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Financial accounting information

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is reported at fixed intervals in general-purpose financial statements. These financial statements are prepared according to GAAP.

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Financial accounting information

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used by external users such as the following: Shareholders Creditors Government agencies The general public

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Managerial accounting information

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is designed to meet the specific needs of a company's management and includes historical data, which provide objective measures of past operations, and estimated data, which provide subjective estimates about future decisions.

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Managerial accounting reports do not always have to be:

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Prepared according to GAAP. Prepared at fixed intervals. Prepared for the business as a whole

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line department

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is directly involved in providing goods or services to the customers of the company.

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Line department positions:

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Senior Vice President—Equipment Plant Manager—Chicopee, MA Plant Senior Vice President—Callaway Brand Managing Director, Callaway Golf Europe

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staff department

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provides services, assistance, and advice to the departments with line or other staff responsibilities.

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Staff department positions:

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Senior VP—Chief Administrative Officer Vice President, Human Resources Chief Financial Officer Controller

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controller

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is the chief management accountant.

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The controller's staff consists of a variety of other accountants who are responsible for specialized accounting functions such as the following:

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Systems and procedures General accounting Budgets and budget analysis Special reports and analysis Taxes Cost accounting

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Strategic planning

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is developing long-term actions to achieve the company's objectives. Long-term courses of action, called strategies, often involve periods of five to ten years.

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Operational planning

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develops short-term actions for managing the day-to-day operations of the company.

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directing

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The process by which managers run day-to-day operations

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controlling

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Monitoring operating results and comparing actual results with the expected results

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feedback

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allows management to isolate areas for further investigation and possible remedial action.

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management by exception

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The philosophy of controlling by comparing actual and expected results

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Continuous process improvement

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is the philosophy of continually improving employees, business processes, and products

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The objective of continuous process improvement

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is to eliminate the source of problems in a process.

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decision making

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Inherent in each of the preceding management processes. Management must continually decide among alternative actions.

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cost

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is a payment of cash or the commitment to pay cash in the future for the purpose of generating revenues.

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cost object

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Costs are often classified in terms of how they relate to an object or segment of operations: a product, a sales territory, a department, or some activity

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Direct costs

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are identified with and can be traced to a cost object. Wood used to make guitars is a direct cost.

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Indirect costs

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cannot be identified with or traced to a cost object

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direct materials cost

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An integral part of the finished product A significant portion of the total cost of the product

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direct labor cost.

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An integral part of the finished product A significant portion of the total cost of the product

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factory overhead cost

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Costs other than direct materials cost and direct labor cost that are incurred in the manufacturing process

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Some examples of factory overhead costs include the following:

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Heating and lighting the factory Repairing and maintaining factory equipment Property taxes Insurance Depreciation of factory plant and equipment

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Prime costs

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consist of direct materials and direct labor costs.

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Conversion costs

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consist of direct labor and factory overhead costs. Conversion costs are the costs of converting the materials into a finished product.

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Product costs

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consist of the three elements of manufacturing costs: direct materials, direct labor, and factory overhead.

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Period costs

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Selling expenses, which are incurred in marketing the product and delivering the sold product to the customer, or Administrative expenses, which are incurred in managing the company and are not directly related to the manufacturing or selling functions.

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Materials inventory

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(sometimes called raw materials inventory) consists of the costs of the direct and indirect materials that have not yet entered the manufacturing process.

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Work in process inventory

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consists of direct materials costs, direct labor costs, and factory overhead costs for products that have entered the manufacturing process, but are not yet completed (in process).

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Finished goods inventory

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consists of completed (or finished) products that have not been sold.

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cost of goods manufactured

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The total cost of making products that are available for sale during the period preparing a statement of cost of goods manufactured

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Which of the following is most associated with managerial accounting?

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May rely on estimates and forecasts

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Which of the following is most associated with financial accounting?

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Prepared in accordance with GAAP

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In most business organizations, the chief management accountant is called the:

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controller

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Compute conversion costs given the following data: Direct Materials, $352,700; Direct Labor, $196,300; Factory Overhead, $177,600.

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$373,900

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The cost of a manufactured product generally consists of which of the following costs?

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Direct labor cost, direct materials cost, and factory overhead cost

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The cost of materials entering directly into the manufacturing process is classified as:

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direct materials cost

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If the cost of direct materials is a small portion of total production cost, it may be classified as part of:

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factory overhead cost

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The cost of wages paid to employees directly involved in the manufacturing process in converting materials into finished product is classified as:

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direct labor cost

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Which of the following is an example of a factory overhead cost?

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Factory heating and lighting cost

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Another term often used to refer to factory overhead is:

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factory burden

ACCT 2302 Chapter 18 – Flashcards

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