Managerial Accounting Exam Flashcards

Terms Definitions
profit margin
NI/REV=
Conversion Cost
DL + MOH
Variable costs:When activity increases:Total:per/unit
increased proportionconstant
Cross-Functional Teams
Corporate teams whose members represent various functions of the organization, such as R&D, design, production, marketing, distribution, and customer service.
price
revenue per unit (different than cost)
the cost equation
Y=A+Bx

Y=total costs
A=total fixed costs
B= variable cost per unit
x= level of activity
attention-directing function
The function of managerial accounting information in pointing out to managers issues that need their attention.
compounding of interest
earning of interest on interest
administrative costs
all costs associated with research, development, and general administration of the organization that cant be easily associated with selling or production
prestige pricing
pay more for a new product
standard quantity
may be established for direct materials in engineering plans, recipes, or formulas
Yield Management
an approach to maximizing room reveunes and profits once prices have been set; the object is to sell more rooms at high rates
cost-plus pricing
a pricing approach in which the company adds a desired level of profit to the product's cost
Period Costs
Costs that are identified with a specific time period and charged to expense as incurred
average investment
= (income + salvage value) / 2
repetitive production
The manufacture of large numbers of identical or very similar products in a continuous flow.
Cost pools
groups of overhead costs that are similar; used to simplify the task of assigning costs to products using ABC costing.
Direct cost
Cost that can be easily and conveniently traced to a specified cost object
Value-Added Cost
The necessary cost of an activity that cannot be eliminated without affecting a product's value to the customer
relevant range
the normal range of units of production where the fixed and variable relationship holds.
contribution margin ratio
Contribution Margin / Sales = Contribution Margin Ratio
trace
to assign a direct cost to a cost object
Corporate governance
The system by which a company is directed and controlled. If properly implemented it should provide incentives for top management to pursue objectives that are in the interests of the company and it should effectively monitor performance.
Two types of capital budgeting
Independent Projects and Mutually Exclusive Projects
production budget
A schedule showing the number of units of services or goods that are to be produced during a budget period.
cost object
is any item such as a product, customer, dept, etc for which costs are measured and assigned
Directing and motivating
Mobilizing people to carry out plans and run routine operations
throughput time
the amount of time required to turn raw materials into completed products.
throughput time
the amount of time required to turn raw materials into completed products.
unit-level activity costing
performed each time a unit is produced
Present Value
The value now of an amount that will be received in some future period
contribution income statement
An income statement on which fixed and variable expenses are separated.
How can variable costing mislead management?
Causes decision makers to underestimate true production costs
Two-Stage ABC System
A costing system with two stages of allocation to get from the original cost to the final product or service cost. The first stage allocates resource costs to activity-cost pools. The second stage allocates activity costs to products or services
variable costs
costs that stay the same per unit but change in total as production volume increases or decreases
cost of goods manufactured
total cost of work in process minus the cost of the ending work in process inventory
Define Manufacturing Overhead and give some examples.
Manufacturing Overhead are costs that are indirectly associated with the finished product.
Some examples include:
indirect materials and labor
depreciation on buildings and machines
insurance
taxes
maintenance
Equivalent Units of ProductionFIFO Method
equivalent units and unit costs relate only to work done during the current period
What is the biggest challenge in measuring the cost of a product?
Determining the amount of overhead incurred to produce it
What kind of account is Raw Materials Inventory?
Control Account - a summary account in the general ledger
Define the responsibilities of a Profit Center Manager
In addition to the costs that the cost center manager has control over, a profit center manager has responsibilities of revenue as well. This allows this manager to be responsible for the total profits of that center.
product costs
overheadmaterialslabornot expensed till good is sold
Depreciation of factory machinery
manufacturing cost
Annuity
A series of identical cash flows
Fraud
Intentional misstatements that can be classified as fraudulent financial reporting and misappropriation of assets/
Segments
Responsibility centers for which a company develops separate measures of revenues and costs
merchandising company
a company that resells tangible products previously bought from suppliers
Prime cost
Direct materials cost plus direct labor cost.
manufacturing overhead
indirect materials and labor; man. costs which cannot be conveniently traced to specific units produced
Which of the following are Financial vs Managerial Accounting:Reports are based on Internal user needs; Reports must follow GAAP
Managerial/financial
direct labor
labor traced directly and conveniently to the production of a product
a detailed plan for the future, usually expressed in formal quantitative terms
budget
staff positions
Positions held by managers who are only indirectly involved in producing an organization's product or service.
Controller
The member of the top management team who is responsible for providing relevant and timely data to managers and for preparing financial statements for external users. The controller reports to the CFO.
partial productivity measurement
measuring productivity for one input at a time
cost-volume-profit analysis
A study of the relationships between sales volume, expenses, revenue, and profit.
Just In Time
Reduces inventory holding costs and increases customer satisfaction
sunk cost
irrelevant to decision making, a cost that has already been incurred
direct labor budget
Proj. production
x Labor time
= labor hours needed for production
x labor rate/hr
= projected labor cost
Costs that the manager has the power to determine or at least strongly influence are called:
Controllable costs.
3 Methods of Mixed cost
1. High-low
2. Scattergraph
3. Least squares (QA)- maintenance cost
Theory of Constraints
a specific approach used to identify and manage constraints in order to achieve the company's goals
cost driver
any factor or activity that has a direct cause-effect relationship with the resources consumed
Activity cost pool
A bucket in which costs are accumulated that relate to a single activity measure in a activity-based costing system
Cost Assignment
Tracing or allocating costs to one or more cost objectives such as activities, departments, customers, or products
management by exception
approach in which only those variances deemed as significant are investigated.
advertising of a product is an example of what ABC costing?
product level
underallocated overhead
cost of goods sold is too low, we increase the amount of COGS for the amount of the over allocation, we find it by comparing the actual MOH amount
weighted average method
A method of process costing in which the cost assigned to beginning work-in-process inventory is added to the current-period production costs. The cost per equivalent unit calculated under this process-costing method is a weighted-average of the costs in the beginning work in process and the costs of the current period.
What do underapplied and overapplied overhead mean?


Underapplied = applied < actual
Overapplied = applied > actual
direct materials budget
a detailed plan showing the amount of raw materials that must be purchased during a period to meet both production and inventory needs.
Range of acceptable transfer prices
The range of transfer prices within which the profits of both the selling division and the buying division would increase as a result of a transfer
A materials requisition form is used to record what?
 
The transfer of responsibility for materials
Materials changes on raw materials and job cost sheet records
 
Break even in volume
Break Even in Volume (units) = Total Fixed Costs / Contribution Margin per Unit
What is the journal entry for direct labor costs incurred?
Work-in-Process Inventory xx
---------Wages Payable       xx
Total Cost of Work in Process
Cost of the beginning work in process plus total manufacturing overhead incurred in the current period
How are costs incurred in the FIFO method?
The first costs incurred each period are assumed to have been used to complete the unfinished units carried over from the previous period
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