Managerial Accounting – Chapter 4 – Flashcards
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overcosting some products while undercosting other products
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cost distortion
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when overhead is allocated to every product using the same manufacturing overhead
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plantwide overhead rate
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separate manufacturing overhead rates established for each department
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departmental overhead rates
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focuses on activities as the fundamental cost objects. The costs of those activities become building blocks for compiling the indirect costs products, services, and customers
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activity based costing
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activities and costs incurred for every unit produced
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unit level activities
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activities and costs incurred for every batch, regardless of the number of units in the batch
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batch level activities
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activities and costs incurred for a particular product, regardless of the number of units or batches of the product produced
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product level activities
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activities and costs incurred no matter how many units, batches, or products in the plant
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facility level activities
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using activity-based cost information to make decisions that increase profits while satisfying customers' needs
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activity based management ABM
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activities for which the customer is willing to pay because these activities add value to the final product or service
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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; also known as waste activities
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non value added activities
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eliminating waste in the system by making the company's processes as effective and efficient as possible
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value engineering
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a management philosophy and strategy focused on creating value for the customer by eliminating waste
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lean thinking
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a Japanese word meaning change for the better
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Kaizen
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the time that elapses between receipt of a customer order and delivery of the product or service
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customer response time
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eight wastes, downtime
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defects, overproduction, waiting, not utilizing people to their full potential, transportation, inventory, movement, excess processing
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an inventory management philosophy that focuses on purchasing raw materials just in time for production and completing finished goods just in time for delivery to customers
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just in time
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a storage system used to reduce the waste of transportation and movement in which tools, materials, and equipment are stored in proximity to where they will be used most frequently
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point of use storage, POUS
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the rate of production needed to meet customer demand yet avoid overproduction
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takt time
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the time that elapses between the start of production and the product's completion
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manufacturing cycle time
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refers to shifting the responsibility for quality adherence to the operators at each step in the value stream, rather than relying on supervisors or a quality assurance department to catch errors
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quality at the source
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a simplified accounting system in which production costs are not assigned to the units until they are finished, or even sold, thereby saving the bookkeeping steps of moving the product through the various inventory accounts
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backflush costing
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a management philosophy of delighting customers with superior products or services by continually setting higher goals and improving the performance of every business function
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total quality management TQM
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a report that lists the costs incurred by the company related to quality. The costs are categorized as prevention costs, appraisal costs, internal failure costs, and external failure costs
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costs of quality reports
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costs incurred to avid poor quality goods or services
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prevention costs
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costs incurred to detect poor quality goods or services
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appraisal costs
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costs incurred when the company detects and corrects poor quality goods or services before making delivery to customers
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internal failure costs
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costs incurred when the company does not detect poor quality goods or services until after delivery is made to customers
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external failure costs
