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Accounting 2020 Final
Terms in this set (48)
What is MA
Is concerned with providing information to managers for use within the organization. Reports to managers for: Planning, Controlling, Decision making. Emphasizes decisions affecting the future. Emphasizes relevance. Emphasizes segment reports. Need not follow GAAP/IFRS. Not mandatory.
Include all cost involved in acquiring or making a product.
Are all cost that are not product cost. Ex: sales commissions, advertising executive salaries, public relations, and rental cost of administrative offices.
Cost that has already been incurred and that cannot be changed by any decision made now or in the future. Sunk costs should always be ignored.
Potential benefit that is given up when on alternative is selected over another.
Based on the rise-over-run formula.
Cost at high level-Cost at low level/ High level activity-low level activity
Cost of Goods Manufactured
Includes the manufacturing costs associated with the goods that were finished during the period. Ex. Dl, DM, MO. Sum of finished goods and work in process accounts.
Cost of Goods Sold
(How many units x cost per unit), Cost transferred from Finished Goods.
Process of charging manufacturing overhead cost to job cost sheets and to the Work in Process account.
A credit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost applied to Work in Process EXCEEDS the amount of overhead cost actually incurred during a period.
A debit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost actually incurred exceeds the amount of overhead cost applied to Work in Process during a period.
Costing method that includes only variable manufacturing costs- direct materials, direct labor, and variable manufacturing overhead- in unit product costs
Traceable Fixed Cost
A fixed cost that is incurred because of the existence of a particular business segment and that would be eliminated if the segment were eliminated.
Break-Even in Unit Formula
Fixed expenses/ Unit CM
Steps for Implementing Activity-Based Costing
1. Define activities, activity cost pools, and activity measures
2. Assign overhead costs costs to activity cost pools
3. Calculate activity rates
4. Assign overhead costs to cost objects using the activity rates and activity measures
5. Prepare management reports
Activity Based costing (ABC)
A management approach that focuses on managing activities as a way of eliminating wast and reducing delays and defects
1. Budgets communicate management's plans throughout the organization
2. Budgets force mangers to think about and plan for the future.
3. The budgeting process provides a means of allocating resources to those parts of the organization where they can be used most effectively.
4. The budgeting process can uncover bottlenecks before they occur.
5. Budgets coordinate the activities of the entire organization by integrating the plan of various parts.
6. Budgets define goals and objectives that can serve as benchmarks for evaluating subsequent performance.
A detailed plan showing the number of units that must be produced during a period in order to satisfy both sales and inventory
Non- Operating Expenses
Interest, Casualty loss, Equipment sales loss, Taxes, Admin costs
Rent, Selling, Admin salary, Advertising, Shipping
What does X stand for in the equation: Y= A+Bx
What does Y stand for in the equation: Y= A+Bx
Investment Turn Over (ITO) Equation
Sales Revenue/ Average investment assets (SR/AIA)
Profit Margin Equation
Operating Income/ Sales Revenue (OI/SR) or Return On Investment/Investment Turn Over (RTO/ITO)
Sales Revenue Equation
Operating Income/ Profit Margin (OI/PM)
Operating Income Equation
Profit Margin (SR
PM) or Sales-Epenses (S-E)
Average Investment Assets Equation
Sales Revenue/Investment Turn Over (SR/ITO)
Operating Income-(Average Investment Assets* Hurdle Rate)
Return On Investment
ITO*PM or OI/AIA
What makes up prime costs
Direct Materials and Direct Labor
What makes up conversion costs
Manufacturing Overhead and Direct Labor
What is the flexible budget equation
y=a + bX
Materials Price Variance Equation (MPV)
Actual Quantity(Actual Price-Standard Price)
Materials Quantity Variance Equation (MQV)
(Actual Quantity-Standard Quantity)Standard Price
Labor Efficiency Variance Equation (LEV)
(Actual Hours-Standard Hours)Standard Rate
Labor Rate Variance Equation (LRV)
Actual Hours(Actual Rate-Standard Rate)
The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, the riskier the project, the higher the hurdle rate.
Contribution Margin Income Statement
Sales- Variable Expenses (Variable COGS, Variable selling & administrative)
An integrated set of performance measures that are derived from and support the organization strategy.
Net operating income/ Sales
Cost that differs between alternatives in a decision. Synonyms are avoidable cost, differential cost, and incremental cost.
Make or Buy
A decision concerning whether an item should be produced internally or purchased from an outside supplier.
A one-time order that is not considered part of the company's normal ongoing business.
ex. Constricted Resource
The length of time that it takes a project to fully recover its initial cost out of the net cash inflows that it generates.
Accounting Rate of Return (Simple rate of return)
Annual incremental net operating income/ Initial investment
Net Present Value (NPV)
The difference between the present value of an investment project's cash inflows and the present value of its cash outflows.
Internal Rate of Return (IRR)
Investment required/ Annual net cash inflow
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