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Definitions |
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Inventory Holding Costs
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financingwarehouse spacesupervisiontheftdamage
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MA verification process
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No independent audits
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Operating Assets
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cash, accounts receivable, inventory, plant and equipment, and all other assets held for operating purposes
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contribution margin
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Sales revenue minus variable expenses. The amount of sales revenue, which is left to cover fixed expenses and profit after paying variable expenses.
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Benchmarking
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The continuous process of comparing products, services, and activities against the best industry standards
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Labor costs that are clearly associated with specific units or batches of product because the labor is used to convert raw materials into finished products called are:
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Direct labor.
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absorption costing
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all manufacturing costs as product costs regardless of fixed or variable
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Business Processes
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Processes implemented by management to achieve entity objectives. Business processes are typically organized into the following categories: revenue, purchasing, human resource management, inventory management, and financing processes.
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VarianceMaterials Price Variance
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Actual Quantity(Actual Price - Standard Price)
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line position
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directly involved in achieving the organization's goal
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Cash Budgets
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Beg. Cash Balance
Add: Cash Reciepts
= Cash Available
Less: Expected Cash Disbursement
= End cash balance before financing
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cost driver
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A characteristic of an activity or event that results in the incurrence of costs by that activity or event.
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Lean Production
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A philosophy and business strategy of manufacturing without waste.
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chief financial officer
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corporate officer who is responsible for all of the accounting and finance issues of the company
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Kaizen costing
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The process of cost reduction during the manufacturing phase of a product. Refers to continual and gradual improvement through small betterment activities.
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manufacturing overhead
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all product costs other than direct materials and direct labour. are put into this category if the cost cannot be directly traced to the cost object of interest (ex: unit of production)
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Product level activities
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Activites that relate to specific products that must be carried out regardless of how many units are produced and sold or batches run
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Indirect Materials
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Raw materials that do not physically become part of the finished product or cannot be traced because their physical association with the finished product is too small
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job-order costing
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1. assigns jobs for each individual product
2. works well with products that are different or are in low volume
3. used in service industries
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operating leverage
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the contribution margin divided by net income; used as an indicator of how sensitive net income is to the change in sales
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Horizontal Analysis
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absolute and relative changes from one period to the next
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Bottleneck
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a machine or some other part of a process that limits the total output of the entire system
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just-in-time (JIT) inventory
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inventory system in which goods are manufactured or purcheased just in time for use
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net operating income
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(sales revenue) - COGS = (gross margin)->(gross margin) - (selling and admin exp.)
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Allocation base
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A measure of activity such as direct labor-hours or machine-hours that is used to assign costs to cost objects
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Traditional Costing Systems
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One that does not accumulate or report costs of activities or processes
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standard cost variance
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the difference between a standard and an actual cost
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receiving of goods is an example of what type of ABC costing?
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batch level
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indirect costs
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a cost that can't be traced to the cost object
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actual indirect-cost rate
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actual total indirect costs in a cost pool divided by the actual total quantity of the cost-allocation base for that cost pool
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How do you evaluate organizational performance?
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Lower costs means higher profit
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What is the format of a variable costing income statement
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SalesVariable ExpensesContribution MarginFixed ExpensesNOI
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delivery cycle time
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the elapsed time from receipt of a customer order to when the completed goods are shipped.
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Payback period
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The length of time that it takes for a project to fully recover its initial cost out of the net cash inflows that it generates
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What do conversion costs consist of?
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1) Direct labor cost2) Manufacturing overhead
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R square (R^2)
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a measure of goodness of fit (how well the regression line "fits" the data)
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What are some overhead cost per unit flaws?
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1) Units requiring extensive manufacturing activity have too little cost assigned2) Units requiring little manufacturing activity have too much cost assigned
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Target Profit in Sales Revenue
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Target Profit in $ = (Total Fixed Costs + Target Profit) / Contribution Margin Ratio
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Units sales to attain target profit =
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= (Fixed expenses + Target profit) / Unit contribution margin
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