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52 Cards in this Set
- Front
- Back
financial accounting system
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follow established rules and conventions to provide information to external users such as investors, goverment agencies and banks
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cost management system
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identifies, collects, measures, and classifies, and reports information that is useful to managers in costing, planning, controlling, and decisions making.
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cost accounting system
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assigns costs to individual products and services and other cost objects as specified by management; satisfies financial reporting and mangement decision making needs
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operational control system
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provides accurate and timely feeback concerning performance; concerned with what activities should be performed and assessing those activities.
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just in time manufacturing
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a demand pull system that strives to produce a product only when it is needed and only in quantities demanded by customers.
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growth of service industry:global comeptition
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increased demand for more cost information, and more accurate information
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factors affecting cost management: growth of service industry
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service sector of economy has increased in importance.deregulation of many services has increased competition in the service industry.
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factors affecting cost management: advances in info technology
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increased ability to accurately cost products due to advances in available tools
emergence of electronic commerce computer are used to continuously monitor and control system wide operations |
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value chain
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set of activities required to design develop produce market and deliver products and services to customers.
firms compete in speed of delivery and response to deliver value to the customer |
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factors affecting cost management: new product development
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high proportion of product costs are committed during the development and design stage of a new product.
encourages the use of target costing and activity based management. |
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role of cost and management accountant:
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responsible for generating financial information required by the firm for internal and external reporting. used by management to plan, control, and make decisions.
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role of cost and management accountant: planning
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detailed formulation of future actions to achieve a particular end.
requires setting objectives and identifying methods to achieve those objectives |
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role of cost and management accountant:controlling
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monitoring a plans implementation and taking corrective action as needed. feedback as information that can be used to evaluate or correct steps being taken to implement of a plan
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role of cost and management accoutant: decision making
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process of choosing among competing alternative. based on info provided by the accounting system.
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benefits of ethical behavior
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create customer and employee loyalty
avoid litigation costs increase likelihood of commercial success |
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certified public accountant
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to provide assurance concerning the reliability of financial statements
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certified internal auditor
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to recognize competency in internal auditing rather than external auditing.
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certified managerial accountant
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to establish management accounting as a recognized professional discipline separate from the profession of public accounting.
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four areas emphasized on cma exam
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business analysis
management accounting and reporting strategic mangement business application |
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cost object
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any item, such as products, customers, departments projects activities and so on for which costs are measured and assigned
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activity
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basic unit of work performed within an organization.
ie. setting up equipment, moving materials. |
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direct tracing
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relies on physical observance of casual relationships to assigns costs to cost objects
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drive tracing
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relies on drivers as casual factors to assigns costs to cost objects
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direct materials/ direct labor
overhead |
materials directly traceable to the goods or services being produced
all other manufacturing costs |
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non production costs
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amount and timing of benefit cannot be reasonably estimated
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period costs
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not inventoried. expensed as incurred
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income statement
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sales
less cogs = gross margin less operating expenses = operating income |
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prime cost
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DM + DL = prime cost
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conversion costs
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DL + OH = conversion costs
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cost management systems: functional based
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assumes linear production cost behavior
assigns costs to organizational units unit based drivers allocation intensive narrow and rigid product costing focus on managing costs sparse activity information maximization of individual performance uses financial measures of performance |
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cost management systems: activity based
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emphasized tracing over allocation
identifies non unity based activity drivers unit and non unit based drivers tracing intensive board flexible product costing focus on managing activities detailed activity information system wide performance maximization uses both financial and non financial measures of performance |
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cost of goods manufactured
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DM + DL+ OH = total manufacturing cost + beg. WIP - end WIP = cost of goods manufactured.
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non unit related costs
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the use of either plant wide or departmental rates assumes that the number of units produced causes overhead costs to increase. some OH costs are not driven by the number of units produced.
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transaction drivers
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measure demand by quantity of events
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duration drivers
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measure demand by elapsed time
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reducing side and complexity of an ABC system
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aproximately relevant abc system: use only most expensive activities for abc assignment. assign using cause and effect drivers
all other activities are added to cost pools o the expensive activities. |
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reducing size and complexity of an abc system: time driven
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time-driven: overcomes the drawback of traditional abc systems. few people report idle of unused time.
1. managers estimate practical capacity as a percentage of theoretical capacity 2. determine per time unit rate 3. determine time required for one unit of activity 4. multiply rate by time. |
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manufacturing firms
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involves joining together dm dl oh to produce a new product. It is tangible and can be inventoried.
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service firms
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service in intangible and cannot be separated from the customer and cannot be inventoried. must be able to track costs of service rendered just as precisley as COGM.
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job order costing system
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produce unique products in small batches that incur different product costs must track the costs of each product or batch seperatly ex. home builders, dental, medical services, cabinet makers.
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process costing system
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produce identical units of the same product. costs of each unit are the same also ie. food cement, chemicals, petroleum
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cost accumulation
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recognition and recording of costs
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source documents
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describes a transaction. recorded into a dababase and captured in the general ledger. can be designed to supply information that can be used for multiple purposes.
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cost measurement
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classifying the costs and determining the dollar amounts for dm, dl and oh
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actual costing
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uses actual costs for dm dl and oh
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normal costing
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uses actual costs and dm and dl but measures oh costs on predetermined basis.
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cost assignment
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occurs after costs have been accumulated and measured.
total product cost/number of units produced |
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unit cost =
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total product cost/number of units produced.
used in manufacturing firms to value inventory, determine income, and inform decision making made up of dm, dl and oh |
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over head
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applied using predetermined rate based on budgeted oh costs and budgeted amount of driver. ie units produced, dl hours, dl dollars
should be a cause and effect relationship |
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activity level
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must be predicted for the coming year to calculate predetermined oh rate.
reflective of consumer demand, and reflective of production capabilities. |
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theoretical activity level
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operating at top of relative range, assuming perfection. no downtime, no inventory shortages
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practical capacity
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allows for some imperfections and shortages. more realistic
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