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55 Cards in this Set

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Define Cost Accounting
Estimating, processing, and analyzing, reporting and controlling the revenues and cost elements of the different types of enterprises.
List 8 cost accounting functions
Design systemsEstimate revenues and costsCompile revenue and cost elementsAllocate revenues and cost elementsRecord revenues and cost elementsCompute revenues and cost elementsAnalyze revenues and cost elementsReport revenues and cost elements
List 8 goals of cost accounting
Control revenues and expensesPrice all types of productsPrepare purchasing plans and programsPrepare financial plans and programsPrepare budgetsDetect and correct errors and fraudSupply concerned parties with required informationProvide compliance with Federal, State, and Local governmental laws, rules, and regulations.
Cost Auditing vs. Financial AuditingContrast Timing
FA: Deals with pastCA: Deals with past, present, and future
Cost Auditing vs. Financial AuditingContrast Inputs
FA: Mostly factual figures, monetary items and total amounts.CA: Heavy use of estimated figures, uses non-monetary items (tons, lbs, etc.), uses detailed amounts and quantities.
Cost Auditing vs. Financial AuditingContrast Outputs
FA: final products are the financial statements
CA: final products are cost statements, cost analysis, graphic designing, etc.
Cost Auditing vs. Financial AuditingContrast Functions
Both have REPORTING function in common
BUDGETING function is limited to cost accounting
Cost Auditing vs. Financial AuditingContrast Goals
Both have the goal of protecting the resources of the enterpriseProduct pricing is limited to Cost Accounting
Cost Auditing vs. Financial AuditingContrast Limitations
FA: Fails to prevent and/or detect fraud in due time, allocate managerial responsibility and provide justification for operating problems.
Cost Auditing vs. Financial Auditing
Reporting Frequency
FA: Limited to annual and financial reporting.CA: much higher reporting frequency involving daily, weekly, monthly, quarterly, and annual reports.
Terminology: Products
All types of goods and services provided by and enterprise.
Terminology: Manufacturing
The process of converting materials, parts, and other constituents into semi-finished and/or finished products to be sol in order to generate income and/or to achieve the operating goals of an enterprise.
Terminology: Goals
Pre-set objectives to be achieved by an enterprise
Terminology: Plans
Courses of action to be taken by an enterprise in order to achieve its goals
Terminology: Programs
A detailed breakdown of the contents of plans
Terminology: Policy
Guidelines that govern the performance of all types of activities
Terminology: Planning
The process of selecting the best alternative goal, plan, policy, program, or procedure among the alternative ones available to managers in a given situation.
Terminology: Organization
The process of creating, identifying, or modifying the organization structure often enterprise.Accordingly, it involves the creation, identification or modification of divisions, departments, and positions required to operate an enterprise, and to achieve its goals.
Terminology: Controlling
The process of comparing achieved goals and performances with planned ones, in order to identify and justify related differences, and also to take corrective measured whenever required.
Products: Goods - 5 types
Consumer, Durable, Produce, Commodities, Merchandise
Products: Services - 5 types
Educational, Medical, Legal, Accounting, Transportation
Cost Elements – 3 types
Overhead/Admin. Costs, Material Costs, Labor Costs
Define: Overhead Cost Elements
Incurred by an enterprise in order to pay for its general and departmental administrative expenses.General Admin. Examples:Rent on the Corp. HQ, Casualty Ins. Consulting fees, CPA’s fees.Departmental Examples:Factory Rent, Salaries of factory workers.
Define: Materials Cost Elements
Elements, parts, commodities of which products are made. (wood, steel, copper, fruits, milk)
Define: Labor Cost Elements
Salaries, wages, and fringe benefits paid to members of the work force of an enterprise involved in production, maintenance, marketing, and other diversified working services.
Classification of cost elements according to utilization purpose (4)
Overhead, production, marketing, other non-disbursed.
Production costs
All types of cost elements to be incurred by all types of business enterprises in order to produce their products.
Marketing Costs
All types of cost elements to be incurred in order to transfer products from the producers to the consumers. (packing costs, wrapping, insurance, transportation, storage, buying, selling)
Other Non-disbursed Costs
Cost elements which do not require a cash disbursement (depreciation, depletion, amortization)
Types of costs that have a correlation with products
Direct, indirect
Types of costs that have an correlation with operations volume
Fixed, variable, mixed (semi-variable)
Direct Costs
Cost elements that can be easily identified with products. (Direct material & labor costs)
Indirect Costs
Cost elements that cannot be easily identified with products. (Overhead, )
Fixed Costs
Costs that remain unchanged despite changes in sales volumes.
Variable Costs
Costs that change with changes in the sales volume
Mixed (semi-variable) Costs
Combining fixed and variable costs. (a flat fee for telephone plus a charge per call added to the flat fee.)
List three classifications of cost elements according to its computation methods.
Estimated Costs, standard costs, and actual costs
Cost units
Units of the production output of an enterprise to which cost elements are allocated.
Types of units used (5)
Length, weight, volume, count, time
Cost Centers
Units of the organization structure of an enterprise, to which cost elements are allocated.
Types of Cost Centers (8)
Departments, Divisions, Branches, Subs, SBU’s, Mil. Bases, Battalions, Fleets.
Prime Costs (Def. & Equation)
Total amount of direct material and labor costs.Prime Costs = Direct Material + Direct Labor
Conversion Costs (Def. & Equation)
Total amount of direct labor costs and factory overhead costs.Conversion Costs = Direct Labor + Factory Overhead
Cost of WIP inventory (Def. & Equation)
Total costs of unfinished goods, which are undergoing production processing to become finished goods. Implies direct Materials, Direct Labor, and Factory Overhead.
Cost of Direct Materials (Equation)
Open. Inv. of DM + Pur. DM Cost of Dir. Mat. – Closing Inv. Of Dir. Mat. = Cost of Dir. Materials.
Cost of Goods Manufactured (Equation)
DM + DL + Fac. Over. = Tot. Man. Costs+ Opening WIP - Closing WIP =COG Manu.
Cost of Goods Sold (Equation)
COG Manu. + Fin. Goods Opening Inv. - Fin. Goods Closing Inv. = COGS
Cost Drivers
May lead to an Increase or a decrease in the total costs of a cost object.Cost drivers may change the structure of a cost object. (such as units of production)
Cost Drivers: Financial Activities (3)
Scope of Credit LinesMagnitude of a liabilityInterest Rate
Cost Drivers: Production Activities (5)
Lines of ProductsProduction VolumeNumber of PartsCost of each partLabor costs
Cost Drivers: Marketing Activities (5)
Number of markets
Sales volume
Number of marketing personnel
Number of advertisements
Number of trucks
Cost Drivers: R & D (3)
Number of researchersNumber of prototypesNumber of patents
Organizational Structure
All administrative, financial, production, marketing, and operational units and positions in charge of performing all types of activities required to achieve the goals of an enterprise.
Organizational Sketch
A drawing or sketch depicting the following items concerning the organization structure of an enterprise. Includes, levels of auth., basis for departmentation, position titles, names of positions’ occupants, line of staff authority
BENEFITS: Easy identification of cost centers and precise cost allocation. Enables managers, accountants, and auditors to increase efficiencies.
Preparation of Org. Chart
Set Goals
Title Assignment
Set budget requirements
Create levels of authority
Create SBU’s
Create position titles
Assignment of positions occupants’ names
Put information into a table