Cost - Ch.1

Front 1

Define Cost Accounting

Back 1

Estimating, processing, and analyzing, reporting and controlling the revenues and cost elements of the different types of enterprises.

Front 2

List 8 cost accounting functions

Back 2

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

Front 3

List 8 goals of cost accounting

Back 3

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.

Front 4

Cost Auditing vs. Financial AuditingContrast Timing

Back 4

FA: Deals with pastCA: Deals with past, present, and future

Front 5

Cost Auditing vs. Financial AuditingContrast Inputs

Back 5

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.

Front 6

Cost Auditing vs. Financial AuditingContrast Outputs

Back 6

FA: final products are the financial statements
CA: final products are cost statements, cost analysis, graphic designing, etc.

Front 7

Cost Auditing vs. Financial AuditingContrast Functions

Back 7

Both have REPORTING function in common
BUDGETING function is limited to cost accounting

Front 8

Cost Auditing vs. Financial AuditingContrast Goals

Back 8

Both have the goal of protecting the resources of the enterpriseProduct pricing is limited to Cost Accounting

Front 9

Cost Auditing vs. Financial AuditingContrast Limitations

Back 9

FA: Fails to prevent and/or detect fraud in due time, allocate managerial responsibility and provide justification for operating problems.

Front 10

Cost Auditing vs. Financial Auditing
Reporting Frequency

Back 10

FA: Limited to annual and financial reporting.CA: much higher reporting frequency involving daily, weekly, monthly, quarterly, and annual reports.

Front 11

Terminology: Products

Back 11

All types of goods and services provided by and enterprise.

Front 12

Terminology: Manufacturing

Back 12

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.

Front 13

Terminology: Goals

Back 13

Pre-set objectives to be achieved by an enterprise

Front 14

Terminology: Plans

Back 14

Courses of action to be taken by an enterprise in order to achieve its goals

Front 15

Terminology: Programs

Back 15

A detailed breakdown of the contents of plans

Front 16

Terminology: Policy

Back 16

Guidelines that govern the performance of all types of activities

Front 17

Terminology: Planning

Back 17

The process of selecting the best alternative goal, plan, policy, program, or procedure among the alternative ones available to managers in a given situation.

Front 18

Terminology: Organization

Back 18

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.

Front 19

Terminology: Controlling

Back 19

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.

Front 20

Products: Goods - 5 types

Back 20

Consumer, Durable, Produce, Commodities, Merchandise

Front 21

Products: Services - 5 types

Back 21

Educational, Medical, Legal, Accounting, Transportation

Front 22

Cost Elements – 3 types

Back 22

Overhead/Admin. Costs, Material Costs, Labor Costs

Front 23

Define: Overhead Cost Elements

Back 23

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.

Front 24

Define: Materials Cost Elements

Back 24

Elements, parts, commodities of which products are made. (wood, steel, copper, fruits, milk)

Front 25

Define: Labor Cost Elements

Back 25

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.

Front 26

Classification of cost elements according to utilization purpose (4)

Back 26

Overhead, production, marketing, other non-disbursed.

Front 27

Production costs

Back 27

All types of cost elements to be incurred by all types of business enterprises in order to produce their products.

Front 28

Marketing Costs

Back 28

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)

Front 29

Other Non-disbursed Costs

Back 29

Cost elements which do not require a cash disbursement (depreciation, depletion, amortization)

Front 30

Types of costs that have a correlation with products

Back 30

Direct, indirect

Front 31

Types of costs that have an correlation with operations volume

Back 31

Fixed, variable, mixed (semi-variable)

Front 32

Direct Costs

Back 32

Cost elements that can be easily identified with products. (Direct material & labor costs)

Front 33

Indirect Costs

Back 33

Cost elements that cannot be easily identified with products. (Overhead, )

Front 34

Fixed Costs

Back 34

Costs that remain unchanged despite changes in sales volumes.

Front 35

Variable Costs

Back 35

Costs that change with changes in the sales volume

Front 36

Mixed (semi-variable) Costs

Back 36

Combining fixed and variable costs. (a flat fee for telephone plus a charge per call added to the flat fee.)

Front 37

List three classifications of cost elements according to its computation methods.

Back 37

Estimated Costs, standard costs, and actual costs

Front 38

Cost units

Back 38

Units of the production output of an enterprise to which cost elements are allocated.

Front 39

Types of units used (5)

Back 39

Length, weight, volume, count, time

Front 40

Cost Centers

Back 40

Units of the organization structure of an enterprise, to which cost elements are allocated.

Front 41

Types of Cost Centers (8)

Back 41

Departments, Divisions, Branches, Subs, SBU’s, Mil. Bases, Battalions, Fleets.

Front 42

Prime Costs (Def. & Equation)

Back 42

Total amount of direct material and labor costs.Prime Costs = Direct Material + Direct Labor

Front 43

Conversion Costs (Def. & Equation)

Back 43

Total amount of direct labor costs and factory overhead costs.Conversion Costs = Direct Labor + Factory Overhead

Front 44

Cost of WIP inventory (Def. & Equation)

Back 44

Total costs of unfinished goods, which are undergoing production processing to become finished goods. Implies direct Materials, Direct Labor, and Factory Overhead.

Front 45

Cost of Direct Materials (Equation)

Back 45

Open. Inv. of DM + Pur. DM Cost of Dir. Mat. – Closing Inv. Of Dir. Mat. = Cost of Dir. Materials.

Front 46

Cost of Goods Manufactured (Equation)

Back 46

DM + DL + Fac. Over. = Tot. Man. Costs+ Opening WIP - Closing WIP =COG Manu.

Front 47

Cost of Goods Sold (Equation)

Back 47

COG Manu. + Fin. Goods Opening Inv. - Fin. Goods Closing Inv. = COGS

Front 48

Cost Drivers

Back 48

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)

Front 49

Cost Drivers: Financial Activities (3)

Back 49

Scope of Credit LinesMagnitude of a liabilityInterest Rate

Front 50

Cost Drivers: Production Activities (5)

Back 50

Lines of ProductsProduction VolumeNumber of PartsCost of each partLabor costs

Front 51

Cost Drivers: Marketing Activities (5)

Back 51

Number of markets
Sales volume
Number of marketing personnel
Number of advertisements
Number of trucks

Front 52

Cost Drivers: R & D (3)

Back 52

Number of researchersNumber of prototypesNumber of patents

Front 53

Organizational Structure

Back 53

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.

Front 54

Organizational Sketch

Back 54

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.

Front 55

Preparation of Org. Chart

Back 55

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