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68 Cards in this Set
- Front
- Back
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Business Process
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– is a series of steps that are followed to carry out tasks in business.
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Value Chain
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Processes of various departments are often organized to promote value to the company’s goods and services.
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Non-Value Added activities.
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Processes that consume resources but do not add value (from the customer perspective)
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Activities of managers
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. 1.) Planning, 2.) Directing and motivating, and 3.) Controlling.
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Planning
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involves a strategy of identifying alternatives, selecting the best alternative, and implementing the strategy.
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strategy
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represents a “game plan” to distinguish itself from its competitors
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3 Stratagies for identifying business alternatives
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Customer value proposition, Operational excellence, Product leadership
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Directing and Motivating
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involves mobilizing people in the organization to carry out the plans efficiently and effectively.
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Controlling
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involves developing measurement mechanisms to ensure that the plan is carried out appropriately and modified when circumstances change.
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Controller
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The manager responsible for the day to day activities n
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Decentrelization
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delegation of decision making authority throughout an organization... managers can make decisions
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Managarial accounting places more emphasis on ________
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relevance and timeliness of data
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Financial accounting places most emphasis on ____
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accuracy and completion
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Managerial accounting is not bound by ____
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GAAP
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Total Quality management --> 3 approaches
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Lean Production, Theory of constraints, Six Sigma
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Lean production
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results in lean thinking... using models such as just-in-time manufacturing, supply chain management, theory of constraints, continuous improvement, enterprise system
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Theory of Constraints
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anything that prevents you form getting more of what you want done, key is effective management of constraints
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Six Sigma
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sometimes associated with term 'zero defects' - relies on customer feedback and fact based gathering/analysis to drive process improvement
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Manufacturing costs are usually grouped into what three main categories?
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direct materials
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Direct materials .
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are raw materials that become an integral part of the finished product and whose costs can be conveniently traced to it. Examples include the aircraft engines on a Boeing 777
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Direct labor.
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consists of that portion of labor cost that can be easily traced to a product. Direct labor is sometimes referred to as ?touch labor
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Manufacturing overhead consists of?
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all manufacturing costs
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Manufacturing overhead are costs?.
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that cannot be conveniently traced to products. Such costs are also called indirect manufacturing costs
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Non-manufacturing costs ?
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Selling
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Selling costs
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include all costs necessary to secure customer orders and get the finished product into the hands of the customer. These costs are also referred to as order-getting and order-filling costs. Examples of selling costs include advertising
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Administrative costs
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include all executive
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Product costs
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include all the costs that are involved in acquiring or making a product. More specifically
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Period costs
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include all selling costs and administrative costs. These costs are expensed on the income statement in the period incurred. All selling and administrative costs are typically considered to be period costs. The usual rules of accrual accounting apply to period costs. For example
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Manufacturing cost catagories
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Prime cost and conversion cost
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Prime cost
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the sum of direct materials cost and direct labor cost.
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Conversion cost
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the sum of direct labor cost and manufacturing overhead cost. The term conversion cost is used to describe direct labor and manufacturing overhead because these costs are incurred to convert materials into the finished product.
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Merchandising companies
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purchase finished goods from suppliers for resale to customers.
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Manufacturing companies
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purchase raw materials from suppliers and produce and sell finished goods to customers.
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Basic equation for inventory accounts
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BEGINNING INVENTORY BALANCE + VALUE TRANSFERRED INTO INVENTORY ACCOUNT - VALUE TRANSFERRED OUT OF INVENTORY ACCOUNT = ENDING INVENTORY VALUE
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The schedule of cost of goods manufactured contains? Calculates?
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direct materials
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Direct costs
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are costs that can be easily and conveniently traced to a specified cost object. Examples of direct costs are direct material and direct labor.
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Indirect costs
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are costs that cannot be easily and conveniently traced to a specified cost object. An example of an indirect cost is manufacturing overhead.
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2 COMMON COSTING SYSTEMS:
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Process costing
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Process Costing
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Used for costing products that are produced in a continuous process or bulk production
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Job Order Costing
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Used for costing products that are produced in individual quantities or batches
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Job Order Costing Requires that _________& ______be TRACED to EACH job.
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direct material and direct labor costs
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Job Order Costing Also requires that _____________ be ALLOCATED to EACH job.
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manufacturing overhead
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Job costs are accumulated through
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the use of a JOB COST SHEET.
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Actual Costing
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charges actual DM
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Normal (Absorption) Costing
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charges actual DM and DL to the product and charges FOH to the product based on a “predetermined” overhead rate
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Predetermined Overhead Rate =
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( Estimated Annual FOH ) / (Estimated Activity Base)
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Overhead Cost per Unit =
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(Actual activity base) x (predetermined overhead rate)
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Activity bases consist of
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a cost driver that management chooses that relates to or “drives” the overhead costs. The choice of an appropriate cost driver is important in order that products (jobs) are allocated an accurate amount of manufacturing overhead costs.
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APPLICATION OF MANUFACTURING OVERHEAD TO PRODUCTS:
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Companies use the predetermined overhead rate to APPLY overhead to products in a CONSISTENT manner. 2.)This eliminates the fluctuations that often occur when overhead is actually incurred throughout the year. 3.) Because the application of a consistent amount of factory overhead to products will be different than the ACTUAL overhead incurred
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WEAKNESS OF VOLUME-BASED OVERHEAD ALLOCATION
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1. Economies of Scale -- Companies that produce more than one product will sell varying quantities causing production volumes to be different between products.
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2. Because fixed costs are allocated to the products
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cost savings can be achieved by producing more units (i.e. lower unit cost)
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4. In companies producing multiple products
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a single
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STUDIES HAVE DETERMINED THAT __________ PERFORMED IN THE MANUFACTURING PROCESS ARE WHAT “DRIVE” (CAUSE) THE OVERHEAD COSTS
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NOT A SINGLE VOLUME BASE SUCH AS MACHINE HOURS OR LABOR HOURS.
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Activity-Based Costing has been developed to measure the costs of ______that are required to produce products or services.
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ACTIVITIES
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Levels of Activities
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Creates 5 categories to identify how overhead costs can behave in relation to various activities.
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5 Levels of Activities
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1.) Unit-Level Activities 2.) Batch-Level Costs 3.) Product-Level Costs 4.) Customer-Level Costs 5.) Organization-sustaining Costs
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Unit-Level Activities
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activities that are performed for each unit produced.
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Batch-Level Costs
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costs of producing a batch of similar products.
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Product-Level Costs
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costs associated with producing and selling a particular product line.
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Customer-Level Costs
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costs that relate to specific (groups of) customers.
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Organization-sustaining Costs
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costs that cannot be associated with any of the above. (Facility level costs relate to fixed factory costs that must be allocated).
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In activity based costing
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Costs of Products and Services are accumulated based on
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Activity based costing Allocates Overhead to products based on
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cost of activities required to produce the products & services. Not all products produced require the same activities.
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In activity based costing utilizes _______ that are used to collect costs that relate to a specific activity
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activity (cost) pools
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Activity based costing 2-stage allocation process:
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1. Allocate overhead costs to the appropriate activity pool
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6 STEPS REQUIRED IN AN ACTIVITY-BASED COSTING SYSTEM (pg. 316-327)
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1. Define activities
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4 BENEFITS OF ACTIVITY BASED COSTING:
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1. Recognizes that ACTIVITIES cause costs to be incurred.
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4 RISKS AND PROBLEMS OF ACTIVITY BASED COSTING:
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1. Requires a “buy-in” from all departments
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