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81 terms

Accounting 241

Exam #1 (full amount)
STUDY
PLAY
WHAT IS THE PRIMARY PURPOSE OF MANAGERIAL ACCOUNTING?
provide information that helps managers plan, direct, control operations, and make decisions
WHAT IS THE PRIMARY FOCUS OF MANAGERIAL ACCOUNTING?
focus on the relevance to business decisions
PLANNING
involves setting goals and objectives for the company and determining how to achieve
DIRECTING
overseeing the company's day-to-day operations
CONTROLLING
evaluating the results of business operations against the plan and making adjustments
MAKING DECISIONS
such as opening a new business
WHO ARE THE PRIMARY USERS OF INFORMATION? (MANAGERIAL ACCOUNTING)
internal users (managers)
WHO ARE THE PRIMARY USERS OF INFORMATION? (FINANCIAL ACCOUNTING)
external users (creditors, stockholders)
WHAT IS THE PRIMARY ACCOUNTING PRODUCT? (MANAGERIAL ACCOUNTING)
any internal accounting deemed important by management
WHAT IS THE PRIMARY ACCOUNTING PRODUCT? (FINANCIAL ACCOUNTING)
financial statements
WHAT IS THE PURPOSE OF INFORMATION IN FINANCIAL ACCOUNTING?
to help external users make investing and loaning decisions
WHAT IS THE PURPOSE OF INFORMATION IN MANAGERIAL ACCOUNTING?
to help managers plan, direct, control business operations, and make decisions
WHAT IS THE PRIMARY ACCOUNTING PRODUCT? (MANAGERIAL ACCOUNTING)
any internal accounting deemed important by management
WHAT MUST BE INCLUDED IN THE REPORT AND HOW MUST IT BE FORMATTED? (MANAGERIAL ACCOUNTING)
management determines what is wants in a report
WHAT MUST BE INCLUDED IN THE REPORT AND HOW MUST IT BE FORMATTED? (FINANCIAL ACCOUNTING)
GAAP determines the content and format of financial statements
WHAT IS THE UNDERLYING BASIS OF THE INFORMATION? (MANAGERIAL ACCOUNTING)
provides information on both external and internal transactions
WHAT IS THE UNDERLYING BASIS OF THE INFORMATION? (FINANCIAL ACCOUNTING)
the information is based on historical transactions with external parties
WHAT INFORMATION CHARACTERISTIC IS EMPHASIZED? (MANAGERIAL ACCOUNTING)
data must be RELEVANT
WHAT INFORMATION CHARACTERISTIC IS EMPHASIZED? (FINANCIAL ACCOUNTING)
data must be RELIABLE and OBJECTIVE
WHAT BUSINESS "UNIT" IS THE REPORT ABOUT? (MANAGERIAL ACCOUNTING)
segments of the business (such as products, customers, geographical regions,etc.)
WHAT BUSINESS "UNIT" IS THE REPORT ABOUT? (FINANCIAL ACCOUNTING)
the company as a whole (data is put in footnotes)
HOW OFTEN ARE THE REPORTS PREPARED? (MANAGERIAL ACCOUNTING)
depends on management's needs; some daily, some only once
HOW OFTEN ARE THE REPORTS PREPARED? (FINANCIAL ACCOUNTING)
annually and quarterly
IS THE INFORMATION REQUIRED BY AN OUTSIDE GROUP/GOVERNMENT AGENCY? (MANAGERIAL ACCOUNTING)
no authoritative body requires managerial accounting reports
IS THE INFORMATION REQUIRED BY AN OUTSIDE GROUP/GOVERNMENT AGENCY? (FINANCIAL ACCOUNTING)
yes the SEC requires publicly traded companies to issue annual audited
IS THERE ANY CONCERN OVER HOW THE REPORTS WILL AFFECT EMPLOYEE BEHAVIOR? (MANAGERIAL ACCOUNTING)
management carefully considers behavioral implications, when designing the managerial accounting system
IS THERE ANY CONCERN OVER HOW THE REPORTS WILL AFFECT EMPLOYEE BEHAVIOR? (FINANCIAL ACCOUNTING)
the concern is about adequacy of disclosure; behavioral implications are secondary
ETHICS
refers to the standards of conduct for judging right from wrong, honest from dishonest, fair and unfair
IMAs STATEMENT OF ETHICAL PROFESSIONAL STANDARDS:
1. maintain professional COMPETENCE
2. Preserve CONFIDENTIALITY of information
3. uphold their INTEGRITY
4. perform duties with CREDIBILITY
MANAGERIAL ACCOUNTING
focuses primarily on the needs of personnel within the organizations
MIDDLE-LEVEL MANAGERS
considered an internal user of accounting information rather than an external user
THE DAY-TO-DAY WORK OF MANAGEMENT TEAMS WILL TYPICALLY COMPROMISE ALL ACTIVITIES EXCEPT:
cost minimizing
PRIMARY OUTPUT OF SERVICE COMPANIES:
intangible services
PRIMARY OUTPUT OF MERCHANDISING COMPANIES:
tangible products purchased from supplies
PRIMARY OUTPUT OF MANUFACTURING COMPANIES:
new tangible products made as workers and equipment
TYPE(S) OF INVENTORY OF SERVICE COMPANIES:
none
TYPE(S) OF INVENTORY OF MERCHANDISING COMPANIES:
inventory
TYPE(S) OF INVENTORY OF MANUFACTURING COMPANIES:
raw material inventory, work in process inventory, finished goods inventory
SIGNIFICANT COSTS OF SERVICES COMPANIES:
70% = salaries and benefits
SIGNIFICANT COSTS OF MANUFACTURING COMPANIES:
sell products at high prices to cover its costs
VALUE CHAIN:
1. research and development
2. design
3. production or purchases
4. marketing
5. distribution
6. customer service
RESEARCH AND DEVELOPMENT
new or improved products or services and the processes for producing them
DESIGN
detailed engineering of products and services and the processes for producing them
PRODUCTION OR PURCHASES
resources used to produce a product or service or to purchase finished merchandise intended for resale
MARKETING
promotion and advertising of products and services
DISTRIBUTION
Delivery of products or services to customers
CUSTOMER SERVICE
support provided for customers after the sale
COST OBJECT
anything for which managers want a separate measurement of cost
DIRECT COST
a cost that can be traced to the cost object
INDIRECT COST
a cost that relates to the cost to run a manufacturing plant; this includes utilities, property taxes, depreciation
TOTAL COST
include the cost of all resources used throughout the VALUE CHAIN
WHAT ARE THE COMPONENTS OF INVENTORIABLE PRODUCT COSTS?
1. direct materials
2. direct labor
3. manufacturing overhead
DEPRECIATION ON THE COMPANY'S RETAIL OUTLETS
NOT an example of product costs
CLASSIFYING A COST AS EITHER DIRECT OR INDIRECT DEPENDS UPON:
the ease for which the cost can be attached to a particular cost object
COSTS ARE SUBDIVIDED INTO WHAT 2 MAJOR FUNCTIONAL CATEGORIES?
prime and conversion
CONTROLLABLE COST
management is able to influence or change costs
UNCONTROLLABLE COST
management CANNOT change or influence cost in the short-run
WHAT TYPE OF COSTS ARE RELEVANT TO BUSINESS DECISIONS?
costs that differ between alternatives (Differential cost)
OUTPUTS OF JOB COSTING
unique products and services, such as custom ships
OUTPUTS OF PROCESS COSTING
homogenous products and services such as cans of soda
MANUFACTURING APPROACH OF JOB COSTING:
customized to the needs of the customer
COST ACCUMULATION OF PROCESS COSTING:
cost accumulated by process
MANUFACTURING APPROACH OF PROCESS COSTING:
mass-production of products in series of standardized processes
COST ACCUMULATION OF JOB COSTING:
cost accumulated by job or customer
MAJOR COST REPORT OF JOB COSTING
job cost sheet for each unique unit, customer, or job
MAJOR COST REPORT OF PROCESS COSTING
production report for each major production process
PROCESS COSTING:
averages manufacturing costs across all unit so that each identical unit bears the same cost
USED BY COMPANIES THAT PRODUCE EXTREMELY LARGE NUMBERS OF IDENTICAL UNITS (soda company)
JOB COSTING
a system for assigning cost to products or services that differ in the amount, material, labor, and overhead required (custom products)
WHAT ARE THE 3 STEPS FOR ALLOCATING MANUFACTURING OVERHEAD?
1. compute predetermined overhead rate
2. apply manufacturing overhead rate to products
3. find the difference between actual and applied
COST DISTORTION:
occurs when some products are over-costed while other products are undercosted by the cost allocation system
WHEN WOULD WE USE A DEPARTMENTAL OVERHEAD RATE INSTEAD OF A PLANTWIDE RATE?
1. each department incurs different types and amounts of manufacturing
2. each product, or job, uses the departments to a different extent
WHAT ARE THE BENEFITS OF ABC?
more accurate product cost information
more detailed information on costs of activities and associated cost drivers help managers control costs
COST HIERARCHY
unit level, batch level, product level, customer level, facility level
QUALITY MANAGEMENT
its purpose is to provide customers with superior products and services
4 TYPES OF QUALITY COSTS
1. prevention cost
2. appraisal cost
3. internal failure costs
4. external failure costs
PREVENTION COST:
costs incurred to AVOID producing poor-quality goods or services
*COMPANIES TRY USING MORE AUTOMATED TECHNOLOGY FOR AS MUCH AS POSSIBLE
APPRAISAL COST:
costs incurred to DETECT poor-quality goods or services
INTERNAL FAILURE COSTS:
costs incurred on defective units BEFORE delivery to customers
EXTERNAL FAILURE COSTS
costs incurred because the defective goods or services are not detected until AFTER delivery is made to the customers
VALUE-ADDED ACTIVITIES
activities for which the customer is willing to pay because these activities ADD VALUE to the final product
NON-VALUE-ADDED ACTIVITIES
activities that neither enhance the customer's image of the product or service nor provide a competitive advantage