Terms in this set (32)
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
-add value to the business
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
provide economic and financial information for managers and other internal users
-deals with economic event of the company
the price of the company's stock and by the potential selling price of the company
added value is measured by:
officers and manager
primary user of reports of Managerial Accounting
as frequently as needed
types and frequency of reports of Managerial Accounting
special purpose for specific decisions
purpose of reports of Managerial Accounting
pertains to subunits of the business
extends beyond accrual accounting to any relevant data
standard is relevance to decision
content of reports of Managerial Accounting
no independent audits
verification process of Managerial Accounting
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.
- manufacturing overhead
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
indirectly associated with the manufacture of the finished product.
-all manufacturing costs except direct material and labor
-indirect labor, indirect materials
-deprecation of factory and machines
-insurance, tax, maintenance, repairs, utilities on factory
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 to make a product and integral part of producing the finished product.
-recorded in inventory account
-not an expenses until goods are sold
-direct materials and labor
-indirect labor, materials, indirect costs
consists activities and processes that convert raw material into finished goods
-direct labor, direct materials, and overhead
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.
Costs that vary in total directly and proportionately with changes in the activity level.
- remain the same per unit at every level of activity
costs remain the same in total regardless of changes in the activity level within a range
-per unit costs varies inversely with activity
The range of the activity index over which the company expects to operate during the year.
Contribution margin (CM)
The amount of revenue remaining after deducting variable costs.
Contribution margin ratio
the % of each sales dollar available to apply toward fixed costs and profits
unit of Contribution margin
the contribution margin is available to cover fixed costs and to contribute to income
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.
Net present value (NPV)
The difference that results when the original capital outlay is subtracted from the discounted net cash flows. (p. 683).
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.
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.
-repairs and maintenance
-increased operating costs
-overhaul of equipment
-sale of old equipment
-increase cash received from customers
-reduced cash outflow related to operating costs
-salvage value of equipment
Capital Budgeting Decision
-availability of funds
-relationships among proposed projects
-company basic decision making approach
-risk associated with a particular project