Accounting 241 – Flashcards
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CONTROLLING
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evaluating the results of business operations against the plan and making adjustments
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MAKING DECISIONS
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such as opening a new business
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WHO ARE THE PRIMARY USERS OF INFORMATION? (MANAGERIAL ACCOUNTING)
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internal users (managers)
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WHO ARE THE PRIMARY USERS OF INFORMATION? (FINANCIAL ACCOUNTING)
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external users (creditors, stockholders)
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WHAT IS THE PRIMARY ACCOUNTING PRODUCT? (MANAGERIAL ACCOUNTING)
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any internal accounting deemed important by management
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WHAT IS THE PRIMARY ACCOUNTING PRODUCT? (FINANCIAL ACCOUNTING)
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financial statements
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WHAT IS THE PURPOSE OF INFORMATION IN FINANCIAL ACCOUNTING?
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to help external users make investing and loaning decisions
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WHAT IS THE PURPOSE OF INFORMATION IN MANAGERIAL ACCOUNTING?
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to help managers plan, direct, control business operations, and make decisions
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WHAT IS THE PRIMARY ACCOUNTING PRODUCT? (MANAGERIAL ACCOUNTING)
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any internal accounting deemed important by management
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WHAT MUST BE INCLUDED IN THE REPORT AND HOW MUST IT BE FORMATTED? (MANAGERIAL ACCOUNTING)
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management determines what is wants in a report
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WHAT MUST BE INCLUDED IN THE REPORT AND HOW MUST IT BE FORMATTED? (FINANCIAL ACCOUNTING)
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GAAP determines the content and format of financial statements
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WHAT IS THE UNDERLYING BASIS OF THE INFORMATION? (MANAGERIAL ACCOUNTING)
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provides information on both external and internal transactions
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WHAT IS THE UNDERLYING BASIS OF THE INFORMATION? (FINANCIAL ACCOUNTING)
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the information is based on historical transactions with external parties
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WHAT INFORMATION CHARACTERISTIC IS EMPHASIZED? (MANAGERIAL ACCOUNTING)
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data must be RELEVANT
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WHAT INFORMATION CHARACTERISTIC IS EMPHASIZED? (FINANCIAL ACCOUNTING)
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data must be RELIABLE and OBJECTIVE
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WHAT BUSINESS "UNIT" IS THE REPORT ABOUT? (MANAGERIAL ACCOUNTING)
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segments of the business (such as products, customers, geographical regions,etc.)
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WHAT BUSINESS "UNIT" IS THE REPORT ABOUT? (FINANCIAL ACCOUNTING)
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the company as a whole (data is put in footnotes)
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HOW OFTEN ARE THE REPORTS PREPARED? (MANAGERIAL ACCOUNTING)
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depends on management's needs; some daily, some only once
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HOW OFTEN ARE THE REPORTS PREPARED? (FINANCIAL ACCOUNTING)
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annually and quarterly
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IS THE INFORMATION REQUIRED BY AN OUTSIDE GROUP/GOVERNMENT AGENCY? (MANAGERIAL ACCOUNTING)
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no authoritative body requires managerial accounting reports
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IS THE INFORMATION REQUIRED BY AN OUTSIDE GROUP/GOVERNMENT AGENCY? (FINANCIAL ACCOUNTING)
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yes the SEC requires publicly traded companies to issue annual audited
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IS THERE ANY CONCERN OVER HOW THE REPORTS WILL AFFECT EMPLOYEE BEHAVIOR? (MANAGERIAL ACCOUNTING)
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management carefully considers behavioral implications, when designing the managerial accounting system
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IS THERE ANY CONCERN OVER HOW THE REPORTS WILL AFFECT EMPLOYEE BEHAVIOR? (FINANCIAL ACCOUNTING)
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the concern is about adequacy of disclosure; behavioral implications are secondary
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ETHICS
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refers to the standards of conduct for judging right from wrong, honest from dishonest, fair and unfair
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IMAs STATEMENT OF ETHICAL PROFESSIONAL STANDARDS:
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1. maintain professional COMPETENCE 2. Preserve CONFIDENTIALITY of information 3. uphold their INTEGRITY 4. perform duties with CREDIBILITY
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MANAGERIAL ACCOUNTING
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focuses primarily on the needs of personnel within the organizations
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MIDDLE-LEVEL MANAGERS
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considered an internal user of accounting information rather than an external user
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THE DAY-TO-DAY WORK OF MANAGEMENT TEAMS WILL TYPICALLY COMPROMISE ALL ACTIVITIES EXCEPT:
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cost minimizing
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PRIMARY OUTPUT OF SERVICE COMPANIES:
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intangible services
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PRIMARY OUTPUT OF MERCHANDISING COMPANIES:
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tangible products purchased from supplies
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PRIMARY OUTPUT OF MANUFACTURING COMPANIES:
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new tangible products made as workers and equipment
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TYPE(S) OF INVENTORY OF SERVICE COMPANIES:
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none
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TYPE(S) OF INVENTORY OF MERCHANDISING COMPANIES:
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inventory
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TYPE(S) OF INVENTORY OF MANUFACTURING COMPANIES:
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raw material inventory, work in process inventory, finished goods inventory
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SIGNIFICANT COSTS OF SERVICES COMPANIES:
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70% = salaries and benefits
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SIGNIFICANT COSTS OF MANUFACTURING COMPANIES:
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sell products at high prices to cover its costs
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VALUE CHAIN:
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1. research and development 2. design 3. production or purchases 4. marketing 5. distribution 6. customer service
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RESEARCH AND DEVELOPMENT
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new or improved products or services and the processes for producing them
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DESIGN
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detailed engineering of products and services and the processes for producing them
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PRODUCTION OR PURCHASES
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resources used to produce a product or service or to purchase finished merchandise intended for resale
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MARKETING
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promotion and advertising of products and services
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DISTRIBUTION
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Delivery of products or services to customers
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CUSTOMER SERVICE
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support provided for customers after the sale
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COST OBJECT
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anything for which managers want a separate measurement of cost
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DIRECT COST
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a cost that can be traced to the cost object
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INDIRECT COST
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a cost that relates to the cost to run a manufacturing plant; this includes utilities, property taxes, depreciation
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TOTAL COST
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include the cost of all resources used throughout the VALUE CHAIN
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WHAT ARE THE COMPONENTS OF INVENTORIABLE PRODUCT COSTS?
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1. direct materials 2. direct labor 3. manufacturing overhead
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DEPRECIATION ON THE COMPANY'S RETAIL OUTLETS
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NOT an example of product costs
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CLASSIFYING A COST AS EITHER DIRECT OR INDIRECT DEPENDS UPON:
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the ease for which the cost can be attached to a particular cost object
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COSTS ARE SUBDIVIDED INTO WHAT 2 MAJOR FUNCTIONAL CATEGORIES?
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prime and conversion
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CONTROLLABLE COST
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management is able to influence or change costs
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UNCONTROLLABLE COST
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management CANNOT change or influence cost in the short-run
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WHAT TYPE OF COSTS ARE RELEVANT TO BUSINESS DECISIONS?
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costs that differ between alternatives (Differential cost)
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OUTPUTS OF JOB COSTING
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unique products and services, such as custom ships
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OUTPUTS OF PROCESS COSTING
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homogenous products and services such as cans of soda
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MANUFACTURING APPROACH OF JOB COSTING:
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customized to the needs of the customer
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COST ACCUMULATION OF PROCESS COSTING:
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cost accumulated by process
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MANUFACTURING APPROACH OF PROCESS COSTING:
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mass-production of products in series of standardized processes
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COST ACCUMULATION OF JOB COSTING:
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cost accumulated by job or customer
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MAJOR COST REPORT OF JOB COSTING
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job cost sheet for each unique unit, customer, or job
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MAJOR COST REPORT OF PROCESS COSTING
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production report for each major production process
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PROCESS COSTING:
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averages manufacturing costs across all unit so that each identical unit bears the same cost USED BY COMPANIES THAT PRODUCE EXTREMELY LARGE NUMBERS OF IDENTICAL UNITS (soda company)
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JOB COSTING
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a system for assigning cost to products or services that differ in the amount, material, labor, and overhead required (custom products)
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WHAT ARE THE 3 STEPS FOR ALLOCATING MANUFACTURING OVERHEAD?
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1. compute predetermined overhead rate 2. apply manufacturing overhead rate to products 3. find the difference between actual and applied
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COST DISTORTION:
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occurs when some products are over-costed while other products are undercosted by the cost allocation system
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WHEN WOULD WE USE A DEPARTMENTAL OVERHEAD RATE INSTEAD OF A PLANTWIDE RATE?
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1. each department incurs different types and amounts of manufacturing 2. each product, or job, uses the departments to a different extent
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WHAT ARE THE BENEFITS OF ABC?
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more accurate product cost information more detailed information on costs of activities and associated cost drivers help managers control costs
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COST HIERARCHY
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unit level, batch level, product level, customer level, facility level
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QUALITY MANAGEMENT
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its purpose is to provide customers with superior products and services
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4 TYPES OF QUALITY COSTS
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1. prevention cost 2. appraisal cost 3. internal failure costs 4. external failure costs
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PREVENTION COST:
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costs incurred to AVOID producing poor-quality goods or services *COMPANIES TRY USING MORE AUTOMATED TECHNOLOGY FOR AS MUCH AS POSSIBLE
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APPRAISAL COST:
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costs incurred to DETECT poor-quality goods or services
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INTERNAL FAILURE COSTS:
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costs incurred on defective units BEFORE delivery to customers
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EXTERNAL FAILURE COSTS
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costs incurred because the defective goods or services are not detected until AFTER delivery is made to the customers
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VALUE-ADDED ACTIVITIES
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activities for which the customer is willing to pay because these activities ADD VALUE to the final product
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NON-VALUE-ADDED ACTIVITIES
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activities that neither enhance the customer's image of the product or service nor provide a competitive advantage
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