Acc 350 Chapter 2

Front 1

market price

Back 1

an asset's price in a fair market

Front 2

market value

Back 2

true underlying value

Front 3

asset

Back 3

economic resources; ownership of value

Front 4

cost object

Back 4

a tangible input with an associated monetary cost

Front 5

indirect costs

Back 5

not directly accountable to a cost object; fixed or variable overhead

Front 6

Business/ACC cost

Back 6

money that has already been used to produce something

Front 7

ECN cost

Back 7

an alternative that was given up

Front 8

Michael Porter popularized what concept in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance?

Back 8

Value chain

Front 9

value chain

Back 9

a chain of activities for a firm operating in a specific industry

Front 10

The ____ unit is the appropriate level for construction of a value chain

Back 10

business, not divisional or corporate

Front 11

cost accounting

Back 11

internal/management accounting that establishes budget and actual cost of operations, processes, etc.; doesn't follow GAAP

Front 12

managers use ___ to support decisions, such as cutting costs

Back 12

cost accounting

Front 13

management

Back 13

the act of getting people together to accomplish goals efficiently and effectively

Front 14

management comprises

Back 14

planning, organizing, staffing, leading/directing, and controlling an organization or accomplishing a goal

Front 15

resourcing encompasses

Back 15

deployment and manipulation of human, financial, technological, and natural resources

Front 16

A competitive market must have

Back 16

more than one buyer or seller

Front 17

a market

Back 17

one of a variety of systems, institutions, procedures, social relations, and infrastructures whereby parties engage in exchange

Front 18

most markets operate using

Back 18

money rather than barter

Front 19

financial accounting

Back 19

external; reports to decision makers via financial statements

Front 20

Accounting information system: 6 components

Back 20

1. people
2. procedures and instructions
3. data
4. software
5. information technology insfrastructure (devices)
6. internal controls and security measures

Front 21

Problem with "in-house" accounting systems

Back 21

expensive to maintain, difficult to develop

Front 22

commission

Back 22

used to reward sales people as a percentage of goods sold, solving principal/agent problem

Front 23

exchange

Back 23

a highly organized market where tradeable securities, commodities, foreign exchange, futures, and options contracts are sold and bought

Front 24

manufacturing cost

Back 24

sum of costs of all resources consumed in the process of making a product

Front 25

the 3 categories of manufacturing costs

Back 25

1. direct materials
2. direct labor
3. manufacturing overhead

Front 26

direct materials

Back 26

raw materials that become part of the finished product

Front 27

overhead

Back 27

operating (ongoing) expenses that cannot be directly traced to manufactured products

Front 28

financial reporting

Back 28

preparing and distributing financial statements to users per regulatory standards

Front 29

cash flow

Back 29

movement of cash into and out of a business, project, or financial product

Front 30

order

Back 30

in a market, it's an instruction from customers to brokers to buy or sell on the exchange (sometimes complicated, sometimes standard)

Front 31

financial statement

Back 31

a formal record of all financial activities for an entity (term in the UK is also an "account")

Front 32

income

Back 32

generally the net profit for firms

Front 33

income statement--other names

Back 33

profit and loss statement, statement of financial performance, earnings statement, operating statement

Front 34

income statement

Back 34

financial statement that shows how revenue (top line) becomes net income (bottom line) to show whether the company made or lost money during a period

Front 35

cost of goods sold

Back 35

inventory costs of the goods a business has sold during a period; costs are determined using a method such as FIFO, LIFO, average cost, or specific identification

Front 36

activity-based costing

Back 36

a costing model that identifies activities and assigns their costs to products/services depending on actual consumption; turns more overhead into direct costs

Front 37

activity-based costing allows an organization to

Back 37

precisely estimate costs of individual products/services and make decisions accordingly

Front 38

activity-based management

Back 38

uses ABC to carry out a value chain analysis or a re-engineering initiative to improve strategic and operational decisions

Front 39

insurance

Back 39

risk management tool; the equitable transfer of risk of a loss from one entity to another, in exchange for payment

Front 40

revenue (UK may call it turnover)

Back 40

income from normal business activities and sometimes interest, dividends, and royalties

Front 41

A system is a

Back 41

set of interrelated parts that performs one or more processes to accomplish specific objectives.

Front 42

An accounting information system is one that

Back 42

consists of interrelated manual and computer parts and uses processes such as collecting, classifying, summarizing, analyzing, and managing data to provide information to users.

Front 43

an accounting information system’s inputs are usually

Back 43

economic events

Front 44

the ________ of an accounting information system is critically involved with the user of information, since the output of the information system influences users and may serve as the basis for action

Back 44

operational model

Front 45

The accounting information system can be divided into two major (and usually interlinked) subsystems:

Back 45

(1) the financial accounting information system and (2) the cost management information system

Front 46

The cost management information system provides information for three broad objectives:

Back 46

1 . Costing services, products, and other objects of interest to management
2. Planning and control
3. Decision making

Front 47

cost management system should be integrated with the organization’s

Back 47

operational systems

Front 48

______ are integrative, cross-functional systems that coordinate information to facilitate timely and accurate reporting and decision making. Ideally, data must be input only once; then it is available to people across the company for whatever
purpose it may serve.

Back 48

ERP systems

Front 49

_____ is a cost management subsystem
designed to provide accurate and timely feedback concerning the performance of managers and others relative to their planning and control of activities.

Back 49

The operational control information system

Front 50

A ____ is a cost that
expires without producing any revenue benefit

Back 50

loss

Front 51

An _____ is a basic unit of
work performed within an organization

Back 51

activity

Front 52

_______ is the ability to assign a cost directly to a cost object in an economically feasible way by means of a causal relationship

Back 52

traceability

Front 53

_____ determines whether a costs is direct or indirect

Back 53

what the cost object is

Front 54

Tracing costs to cost objects can occur in one of two ways:

Back 54

(1 ) direct tracing and (2) driver tracing

Front 55

_____ is the process of identifying and assigning costs to a cost object that are specifically or physically associated with the cost object and is most often accomplished by physical observation

Back 55

Direct tracing

Front 56

___ are factors that cause changes in resource
usage, activity usage, costs, and revenues

Back 56

Drivers

Front 57

____ is the use of drivers to assign
costs to cost objects; although less precise than direct tracing, it can be accurate if the cause-and-effect relationship is sound

Back 57

Driver tracing

Front 58

Assignment of indirect costs to cost objects is called ____. Since no causal relationship exists, this is done based on convenience or some
assumed linkage

Back 58

allocation

Front 59

There are three methods of assigning costs to cost
objects:

Back 59

direct tracing, driver tracing, and allocation

Front 60

___ are goods produced by converting raw materials into finished products through the use of labor and capital inputs such as plant, land, and machinery

Back 60

Tangible products

Front 61

____ are tasks or activities performed for a customer or an activity performed by a customer using an organization’s products or facilities

Back 61

Services

Front 62

___ means that services cannot be stored

Back 62

Perishability

Front 63

Services differ from tangible products on three important dimensions:

Back 63

intangibility, perishability, and inseparability

Front 64

____ means that producers of services and buyers of services must usually be in direct contact for an exchange to take place

Back 64

inseparability

Front 65

just read

Back 65

For pricing decisions, product mix decisions, and strategic profitability analysis, all
traceable costs along the value chain need to be assigned to the product. For strategic product design decisions and tactical profitability analysis, costs for production, marketing, and customer service (including customer post-purchase costs) are needed. For external financial reporting, FASB rules and conventions mandate that
only production costs be used in calculating product costs

Front 66

_____ are those costs associated with the functions of selling and
administration

Back 66

Nonproduction costs

Front 67

Production costs can be further classified as

Back 67

direct materials, direct labor, and overhead

Front 68

____ are generally those materials necessary for production that do not become part of the finished product or are not used in providing a service

Back 68

Supplies

Front 69

Direct materials that form an insignificant part of the final product are usually lumped into the overhead category called ____.

Back 69

indirect materials

Front 70

Overtime is usually part of ___

Back 70

overhead

Front 71

____ is the sum of direct materials cost and direct labor cost

Back 71

Prime cost

Front 72

_____ is the sum of direct labor cost and overhead cost

Back 72

Conversion cost

Front 73

Nonproduction costs are divided into two categories:

Back 73

marketing (selling) costs and administrative costs

Front 74

Marketing and administrative costs are not inventoried and are called ____, which are expensed in the period in which they are incurred

Back 74

period costs

Front 75

Period costs appear on which financial statement?

Back 75

the income statement

Front 76

_____ are often referred to as order-getting and order-filling costs and include the following: salaries and commissions of sales person-
nel, advertising, warehousing, shipping, and customer service

Back 76

marketing costs

Front 77

All costs that cannot be reasonably assigned to either marketing or production are ____

Back 77

administrative costs

Front 78

production and nonproduction costs are separated on the ________

Back 78

income statement (also called absorption-costing income or full-costing income)

Front 79

Cost management systems can be broadly classified as _____, with the former being more common

Back 79

traditional or activity-based

Front 80

A cost accounting system that uses only unit-based activity drivers to assign costs to cost objects is called a _____

Back 80

traditional cost system

Front 81

A ____ assigns costs to
organizational units and then holds the organizational unit manager responsible for controlling the assigned costs. Performance is measured by comparing actual outcomes with standard or budgeted outcomes

Back 81

traditional operation control system

Front 82

The overall objective of an activity-based cost management system is to _____

Back 82

manage activities to reduce costs and improve customer value

Front 83

A cost accounting system that uses both unit- and non-unit-based activity drivers to assign activity costs to cost objects is called an ____

Back 83

activity-based cost (ABC)
system

Front 84

____ focuses on the management of activities with the objective of improving the value received by the customer and the profit received by the company in providing this value. It includes driver analysis, activity analysis, and performance evaluation and draws on ABC as a major source of information

Back 84

Activity-based management (ABM)

Front 85

_____ are expensive to build, complex to sustain, and difficult to modify

Back 85

ABC systems

Front 86

____ are the costs associated with the measurements required by the cost management system

Back 86

Measurement costs

Front 87

____ are the costs associated with making poor decisions based on bad cost information

Back 87

Error costs

Front 88

Firms should consider implementing an ABM system if they have experienced _____ in measurement costs and _____ in error costs

Back 88

a decrease, an increase