Introduction To Managerial & Cost Accounting Chapter 1 – Flashcards

to provide the information managers need for planning, control, and decision making. If your goal is to be an effective manager, a thorough understanding of managerial accounting is essential.

a profit budget indicates planned income, a cash-flow budget indicates planned cash inflows and outflows, and a production budget indicates the planned quantity of production and the expected costs; estimates used for planning.

Control of organizations is achieved by evaluating the performance of managers and the operations for which they are responsible; Managers can compare actual results with planned results and decide whether corrective action is necessary.

managers investigate departures from the plan that appear to be exceptional; they do not investigate minor departures from the plan.

1. Managerial accounting is directed at internal rather than external users of accounting information. 2. Managerial accounting may deviate from generally accepted accounting principles (GAAP). 3. Managerial accounting may present more detailed information. 4. Managerial accounting may present more nonmonetary information. 5. Managerial accounting places more emphasis on the future.

Costs that increase or decrease in proportion to increases or decreases in the level of business activity

Costs that remain constant when there are changes in the level of business activity

Costs incurred in the past; These costs are not relevant for decision making because they do not change when decisions are made

The value of benefits forgone when one decision alternative is selected over another

Costs that are directly traceable to a product, activity, or department

costs that either cannot be directly traced to a product, activity, or department or are not worth tracing.

a cost that the managers can influence

a cost that the manager cannot control

1.) Decision making relies on incremental analysis—an analysis of the revenues that increase (decrease) and the costs that increase (decrease) if a decision alternative is selected. 2.) You get what you measure

involves the calculation of the difference in revenue and the difference in cost between decision alternatives.

The difference in revenue/cost of one alternative over another

comprises the fundamental activities a firm engages in to create value; When the value to the customer of receiving products and services exceeds the cost of these activities, firm value is created

have ability to prepare a master production schedule and a bill of materials and generate purchase orders

the organization of activities between a company and its suppliers in an effort to provide for the profitable development, production, and delivery of goods to customers

used to manage a variety of customer interactions

prepares reports for planning and evaluating company activities (e.g., budgets and performance reports) and provides the information needed to make management decisions (e.g., decisions related to purchasing office equipment or decisions related to adding or dropping a product). The controller also has responsibility for all financial accounting reports and tax filings with the Internal Revenue Service and other taxing agencies, as well as coordinating the activities of the firm's external auditors.