cost accounting final

79 terms by jim_klaisle 

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cost margin =

rev - var cost

budget defined

an aid to coordination what needs to be done to implement that plan, may include both financial and non-financial data

operating budget

building blocks leading to the creation of the budgeted income statement

financial budget

building blocks based on the operating budget that lead to the creation of the budgeted balance sheet and the budgeted statement of cash flows

responsibility center

a part, segment, or sub unit of an organization whose manager is accountable for a specified set of activities

responsibility accounting

a system that measures the plans, budgets, actions, and actual results of each responsibility center

types of responsibility centers
cost
revenue
profit
investment

accountable for cost only
accountable for revenues only
accountable for revenues and costs
accountable for investments, revenues, and costs

controllability

the degree of influence that a manager has over cost, revenues, or related items for which he is being held responsible

GAP says

must us Absortion

absorption costing

product cost are capitalized; period costs are expensed

variable costing

variable product and period costs are capitalized; fixed product and period costs are expensed

absorption for?

internal reporting

Sunk costs

are costs that have already occurred and can not be changed, they can not be be changed by future actions.

Quantitative

outcomes that can be measured in numerical terms such as direct labor

3 major influences on pricing decisions

customers
cpmpetitors
costs

flexible budget

actual results x budget cost

Which of the following costs(s) are inventoried when using variable costing?
A. direct manufacturing costs
B. variable marketing costs
C. fixed manufacturing costs
D. Both A and B are correct

A. direct manufacturing costs

Which of the following cost(s) are inventoried when using absorption costing?

A. direct manufacturing costs
B. variable marketing costs
C. fixed manufacturing costs
D. Both A and B are correct

D. Both A and B are correct

A decision model involves:
A. only quantitative analyses
B. both quantitative and qualitative analyses
C. only qualitative analyses
D. a mangers instinct

B. both quantitative and qualitative analyses

qualitative

outcomes that are difficult to measure accurately in numerical terms, such as satisfaction

For decision making, a listing of the relevant future costs:
A. will help the decision maker concentrate on the pertinent data
B. will only include future costs
C. will only include costs that differ among alternatives
D. All of these answers are correct.

D. All of these answers are correct.

decision models

is a formal method of making a choice, often involving both quantitative and qualitative analyses. Managers often use some variation of the 5 stp decision making process.

opportunity costs

the contribution to operating income that is foregone by not using a limited resurce in its next best alternative use. How much did the firm lose out on by not selecting this alternative?

product mix decisions

the decisions made by a company about which products to sell and in what quantities

decision rule

does adding or dropping a customer add operating income to the firm? yes - add, no - drop

incremental cost

the additional total cost incurred for an activity

differential cost

the difference in total cost between two alternatives

incremental revenue

the additional total revenue from an activity

differential revenue

the difference in total revenue between two alternatives

Ture or False
All variable costs are relevant and all fixed costs are irrelebant?

False

strategy

specifies how an organization matches its own capabilities with theopportunities in the marketplace to accomplish its objectives

product differentiation

an organizations's ability to offer products or services perceived by its customers to be superior and unique relative to the products or services of its competitors. leads to brand loyalty and the willingness of customers to pay high prices.

cost leadership

an organizations ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control. leads to lower selling prices

balanced scorecard

translates an organizations mission and strategy into a set of performance measures that provides the framework for implementing its strategy. It is called this because it balances the use of financial and nonfinancial performance measures to evalute performance.

learning and growth perspective

identifies the capabilities the organization must excel at to achieve superior internal processes that create value for customers and sharholders

balanced scorecard measures?

financial perspective
customer perspective
internal business process perspective
learning and growth perspective

balanced scorecard implementation

must have commitment and leadership from top management. must be communicated to all employees.

features of a good balanced scorecard

tells the story of a firms strategy, articulating a sequence of cause and effect relationship, describe how strategy will be implemented. helps communicate the strategy to all members of the organization by translating the strategy into a coherent and linked set of understandable and measurable operations targets.

variance

difference between an actual and an expected budgeted amount

management by exception

the practice of focusing attention on areas not operating as expected (budgeted)

static budget

is based on the output planned at the start of the budget period

static budget variance

the difference between the actual result and the corresponding static budget amount

favorable variance

has the effect of increasing operating income relative to the budget amount

unfavorable variance

has the effect of decreasing operating income relative to the budget amount

flexible budget

shifts budgeted revenues and costs up and own based on actual operating results

standard costing

targets or standards are established for direct material and direct labor. the standard costs are recorded in the accounting system. actual price and usage amounts are compared to the standard and variances are recorded.

influences on demand and supply

customrs
competitors
costs

customers

influence price through their effect on the demand for a product or service, based on factors such as quality and product features.

competitors

influence price through their pricing shemes, product features, and productions volume.

costs

influence prices because they affect supply(the lower the cost, the greater the quantity a firm is willing to supply)

short run pricing decisions

are generally less than one year and include decisions such as pricing a one time only special order with no long run implications. adjusting product mix and ouput volume in a competitive market.

long run pricing decisions

time horizon of one year or longer and include pricing a product in a jamor market where there is some leeway in setting price.

dumping

a non us firm sells a product in the us at a price below the marke value in the country where it is produced, and this lower price materially injures or threatens to materially injure an industry in the us.

collusive pricing

occurs when compaines in an industry conspire in their pricing and production decisions to achieve a price above the competitive price and so restrain trade.

long run vs short run affecting pricing

short run - fixed costs cannot be changed
long run - costs can be altered

market based price charged

is based on what customers want and how competitors react

cost based price charged

is based on what it costs to produce, coupled with the ability to recoup the costs and still achieve a required rate of return

value added costs

a cost that, if eliminated, would reduce the actual or perceived value or utility usefulness customers obtrain from using the product or service

on value added costs

a cost that, if eliminated, would not reduce the actual or perceived value or utility customers obtain from using the product or service. it is a cost teh customer is unwilling to pay for.

cost incurrence

describes when a resource is consumed or benefit foregone to meet a specific objective

locked in cost

are costs that have not yet been incurred but, based on decision that have already been made, will be incurred in the furture

life cycle budgeting

involves estimatin the revenues and individual value chain cost attributable to each product from its initial r&d to its final customer service and support. it tracks and accmulates individual value chain costs attributable to each product from its initial r&d to its final customer service and support.

price discrimination

the practice of charging different customer differnt prices for the same product or service. it is illegal if the intent is to lessen or prevent competition for customers.

peak load pricing

the practice of charging a higher price for the same product or service when the demand for it approaches the physical limit of the capacity to produce that produt or service.

predator pricing

is deliberately lowering prices below costs in an effort to drive competitors out of the market and restric supply, and then raising prices.

differ among the alternative courses of action

cost and revenues that do not differ will not amtter and, hence, will have no bearing on the decision being made.

opportunity cost

is the contribution to operating income that is forgone by not using a limited resource in its next best alternative use.

variable cost

cost that change in total in proportion to changes in teh related level of total activity or volume

relevant cost

expected future costs that differ among alternative courses of action being considered

target price

estimated price for a product or service that potential customer will pay

full cost of the product

the sum of all variable and fixed cost in all business functions fo the value chain

make or buy decisions

decisions about whether a producer of goods or services will insource, product goods or services, or outsource, purchase them from outside vendors

capital budgeting

the making of long run planning decisions for investments in projects

manufacturing overhead

indirect costs, all manufacturing costs are related to teh cost object, work in process and then finished goods, but that cannot be traced to that cost object in aneconomically feasible way

fixed cost

cost that remains unchanged in total for a given time period, dspite wide changes in the related level of total activity or volume

variable cost

cost that changes in total in proportion to changes in the related lwevel of total activity or volume

True or False
Full costs of a product include variable costs, but not fixed costs.

FALSE

True or False
In a decision as to whether or not to drop a product, fixed costs that have been allocated to that product are always relevant.

FALSE
Fixed costs are not necessarily relevant-they will be incurred regardless
More concern with contribution margin-if $ left over to pay fixed costs

True or False
When replacing an old machine with a new machine, the purchase price of the new machine is a relevant cost.

True

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