for a firm operating in a specific industry
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The ____ unit is the appropriate level for construction of a value chain
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business, not divisional or corporate
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cost accounting
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internal/management accounting that establishes budget and actual cost of operations, processes, etc.; doesn't follow GAAP
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managers use ___ to support decisions, such as cutting costs
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cost accounting
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management
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the act of getting people together to accomplish goals efficiently and effectively
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management comprises
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planning, organizing, staffing, leading/directing, and controlling an organization or accomplishing a goal
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resourcing encompasses
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deployment and manipulation of human, financial, technological, and natural resources
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A competitive market must have
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more than one buyer or seller
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a market
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one of a variety of systems, institutions, procedures, social relations, and infrastructures whereby parties engage in exchange
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most markets operate using
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money rather than barter
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financial accounting
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external; reports to decision makers via financial statements
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Accounting information system: 6 components
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1. people
2. procedures and instructions 3. data 4. software 5. information technology insfrastructure (devices) 6. internal controls and security measures |
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Problem with "in-house" accounting systems
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expensive to maintain, difficult to develop
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commission
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used to reward sales people as a percentage of goods sold, solving principal/agent problem
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exchange
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a highly organized market where tradeable securities, commodities, foreign exchange, futures, and options contracts are sold and bought
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manufacturing cost
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sum of costs of all resources consumed in the process of making a product
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the 3 categories of manufacturing costs
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1. direct materials
2. direct labor 3. manufacturing overhead |
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direct materials
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raw materials that become part of the finished product
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overhead
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operating (ongoing) expenses that cannot be directly traced to manufactured products
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financial reporting
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preparing and distributing financial statements to users per regulatory standards
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cash flow
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movement of cash into and out of a business, project, or financial product
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order
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in a market, it's an instruction from customers to brokers to buy or sell on the exchange (sometimes complicated, sometimes standard)
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financial statement
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a formal record of all financial activities for an entity (term in the UK is also an "account")
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income
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generally the net profit for firms
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income statement--other names
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profit and loss statement, statement of financial performance, earnings statement, operating statement
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income statement
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financial statement that shows how revenue (top line) becomes net income (bottom line) to show whether the company made or lost money during a period
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cost of goods sold
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inventory costs of the goods a business has sold during a period; costs are determined using a method such as FIFO, LIFO, average cost, or specific identification
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activity-based costing
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a costing model that identifies activities and assigns their costs to products/services depending on actual consumption; turns more overhead into direct costs
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activity-based costing allows an organization to
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precisely estimate costs of individual products/services and make decisions accordingly
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activity-based management
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uses ABC to carry out a value chain analysis or a re-engineering initiative to improve strategic and operational decisions
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insurance
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risk management tool; the equitable transfer of risk of a loss from one entity to another, in exchange for payment
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revenue (UK may call it turnover)
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income from normal business activities and sometimes interest, dividends, and royalties
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A system is a
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set of interrelated parts that performs one or more processes to accomplish specific objectives.
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An accounting information system is one that
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consists of interrelated manual and computer parts and uses processes such as collecting, classifying, summarizing, analyzing, and managing data to provide information to users.
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an accounting information system’s inputs are usually
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economic events
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the ________ of an accounting information system is critically involved with the user of information, since the output of the information system influences users and may serve as the basis for action
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operational model
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The accounting information system can be divided into two major (and usually interlinked) subsystems:
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(1) the financial accounting information system and (2) the cost management information system
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The cost management information system provides information for three broad objectives:
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1 . Costing services, products, and other objects of interest to management
2. Planning and control 3. Decision making |
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cost management system should be integrated with the organization’s
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operational systems
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______ are integrative, cross-functional systems that coordinate information to facilitate timely and accurate reporting and decision making. Ideally, data must be input only once; then it is available to people across the company for whatever
purpose it may serve. |
ERP systems
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_____ is a cost management subsystem
designed to provide accurate and timely feedback concerning the performance of managers and others relative to their planning and control of activities. |
The operational control information system
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A ____ is a cost that
expires without producing any revenue benefit |
loss
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An _____ is a basic unit of
work performed within an organization |
activity
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_______ is the ability to assign a cost directly to a cost object in an economically feasible way by means of a causal relationship
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traceability
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_____ determines whether a costs is direct or indirect
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what the cost object is
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Tracing costs to cost objects can occur in one of two ways:
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(1 ) direct tracing and (2) driver tracing
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_____ is the process of identifying and assigning costs to a cost object that are specifically or physically associated with the cost object and is most often accomplished by physical observation
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Direct tracing
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___ are factors that cause changes in resource
usage, activity usage, costs, and revenues |
Drivers
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____ is the use of drivers to assign
costs to cost objects; although less precise than direct tracing, it can be accurate if the cause-and-effect relationship is sound |
Driver tracing
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Assignment of indirect costs to cost objects is called ____. Since no causal relationship exists, this is done based on convenience or some
assumed linkage |
allocation
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There are three methods of assigning costs to cost
objects: |
direct tracing, driver tracing, and allocation
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___ are goods produced by converting raw materials into finished products through the use of labor and capital inputs such as plant, land, and machinery
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Tangible products
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____ are tasks or activities performed for a customer or an activity performed by a customer using an organization’s products or facilities
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Services
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___ means that services cannot be stored
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Perishability
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Services differ from tangible products on three important dimensions:
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intangibility, perishability, and inseparability
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____ means that producers of services and buyers of services must usually be in direct contact for an exchange to take place
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inseparability
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just read
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For pricing decisions, product mix decisions, and strategic profitability analysis, all
traceable costs along the value chain need to be assigned to the product. For strategic product design decisions and tactical profitability analysis, costs for production, marketing, and customer service (including customer post-purchase costs) are needed. For external financial reporting, FASB rules and conventions mandate that only production costs be used in calculating product costs |
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_____ are those costs associated with the functions of selling and
administration |
Nonproduction costs
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Production costs can be further classified as
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direct materials, direct labor, and overhead
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____ are generally those materials necessary for production that do not become part of the finished product or are not used in providing a service
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Supplies
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Direct materials that form an insignificant part of the final product are usually lumped into the overhead category called ____.
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indirect materials
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Overtime is usually part of ___
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overhead
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____ is the sum of direct materials cost and direct labor cost
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Prime cost
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_____ is the sum of direct labor cost and overhead cost
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Conversion cost
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Nonproduction costs are divided into two categories:
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marketing (selling) costs and administrative costs
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Marketing and administrative costs are not inventoried and are called ____, which are expensed in the period in which they are incurred
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period costs
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Period costs appear on which financial statement?
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the income statement
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_____ are often referred to as order-getting and order-filling costs and include the following: salaries and commissions of sales person-
nel, advertising, warehousing, shipping, and customer service |
marketing costs
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All costs that cannot be reasonably assigned to either marketing or production are ____
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administrative costs
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production and nonproduction costs are separated on the ________
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income statement (also called absorption-costing income or full-costing income)
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Cost management systems can be broadly classified as _____, with the former being more common
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traditional or activity-based
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A cost accounting system that uses only unit-based activity drivers to assign costs to cost objects is called a _____
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traditional cost system
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A ____ assigns costs to
organizational units and then holds the organizational unit manager responsible for controlling the assigned costs. Performance is measured by comparing actual outcomes with standard or budgeted outcomes |
traditional operation control system
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The overall objective of an activity-based cost management system is to _____
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manage activities to reduce costs and improve customer value
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A cost accounting system that uses both unit- and non-unit-based activity drivers to assign activity costs to cost objects is called an ____
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activity-based cost (ABC)
system |
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____ focuses on the management of activities with the objective of improving the value received by the customer and the profit received by the company in providing this value. It includes driver analysis, activity analysis, and performance evaluation and draws on ABC as a major source of information
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Activity-based management (ABM)
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_____ are expensive to build, complex to sustain, and difficult to modify
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ABC systems
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____ are the costs associated with the measurements required by the cost management system
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Measurement costs
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____ are the costs associated with making poor decisions based on bad cost information
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Error costs
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Firms should consider implementing an ABM system if they have experienced _____ in measurement costs and _____ in error costs
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a decrease, an increase
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