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24 Cards in this Set
- Front
- Back
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Three types of businesses |
Service Merchandising Manufacturing |
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Service firms |
Products are not tangible/storable No inventory of final product |
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Examples of service industries |
Hotels, restaurants, consulting, airlines, gyms, universities, dentist, hair salon |
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Merchandising Firms |
Sell the same product they purchase Carry inventory to allow goods to be available in the quantities, varieties, and delivery schedule demanded by customers |
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Examples of merchandising firms |
Target, Wal-Mart, Kroger, Staples |
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Manufacturing Firms
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Use labor and equipment to transform raw materials in finished goods Carry inventory in multiple categories (raw materials, WIP, finished goods) |
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Examples of manufacturing firms |
Apple, Jewelers, Samsung |
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GAAP Income Statement |
Revenue - COGS = Gross Margin - SG&A = Profit before taxes |
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Costs on the income statement are classified as: |
Product costs or period costs |
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Product costs |
All costs associated with getting products and services ready for sale |
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Product cost is synonymous with |
Cost of services Cost of sales COGS Inventoriable costs |
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Period Costs |
Costs that aren't product costs; aren't related to getting products ready for sale |
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Period costs are synonymous with |
Selling & Admin costs Selling, general & admin costs |
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Why does GAAP require the distinction between product and period costs? |
The matching principle |
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COGS = |
Cost of beginning inventory + COGP - Cost of ending inventory |
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Direct Materials equation |
Beginning balance + DM purchased - DM used = End DM |
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WIP equation |
Beginning balance of WIP + DL + DM + MOH - COGP = Ending balance of WIP |
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Finished Goods equation |
Beginning balance of FG + COGM - COGS = End balance of FG |
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Prime Costs |
DM + DL |
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Conversion Costs |
DL + MOH |
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Determining allocation rate |
Rate = Cost pool/denominator value |
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Determining the amount to allocate to the cost object |
Allocated amount = rate x number of driver units for the cost object |
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Cost driver affects the allocation amount o cost objects |
TRUE |
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Does the choice of a cost driver change the total cost that's allocated? |
Nah |
