Managerial Accounting 2020 - Ch. 2
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30 terms
Terms | Definitions |
|---|---|
 Sears | Example of a retailer. |
| Example of Production | The cost of oranges at a fruit juice manufacturer. |
| Administrative Costs | Not an element of Toyota's value chain. |
| Cost of vehicle engine | For Toyota, this is a direct cost with respect to the Prius. |
| Parts of Manufacturing Overhead | Insurance/depreciation on plant and its equipment; plant property taxes; plant utilities; plant repairs. |
| Inventoriable Product Costs | Includes three components: DM, DL, and MOH; includes "Production or Purchases" from the value chain. |
| Cost of Goods Manufactured | This is the manufacturer's counterpart to the merchandiser's purchases when computing COGS. |
| Sunk Costs | Irrelevant to business decisions. |
| Relevant to Business Decisions | Differential, Variable, and Qualitative Costs. |
| True Statement | Total variable costs increase as production volume increases. |
| Service Companies | Sell intangible services such as health care or insurance. |
| Merchandisers | Resell tangible products they buy from suppliers. |
| Retailers | Sell products to consumers like me; example: Wal-Mart. |
| Wholesalers | AKA "middlemen"; buy products in bulk from manufacturers and sell those products to retailers |
| Manufacturers | Use labor, plant, and equipment to convert raw materials into new finished products. |
| Value Chain | Adds value to company's products and services. |
| Period Costs | Include Research & Development, Design, Marketing, Distribution, and Customer Service from the value chain. |
| Cost Object | Anything for which managers want a separate measurement of cost. |
| Direct Object | Can be traced to the cost object; very precise. |
| Indirect Object | Relates to a cost object but cannot be traced to it; "allocate"; less precise. Example: utilities, property taxes, and depreciation. |
| Total costs | Costs of all resources used throughout the value chain. |
| Direct Materials | Primary raw materials that become a physical part of the finished product. |
| Direct Labor | Cost of compensating employees who physically convert raw materials into company's products. |
| Manufacturing Overhead | All indirect manufacturing costs |
| Indirect Materials | Used in the plant and are not easily traced. |
| Indirect Labor | Includes costs of all employees in the plant. |
| Indirect Manufacturing Costs | Same as Manufacturing Overhead. |
| Prime Costs | DM + DL |
| Conversion Costs | DL + MOH |
| COGS | Beg. Inv. + Purchases - End Inv. |
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