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146 Cards in this Set
- Front
- Back
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Planning
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involves establishing basic strategy, selecting a course of action, and specifying how the action will be implemented
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involves establishing basic strategy, selecting a course of action, and specifying how the action will be implemented
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Planning
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Directing and Motivating
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mobilizing people to carry out plans and run routine operations
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involves mobilizing people to carry out plans and run routine operations
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Directing and Motivating
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Controlling
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involves ensuring that the plan is actually carried out and is appropriately modified as circumstances change
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involves ensuring that the plan is actually carried out and is appropriately modified as circumstances change
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Controlling
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budgets
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prepared annually and represent management's plans in specific, quantitative terms
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prepared annually and represent management's plans in specific, quantitative terms
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budgets
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controller
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manager in charge of the accounting department
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manager in charge of the accounting department
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controller
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What do managers do in the directing and motivating stage?
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Deals with the routine of the here and now.
-assign tasks to employees -arbitrate disputes -answer questions -solve on-the-spot problems -make many small decisions that affect customers and employees |
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feedback
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provided by various reports which signal whether operations are on track
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provided by various reports which signal whether operations are on track
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feedback
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performance report
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compares budgeted to actual results
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compares budgeted to actual results
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performance report
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planning and control cycle
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involves the smooth flow of management activities from planning through directing and motivating, controlling, and then back to planning again
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involves the smooth flow of management activities from planning through directing and motivating, controlling, and then back to planning again
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planning and control cycle
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Managerial accounting
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concerned with providing information to managers
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concerned with providing information to managers
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managerial accounting
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financial accounting
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concerned with providing information to stockholders, creditors, and others who are outside the organization
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concerned with providing information to stockholders, creditors, and others who are outside the organization
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financial accounting
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Aspects of financial accounting (7)
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-reports to those outside the organization
-emphasizes financial consequences of past activities -emphasizes objectivity and verifiability -emphasizes precision -emphasizes summary data concerning the entire organization -must follow GAAP -mandatory for external reports |
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Aspects of Managerial accounting (7)
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-reports to those inside the organization
-Emphasizes decisions affecting the future -emphasizes relevance -emphasizes timeliness -emphasizes detailed segment reports about departments, products, and customers -need not follow GAAP -Not mandatory |
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relevance
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appropriate to the problem at hand
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appropriate to the problem at hand
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relevance
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segments
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parts of a company
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parts of a company
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segments
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examples of segments
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-product lines
-sales territories -divisions -departments |
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raw materials
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materials that go into the final product
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materials that go into the final product
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raw materials
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direct materials
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materials that become an integral part of the final product and whose costs can be conveniently traced to the finished product
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materials that become an integral part of the final product and whose costs can be conveniently traced to the finished product
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direct materials
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indirect materials
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minor materials that aren't worth the effort to trace the costs
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minor materials that aren't worth the effort to trace the costs
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indirect materials
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direct labor
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consists of labor costs that can be easily traced to individual units of a product
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consists of labor costs that can be easily traced to individual units of a product
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direct labor
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what is another term for direct labor and why
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touch labor, because direct labor workers typically touch the product while it is being made
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indirect labor
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labor costs that cannot be physically traced to particular products, or that can be traced only at a great cost and inconvenience
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labor costs that cannot be physically traced to particular products, or that can be traced only at a great cost and inconvenience
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indirect labor
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examples of direct labor (3)
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-assembly line workers
-carpenters -electricians who install equipment |
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examples of indirect labor (4)
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-janitors
-supervisors -material handlers -night security guards |
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manufacturing overhead
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includes all manufacturing costs except direct labor and direct materials
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includes all manufacturing costs except direct labor and direct materials
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manufacturing overhead
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what does manufacturing overhead include
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Only costs associated with operating the factory
-indirect materials -indirect labor -maintenance and repairs on production equipment -heat and light -property taxes -depreciation -insurance on manufacturing facilities |
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What are the two categories of nonmanufacturing costs?
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-selling costs
-administrative costs |
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selling costs
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include all costs that are incurred to secure customer orders and get the finished product to the customer
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include all costs that are incurred to secure customer orders and get the finished product to the customer
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selling costs
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examples of selling costs (6)
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-advertising
-shipping -sales travel -sales commissions -sales salaries -costs of finished goods warehouses |
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administrative costs
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include all costs associated with the general management of an organization rather than with manufacturing or selling
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include all costs associated with the general management of an organization rather than with manufacturing or selling
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administrative costs
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examples of administrative costs (4)
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-executive compensation
-general accounting -secretarial -public relations |
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product costs
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include all costs involved in acquiring or making a product
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include all costs involved in acquiring or making a product
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product costs
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product costs in the case of manufactured goods
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-direct materials
-direct labor -manufacturing overhead |
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-direct materials
-direct labor -manufacturing overhead |
product costs in the case of manufactured goods
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inventoriable costs
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same as product costs
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same as product costs
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inventoriable costs
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period costs
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all the costs that are not product costs
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all the costs that are not product costs
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period costs
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examples of period costs (4)
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-advertising
-executive salaries -sales commissions -public relations |
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prime cost
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the sum of direct materials cost and direct labor cost
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the sum of direct materials cost and direct labor cost
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prime cost
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conversion cost formula
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direct labor cost + manufacturing overhead cost
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the sum of direct labor cost and manufacturing overhead cost
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conversion cost
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how do inventory accounts of a merchandising and a manufacturing company differ
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a merchandising company has one class of inventory: goods purchased from suppliers for resale to customers
manufacturing company has three classes: raw materials, work in process, and finished goods. |
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work in process
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consists of units of product that are only partially complete and will require further work before they are ready for sale to a customer
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consists of units of product that are only partially complete and will require further work before they are ready for sale to a customer
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work in process
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finished goods
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consist of completed units of product that have not yet been sold to customers
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consist of completed units of product that have not yet been sold to customers
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finished goods
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Basic equation for inventory accounts
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beginning balance + additions to inventory = ending balance + withdrawals from inventory
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beginning balance + additions to inventory = ending balance + withdrawals from inventory
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Basic equation for inventory accounts
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Cost of goods sold in a merchandising company equation
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Beginning merchandise inventory + purchases = Ending merchandise inventory + cost of goods sold
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Beginning merchandise inventory + purchases = Ending merchandise inventory + cost of goods sold
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Cost of goods sold in a merchandising company equation
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Cost of goods sold in a manufacturing company equation
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beginning finished goods inventory + cost of goods manufactured = ending finished goods inventory + cost of goods sold
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beginning finished goods inventory + cost of goods manufactured = ending finished goods inventory + cost of goods sold
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Cost of goods sold in a manufacturing company equation
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cost of goods manufactured
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consists of the manufacturing costs associated with goods that were finished during a period
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consists of the manufacturing costs associated with goods that were finished during a period
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cost of goods manufactured
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schedule of cost of goods manufactured
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consists of three elements of product costs - direct materials, direct labor, and manufacturing overhead
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consists of three elements of product costs - direct materials, direct labor, and manufacturing overhead
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schedule of cost of goods manufactured
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what is the direct materials cost
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cost of raw materials USED during a period
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Schedule of Cost of Goods Manufactured - Direct Materials process
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beginning raw materials inventory
Add: Purchases of raw materials =Raw materials available for use Deduct: Ending raw materials inventory =Raw materials used in production |
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Schedule of Cost of Goods Manufactured - To calculate total manufacturing costs
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Direct materials + Direct Labor + Manufacturing Overhead
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(Chapter 2) Schedule of Cost of Goods Manufactured - to calculate cost of goods manufactured
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Total Manufacturing Cost
Add: Beginning work in process inventory Deduct: Ending work in process inventory =Cost of goods manufactured |
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Cost behavior
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refers to how a cost reacts to changes in the level of activity
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refers to how a cost reacts to changes in the level of activity
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Cost behavior
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variable cost
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a cost that varies, in total, in direct proportion to changes in the level of activity
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a cost that varies, in total, in direct proportion to changes in the level of activity
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variable cost
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fixed cost
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cost that remains constant, in total, regardless of changes in the level of activity
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cost that remains constant, in total, regardless of changes in the level of activity
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fixed cost
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relevant range
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the range of activity within which the assumptions about variable and fixed costs are valid
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the range of activity within which the assumptions about variable and fixed costs are valid
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relevant range
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cost subject
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anything for which cost data are desired - including products, customers, jobs, and organizational subunits
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anything for which cost data are desired - including products, customers, jobs, and organizational subunits
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cost subject
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direct cost
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a cost that can be easily and conveniently traced to a specified cost object
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a cost that can be easily and conveniently traced to a specified cost object
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direct cost
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indirect cost
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a cost that cannot be easily and conveniently traced to a specified cost object
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a cost that cannot be easily and conveniently traced to a specified cost object
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indirect cost
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common cost
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a cost that is incurred to support a number of cost objects but cannot be traced to them individually
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a cost that is incurred to support a number of cost objects but cannot be traced to them individually
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common cost
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differential cost
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a difference in costs between any two alternatives
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a difference in costs between any two alternatives
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differential cost
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differential revenues
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a difference in revenues between any two alternatives
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a difference in revenues between any two alternatives
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differential revenues
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incremental cost
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another term for differential cost
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opportunity cost
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the potential benefit that is given up when one alternative is selected over another
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the potential benefit that is given up when one alternative is selected over another
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opportunity cost
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sunk cost
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a cost that has already been incurred and that cannot be changed by any decision made now or in the future
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a cost that has already been incurred and that cannot be changed by any decision made now or in the future
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sunk cost
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Labor costs incurred during idle time are considered what?
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Manufacturing Overhead costs
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Overtime Premium costs are considered what and why?
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Manufacturing Overhead costs because it is unfair to assign overtime costs as direct labor to a certain unit simply because it fell at the end of the day in the production line.
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What are labor fringe benefits?
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employment-related costs paid by the employer
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What are included in labor fringe benefits?
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-Employee: insurance programs, retirement plans, various supplemental unemployment benefits, and hospitalization plans.
-Employer: Social Security, Medicare, worker's compensation, federal employment tax, and state unemployment insurance. |
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How are labor fringe benefit costs considered?
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Many companies consider them Indirect Labor and put them under manufacturing overhead while others treat them as additional direct labor costs.
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Quality of Conformance
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The degree to which a product or service meets or exceeds its design specifications and is free of defects or other problems that mar its appearance or degrade its performance
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The degree to which a product or service meets or exceeds its design specifications and is free of defects or other problems that mar its appearance or degrade its performance
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Quality of Conformance
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Quality cost
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Costs that are incurred to prevent defective products from falling into the hands of customers or that are incurred as a result of defective units
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Costs that are incurred to prevent defective products from falling into the hands of customers or that are incurred as a result of defective units
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Quality cost
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four broad groups of quality costs
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Prevention Costs, Appraisal Costs, Internal failure costs, and External failure costs
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Quality costs incurred in an effort to keep defective products from falling into the hands of customers
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-Prevention costs
-Appraisal Costs |
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Quality costs incurred despite efforts to prevent them
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-Internal Failure Costs
-External Failure Costs |
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Example of Prevention Costs (10)
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-Systems development
-Quality engineering -Quality training -Quality circles -Statistical process control activities -Supervision of prevention activities -Quality data gathering, analysis, and reporting -Quality improvement projects -Technical support provided to suppliers -Audits of the effectiveness of the quality system |
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Examples of Appraisal Costs (9)
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-Test and inspection of incoming materials
-Test and inspection of in-process goods -Final product testing and inspection -Supplies used in testing and inspection -Supervision of testing and inspection activities -Depreciation of test equipment -Maintenance of test equipment -Plant utilities in the inspection area -Field testing and appraisal at customer site |
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Examples of Internal Failure Costs (10)
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-Net cost of scrap
-Net cost of spoilage -Rework labor and overhead -Reinspection of reworked products -Retesting of reworked products -Downtime caused by quality problems -Disposal of defective products -Analysis of the cause of defects in production -Re-entering data because of keying errors -Debugging software errors |
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Examples of External Failure costs (7)
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-Cost of field servicing and handling complaints
-Warranty repairs and replacements -Repairs and replacements beyond the warranty period -Product Recalls -Liability arising from defective products -Returns and allowances arising from quality problems -Lost sales arising from a reputation for poor quality |
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What is the most effective way of managing quality costs?
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Preventing defects
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Prevention Costs
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support activities whose purpose is to reduce the number of defects
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support activities whose purpose is to reduce the number of defects
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Prevention Costs
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Quality circles
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consist of small groups of employees that meet on a regular basis to discuss ways to improve quality
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consist of small groups of employees that meet on a regular basis to discuss ways to improve quality
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Quality circles
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Statistical process control
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a technique that is used to detect whether a process is in or out of control
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a technique that is used to detect whether a process is in or out of control
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Statistical process control
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Appraisal costs
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incurred to identify defective products before the products are shipped to customers
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incurred to identify defective products before the products are shipped to customers
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Appraisal costs
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Internal failure costs
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result from identifying defects before they are shipped to customers
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result from identifying defects before they are shipped to customers
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Internal failure costs
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External failure costs
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result when a defective product is delivered to a customer
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result when a defective product is delivered to a customer
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External failure costs
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when quality of conformance is low, what is total quality cost and what does the majority of this cost consist of?
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High, internal and external failure costs
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What is the difference between prevention and appraisal costs?
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Appraisal costs can only find defects while prevention costs can eliminate them.
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quality cost report
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details the prevention costs, appraisal costs, and costs of internal and external failures that arise from the company's current quality control efforts
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details the prevention costs, appraisal costs, and costs of internal and external failures that arise from the company's current quality control efforts
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quality cost report
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What are the uses of quality cost reports? (3)
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helps managers...
-see the financial significance of defects. -identify the relative importance of the quality problems faced by their companies. -see whether their quality costs are poorly distributed |
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What are the three limitations of quality cost information that should be recognized?
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-Simply measuring and reporting quality costs does not solve quality problems. Problems can be solved only by taking action.
-results usually lag behind quality improvement programs. -The most important quality cost, lost sales arising from customer ill will, is usually omitted from the quality cost report because it is difficult to estimate |
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ISO 9000 standards
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Quality control requirements issued by the International Organization for Standardization that relate to products sold in European countries
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Quality control requirements issued by the International Organization for Standardization that relate to products sold in European countries
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ISO 9000 standards
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What are the quality control guidelines of the ISO 9000 Standards? (3)
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1. A quality control system is in use, and the system clearly defines an expected level of quality.
2. The system is fully operational and is backed up with detailed documentation of quality control procedures. 3. The intended level of quality is being achieved on a sustained, consistent basis. |
