act exam 3-10,11,13,16
Terms in this set (48)
is a field of accounting that provides economic and financial information for manager and other internal users
Work of factory employees that has no physical association with the finished product or for which it is impractical to trace the costs to the goods produced.
Raw materials that do not physically become part of the finished product or for which it is impractical to trace to the finished product because their physical association with the finished product is too small.
Manufacturing costs that are indirectly associated with the manufacture of the finished product.
-all manufacturing costs except direct material and labor
Costs that are matched with the revenue of a specific time period and charged to expense as incurred.
-non manufacturing costs
-selling and administrative expenses
-marketing expenses, rent, office depreciation
Costs that are a necessary and integral part of producing the finished product.
-direct materials and labor
-indirect labor, materials, indirect costs
The work of factory employees that can be physically and directly associated with converting raw materials into finished goods.
Raw materials that can be physically and directly associated with manufacturing the finished product.
Total manufacturing costs
direct materials + direct labor + manufacturing overhead
Total cost of work in process
cost of the beginning work in process + total manufacturing costs for the current period
Cost of goods manufactured
Total cost of work in process - the cost of the ending work in process inventory.
planning, directing, controlling
The management of an organization performs several broad functions. They are...
Requires managers to look ahead and establish objectives
-maximizing short term profits and market share
-maintaining a commitment to environmental protection
-contributing to social programs
Involves coordinating a company's diverse activities and human resources to produce a smooth-running operation
-selecting executives, appointing managers, hire and train employees
-implement planned objectives and providing necessary incentives to motive employees
The process of keeping the company's activities on track
-managers determine whether planned goals are met
-decide what changes are needed to get back on track
-may use an informal of formal system of evaluations
Costs that vary in total directly and proportionately with changes in the activity level.
Costs that remain the same in total regardless of changes in the activity level.
The range of the activity index over which the company expects to operate during the year.
Costs that contain both a variable- and a fixed-cost element and change in total but not proportionately with changes in the activity level.
The level of activity at which total revenue equals total costs.
Cost-volume-profit (CVP) income statement
A statement for internal use that classifies costs as fixed or variable and reports contribution margin in the body of the statement.
Contribution margin (CM)
The amount of revenue remaining after deducting variable costs.
high low method
A mathematical method that uses the total costs incurred at the high and low levels of activity to classify mixed costs into fixed and variable components.
Cost-volume-profit (CVP) graph
A graph showing the relationship between costs, volume, and profits.
Cost-volume-profit (CVP) analysis
The study of the effects of changes in costs and volume on a company's profits.
Unit contribution margin
The amount of revenue remaining per unit after deducting variable costs; calculated as unit selling price minus unit variable costs.
Margin of Safety
The difference between actual or expected sales and sales at the break-even point.
A formal written statement of management's plans for a specified future time period, expressed in financial terms.
A formalized process of identifying long-term goals, selecting strategies to achieve those goals, and developing policies and plans to implement the strategies.
A set of interrelated budgets that constitutes a plan of action for a specific time period.
Individual budgets that result in a budgeted income statement.
Individual budgets that focus primarily on the cash resources needed to fund expected operations and planned capital expenditures.
Budgeted income statement
An estimate of the expected profitability of operations for the budget period.
Direct materials budget
An estimate of the quantity and cost of direct materials to be purchased.
A projection of the units that must be produced to meet anticipated sales.
The projection of potential sales for the industry and the company's expected share of such sales.
Net present value (NPV)
The difference that results when the original capital outlay is subtracted from the discounted net cash flows.
Annual rate of return method
The determination of the profitability of a capital expenditure, computed by dividing expected annual net income by the average investment.
Net present value (NPV) method
A method used in capital budgeting in which net cash flows are discounted to their present value and then compared to the capital outlay required by the investment.
Cash payback technique
A capital budgeting technique that identifies the time period required to recover the cost of a capital investment from the net annual cash flow produced by the investment.
The process of making capital expenditure decisions in business.
Cost of capital
The weighted-average rate of return that the firm must pay to obtain funds from creditors and stockholders.
The interest rate used in discounting the future net cash flows to determine present value.
Discounted cash flow technique
A capital budgeting technique that considers both the estimated net cash flows from the investment and the time value of money.
Internal rate of return (IRR)
The interest rate that will cause the present value of the proposed capital expenditure to equal the present value of the expected net annual cash flows.
Internal rate of return (IRR) method
A method used in capital budgeting that results in finding the interest yield of the potential investment.
A method of comparing alternative projects that takes into account both the size of the investment and its discounted net cash flows. It is computed by dividing the present value of net cash flows by the initial investment.
Required rate of return
The rate of return management expects on investments, sometimes called the discount rate or cost of capital.