Accounting 2 -- Test 2
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Created by:
ehiggin1 on October 31, 2010
Subjects:
accounting vocabulary, accounting ii, managerial accounting
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112 terms
Terms | Definitions |
|---|---|
 business process | a series of steps that are followed to carry out some task in a business |
| chief financial officer (CFO) | the member of the top management team who is responsible for providing timely and relevant data to support planning and control activities and for preparing financial statements for external users |
| constraint | anything that prevents and organization or individual from getting more of what it wants |
| controller | the member of the top management team who is responsible for providing relevant and timely data to managers and for preparing financial statements for external users. reports to the cfo |
| corporate governance | the system by which a company is directed and controlled. If properly implemented it should provide incentives for top management to pursue objectives that are in the interests of the company and it should effectively monitor performance |
| corporate social responsibility | a concept whereby organizations consider the needs of all stakeholders when making decisions. It extends beyond legal compliance to include voluntary actions that satisfy stakeholder expectations |
| decentralization | the delegation of decision-making authority throughout an organization by providing managers with the authority to make decisions relating to their area of responsibility |
| enterprise risk management | a process used by a company to help identify the risks that it faces and to develop responses to those risks that enable the company to be reasonably assured of meeting its goals |
| finished goods | units of product that have been competed but have not yet been sold to customers |
| Just-in-time (JIT) | a production and inventory control system in which materials are purchased and units are produced only as needed to meet actual customer demand |
| lean thinking model | a five-step management approach that organizes resources around the flow of business processes and that pulls units through these processes in response to customer orders |
| line | a position in an organization that is directly related to the achievement of the organization's basic objectives |
| non-value-added activities | activities that consume resources but do not add value for which customers are willing to pay |
| organization chart | a diagram of a company's organizational structure that depicts formal lines of reporting, communication, and responsibility between managers |
| raw materials | materials that are used to make a product |
| sarbanes-oxley act of 2002 | legislation enacted to protect the interests of stockholders who invest in publicly traded companies by improving the reliability and accuracy of the disclosures provided to them |
| six sigma | a method that relies on customer feedback and objective data gathering and analysis te hniques to drive process improvement |
| staff | a position in an organization that is only indirectly related to the achievement of the organization's basic objectives. Such positions provide service or assistance to line positions or to other staff positions |
| strategy | a "game plan" that enables a company to attract customers by distinguishing itself from competitors |
| supply chain management | a management approach that coordinates business processes across companies to better serve end consumers |
| theory of constraints (TOC_ | a management approach that emphasizes the importance of managing constraints |
| value chain | the major business functions that add value to a company's products and services such as research and development, product design, manufacturing, marketing, distribution, and customer service |
| work in process | units of product that are only partially complete and will require further work before they are ready for sale to a customer |
| administrative costs | all executive, organization, and clerical costs associated with the general management of an organization rather than with manufacturing or selling |
| budget | a detailed plan for the future, usually expressed in formal quantitative terms |
| common cost | a cost that is incurred to support a number of cost objects but that cannot be trace to them individually. For example, the wage cost of the pilot of a 747 airliner is a common cost of all of the passengers on the aircraft. Without the pilot, there would be no flight and no passengers. But no part of the pilot's wage is caused by any one passenger taking the flight. |
| control | the process of instituting procedures and then obtaining feedback to ensure that all parts of the organization are functioning effectively and moving toward overall company coals |
| controlling | actions taken to help ensure that the plan is being followed and is appropriately modified as circumstances change |
| conversion cost | direct labor cost plus manufacturing overhead cost |
| cost behavior | the way in which a cost reacts to changes in the level of activity |
| cost object | anything for which cost data are desired. Examples of cost objectives are products, customers, jobs, and parts of the organization such as departments or divisions |
| cost of goods manufactured | the manufacturing costs associated with the goods that were finished during the period |
| differential cost | a difference in cost between two alternatives |
| differential revenue | the difference in revenue between two alternatives |
| direct cost | a cost that can be easily and conveniently traced to a specified cost object |
| directing and motivating | mobilizing people to carry out plans and run routine operations |
| direct labor | factory labor costs that can be easily traced to individual units of product. Also called touch labor. |
| direct materials | materials that become an integral part of a finished product and whose costs can be conveniently traced to it |
| feedback | accounting and other reports that help managers monitor performance and focus on problems and/or opportunities that might otherwise go unnoticed |
| financial accounting | the phase of accounting concerned with providing information to stockholders, creditors, and others outside of the organization |
| finished goods | units of product that have been completed but not yet sold to customers |
| fixed cost | a cost that remains constant, in total, regardless of changes in the level of activity within the relevant range. If a fixed cost is expressed on a per unit basis, it varies inversely with the level of activity |
| incremental cost | an increase in cost between two alternatives |
| indirect cost | a cost that cannot be easily and conveniently traced to a specific cost object |
| indirect labor | the labor costs of janitors, supervisors, materials handlers, and other factory workers that cannot be conveniently traced to particular products |
| inventoriable costs | synonym for product costs |
| managerial accounting | the phase of accounting concerned with providing information to managers for use within the organization |
| manufacturing overhead | all manufacturing costs except direct materials and direct labor |
| opportunity cost | the potential benefit that is given up when one alternative i selected over another |
| performance report | a detailed report comparing budgeted data to actual data |
| period costs | costs that are taken directly to the income statement as expenses in ther period in which they are incurred ora ccrued |
| planning | selecting a course of action and specifying how the action will be implemented |
| planning and control cycle | the flow of management activities through planning, directing motivating, and controlling, and then back to planning again |
| prime cost | direct materials cost plus direct labor cost |
| product costs | all costs that are involved in acquiring or making a product. In the case of manufactured goods, these costs consist of direct materials, direct labor, and manufacturing overhead. |
| raw materials | any materials that go into the final product |
| relevant range | the range of activity within which assumptions about variable and fixed cost behavior are valid |
| schedule of cost of goods manufactured | a schedule showing the direct materials, direct labor, and manufacturing overhead costs incurred during a period and the portion of those costs that are assigned to Work in Process and Finished Goods |
| segment | any part of an organization that can be evaluated independently of other parts and about which the manager seeks financial data. Examples include a product line, a sales territory, a division, or a department |
| selling costs | all costs that are incurred to secure customer orders and get the finished product or service into the hands of the customer |
| sunk cost | a cost that has already been incurred and that cannot be changed by any decision made now or in the future |
| variable cost | a cost that varies, in total, in direct proportion to changes in the level of activity. A variable cost is constant per unit |
| account analysis | a method for analyzing cost behavior in which an account is classified as either variable or fixed based on the analyst's prior knowledge of how the sot in the account behaves |
| activity base | a measure of whatever causes the incurrence of a variable cost. For example, the total cost of X-ray film in a hospital will increase as the number of X-rays taken increases. Therefore, the number of X-rays is the activity base that explains the total cost of X-ray film |
| committed fixed costs | investments in facilities, equipment, and basic organizational structure that can't be significantly reduced even for short periods of time without making fundamental changes |
| contribution approach | an income statement format that organizes costs by their behavior. Costs are separated into variable and fixed categories rather than being separated according to organizational functions |
| contribution margin | the amount remaining from sales revenues after all variable expenses have been deducted |
| cost structure | the relative portion of fixed, varable, and mixed costs in an organization |
| discretionary fixed costs | those fixed costs that arise from annual decisions by management to spend on certain fixed cost items, such as advertising and research |
| engineering approach | a detailed analysis of cost behavior based on an industrial engineer's evaluation of the inputs that are required to carry out a particular activity and of the prices of those inputs |
| high-low method | a method of separating a mixed cost into its fixed and variable elements by analyzing the change in cost between the high and low activity levels |
| least-squares regression method | a method of separating a mixed cost into its fixed and variable elements by fitting a regression line that minimizes the sum of the squared errors |
| linear cost behavior | cost behavior is said to be linear whenever a straight line is a reasonable approximation for the relation between cost and activity |
| mixed cost | a cost that contains bot variable and fixed cost elements |
| multiple regression | an analytical method required when variations in a dependent variable are caused by more than one facto |
| R^2 | a measure of goodness of fit in a least-squares regression analysis. It is the percentage of the variation in the dependent variable that is explained by variation in the independent variable |
| relevant range | the range of activity within which assumptions about variable and fixed cost behavior are reasonably valid |
| step-variable cost | the cost of a resource that is obtained in large chunks and that increases and decreases only in response to fairly wide changes in activity |
| break-even point | the level of sales at which profit is zero |
| contribution margin ratio (CM Ratio) | a ratio computed by dividing contribution margin by dollar sales |
| cost-volume-profit (CVP) graph | a graphical representation of the relationships between an organization's revenues, costs, and profits on the one hand and its sales volume on the other hand |
| degree of operating elverage | a measure, at a given level of sales, of how a percentage change in sales will affect pofits. The degree of operating leverage is computed by dividing the contribution margin by net operating income |
| incremental analysis | an analytical approach that focuses only on those costs and revenues that change as a result of a decision |
| margin of safety | the excess of budgeted (or actual) dollar sales over the break-even dollar sales |
| operating leverage | a measure of how sensitive net operating income is to a given percentage change in dollar sales |
| sales mix | the relative proportions in which a company's products are sold. Sales mix is computed by expressing the sales of each product as a percentage of total sales |
| target profit analysis | estimating what sales volume is needed to achieve a specific target profit |
| variable expense ratio | a ratio computed by dividing variable expenses by dollar sales |
| budget | a quantitative plan for acquiring and using resources over a specified time period |
| budget committee | a group of key managers who are responsible for overall budgeting policy and for coordinating the preparation of the budget |
| cash budget | a detailed plan showing how cash resources will be acquired and used over a specific time period |
| continuous budget | a 12-month budget that rolls forward one moth as the current month is completed |
| control | those steps taken by management to increase the likelihood that all parts of the organization are working together to achieve the goals set down at the planning stage |
| direct labor budget | a detailed plan that shows the direct labor-hours required to fulfill the production budget |
| direct materials budget | a detailed plan showing the amount of raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories |
| ending finished goods inventory budget | a budget showing the dollar amount of unsold finished goods inventory that will appear on the ending balance sheet |
| manufacturing overhead budget | a detailed plan showing the production costs, other than direct materials and direct labor, that will be incurred over a specified time period |
| master budget | a number of separate but interdepenedent budgets that formally lay out the company's sales, production, and financial goals and that culminates in a cash budget, budgeted income statement, and budgeted balance sheet |
| merchandise purchases budget | a detailed plan used by a merchandising company that shows the amout of goods that must be purchased from suppliers during the period |
| participative budget | self-imposed budget |
| perpetual budget | continuous budget |
| planning | developing goals and preparing budgets to achieve those goals |
| production budget | a detailed plan showing the number of units that must be produced during a period in order to satisfy both sales and inventory needs |
| responsibility accounting | a system of accountability in which managers are held responsible for those items of revenue and cost -- and only those items -- over which they can exert significant control. The managers are held responsible for differences between budgeted and actual results |
| sales budget | a detailed schedule showing expected sales expressed in both dollars and units |
| self-imposed budget | a method of preparing budgets in which managers prepare their own budgets. These budgets are then reviewed by higher-level managers, and any issues are resolved by mutual agreement |
| selling and administrative expense budget | a detailed schedule of planned expenses that will be incurred in areas other than manufacturing during a budget period |
| activity variance | the difference between a revenue or cost item in the static planning budget and the same item in the flexible budget. An activity variance is due solely to the difference between the level of activity assumed in the planning budget and the actual level of activity used in the flexible budget |
| flexible budget | a report showing estimates of what revenues and costs should have been, given the actual level of activity for the period |
| planning budget | a budget created at the beginning of the budgeting period that is valid only for the planned level of activity |
| revenue variance | the difference between how much the revenue should have been, given the actual level of activity, and the actual revenue for the period. A favorable (unfavorable) revenue variance occurs because revenue is higher (lower) than expected, given the actual level of activity for the period |
| spending variance | the difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost. A favorable (unfavorable) spending variance occurs because the cost is lower (higher) than expected, given the actual level of activity for the period |
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