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Audit Committee

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a subcommittee of the board of directors that is responsible for the financial reporting and disclosure process

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Board of Directors

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The body selected by shareholders to oversee the company

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Budget

answer

Quantitative expression of a plan that helps managers coordinate and implement the plan

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Certified Management Accountant (CMA)

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a professional certification issued by the IMA to designate expertise in the areas of managerial accounting, economics, and business finance.

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Chief Executive Officer (CEO)

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hired by the board of directors to oversee the company on a daily basis

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Chief Financial Officer (CFO)

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responsible for all the company's financial concerns

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Chief Operating Officer (COO)

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responsible for overseeing the company's operations

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Controller

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responsible for general financial accounting, managerial accounting, and tax reporting

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Controlling

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evaluating the results of business operations against the plan and making adjustments to keep the company pressing towards its goals

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Cost-Benefit Analysis

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Weighing costs against benefits to help make decisions

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Cross-Functional Teams

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corporate teams whose members represent various functions of the organization, such as R&D, design, production, marketing, distribution, and customer service.

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Decision Making

answer

identifying possible courses of action and choosing among them

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Directing

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running the company on a day to day basis

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Enterprise Resource Planning (ERP)

answer

software integrates the departments and functions across an organization.

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Extensible Business Reporting Language (XBRL)

answer

data tagging system that enables companies to release financial and business information in a format that can be quickly, efficiently, and cost-effectively accessed, sorted, and analyzed over the internet

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International Financial Reporting Standards (IFRS)

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SEC has recently moved to adopt IFRS for all publicly traded companies within the next few years. In many instances, IFRS vary from GAAP.

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Institute of Management Accountants (IMA)

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professional organization that promotes the advancement of the management accounting profession.

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Internal Audit Function

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corporate function charged with assessing the effectiveness of the company's internal controls and risk management policies.

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ISO 9001:2008

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quality related certification issued by the International Organization for Standardization (ISO) Firms may become ISO 9001:2008 certified by complying with the quality management standards set forth by the ISO and undergoing extensive audits of their quality management processes.

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Just-in-time (JIT)

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A process that redefines and simplifies manufacturing by reducing inventory levels and delivering raw materials at the precise time they are needed on the production line

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Lean Production

answer

An approach to production that emphasizes the elimination of waste in all aspects of production processes

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Planning

answer

setting goals and objectives for the company and deciding how to achieve them

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Sarbanes-Oxley Act of 2002 (SOX)

answer

law that requires companies to maintain adequate systems of internal control

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Supply-Chain Management

answer

Involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

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Sustainability

answer

the ability to meet the needs of the present without compromising the ability of future generations to meet their own needs

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Throughput Time

answer

the time between buying raw materials and selling finished products

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Treasurer

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responsible for raising the firm's capital and investing funds

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Total Quality Management (TQM)

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Managing the entire organization so that it excels on all dimensions of products and services that are important to the customer.

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Allocate

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to assign an indirect cost to a cost object

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Assign

answer

to attach a cost to a cost object

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Average cost

answer

total cost divided by the number of units

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controllable costs

answer

costs that can be influenced or changed my management

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conversion costs

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the combination of direct labor and manufacturing overhead costs

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cost object

answer

anything for which managers want a separate measurement of costs

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cost of goods manufactured

answer

the cost of manufacturing the goods that were finished during the period

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customer service

answer

support provided for customers after the sale

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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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differential cost

answer

the difference in cost between two alternative courses of action

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direct cost

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a cost that can be traced to a cost object

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direct labor

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the cost of compensating employees who physically convert raw materials into the company's products; directly traceable to the finished product

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direct materials

answer

primary raw materials that become a physical part of a finished product and whose costs are traceable to the finished product

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distribution

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delivery of products or services to customers

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finished goods inventory

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completed goods that have not yet been sold

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fixed costs

answer

costs that stay constant in total despite wide changes in volume

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indirect costs

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a cost that relates to the cost object but cannot be traced to it

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indirect labor

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labor costs that are difficult to trace to specific products

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indirect materials

answer

materials whose costs are difficult to trace to specific products

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inventoriable product costs

answer

all costs of a product that GAAP requires companies to treat as an asset for external financial reporting. these costs re not expensed until the product is sold

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manufacturing company

answer

a company that uses labor, plant, and equipment to convert raw materials into new finished products

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manufacturing overhead

answer

all manufacturing costs other than direct materials and direct labor; also called factory overhead and indirect manufacturing cost

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marginal cost

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the cost of producing one more unit

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marketing

answer

promotion and advertising of products or services

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merchandising company

answer

a company that resells tangible products previously bought from suppliers

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other indirect manufacturing costs

answer

all manufacturing overhead costs aside from indirect materials and indirect labor

question

period costs

answer

costs that are expensed in the period in which they are incurred

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prime costs

answer

the combination of direct material and direct labor costs

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production or purchases

answer

resources used to produce a product or service, or to purchase finished merchandise intended for sale

question

raw materials inventory

answer

all raw materials not yet used in manufacturing

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research and development

answer

researching and developing new or improved products or service or the processes for producing them

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retailer

answer

merchandising company that sells to consumers

question

service company

answer

a company that sells intangible services rather than tangible products

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sunk cost

answer

a cost that has already been incurred

question

total costs

answer

the cost of all resources used throughout the value chain

question

trace

answer

to assign direct cost to a cost object

question

uncontrollable costs

answer

costs that cannot be changed or influenced in the short run by management

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value chain

answer

the activities that add value to a firm's products and services; includes R&D, design, production or purchases, marketing, distribution, and customer service

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variable costs

answer

costs that change in total in direct proportion to changes in volume

question

wholesaler

answer

merchandising companies that buy in bulk from manufacturers, mark up the prices, and then sell those products to retailers

question

work in process inventory

answer

goods that are partway through the manufacturing process but not yet complete

question

bill of materials

answer

a list of all the raw materials needed to manufacture a job

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billing rate

answer

the labor rate charged to the customer, which includes both cost and profit components

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cost driver

answer

the primary factor that causes a cost

question

cost-plus pricing

answer

a pricing approach in which the company adds a desired level of profit to the products cost

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job cost record

answer

a written or electronic document the lists the direct materials, direct labor, and manufacturing overhead costs assigned to each individual job

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job costing

answer

a system for assigning costs to products or services that differ in the amount of materials, labor, and overhead required. Typically used by manufacturers that produce unique, or custom-ordered products in small batches; also used by professional service firms

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invoice

answer

bill from a supplier

question

labor time record

answer

a written or electronic document that identifies the employee, the amount of time spent on a particular job, and the labor cost charged to a job

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materials requisition

answer

a written or electronic document that requests specific materials be transferred from the raw materials inventory storeroom to the production floor

question

overallocated manufacturing overhead

answer

the amount of manufacturing overhead allocated to jobs is more than the amount of manufacturing overhead costs actually incurred; results in jobs being overcosted

question

pick

answer

storeroom workers remove items from raw materials inventory that are needed by production

question

predetermined manufacturing overhead rate

answer

the rate used to allocate manufacturing overhead to individual jobs; calculated as total manufacturing overhead costs divided by total estimated amount of allocation base

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process costing

answer

a system for assigning costs to a large numbers of identical units that typically pass through a series of uniform production steps. Costs are averaged over the units produced such that each unit bears the same unit cost

question

production schedule

answer

a written or electronic document indicting the quantity and types of inventory that will be manufactured during a specific time frame

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purchase order

answer

a written or electronic document authorizing the purchase of specific raw materials from a specific supplier

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raw materials record

answer

a written or electronic document listing the number and cost of all units used and received, and the balance currently in stock; a separate record is maintained for each type of raw material kept in stock

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receiving report

answer

a written or electronic document listing the quantity and type of raw materials received in an incoming shipment; the report is typically a duplicate of the purchase order without the quantity prelisted on the form

question

stock inventory

answer

products normally kept on hand in order to quickly fill customer orders

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subsidiary ledger

answer

supporting detail for a general ledger account

question

underallocated manufacturing overhead

answer

the amount of manufacturing overhead allocated to jobs is less than the amount of manufacturing overhead costs actually incurred; this results in jobs being undercosted

question

activity-based costing (ABC)

answer

focuses on activities as the fundamental cost objects. the costs of those activities become building blocks for compiling the indirect costs or products, services, and customers

question

activity-based management (ABM)

answer

using activity-based cost information to make decision that increase profits while satisfying customers' needs

question

appraisal costs

answer

costs incurred to detect poor-quality goods or services

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batch-level activities

answer

activities and costs incurred for every batch, regardless of the number of units in the batch

question

cost distortion

answer

overcosting some products while undercosting others

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cost of quality report

answer

a report that lists the costs incurred by the company related to quality

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departmental overhead rates

answer

separate manufacturing overhead rates established for each department

question

external failure costs

answer

costs incurred after defective product is delivered

question

facility-level activities

answer

Activities and costs incurred no matter how many units, batches, or products are produced in the plant

question

internal failure costs

answer

costs incurred to avoid poor quality goods or services before delivery to customers

question

lean production

answer

a philosophy and business strategy of manufacturing without waste

question

non-value-added activities

answer

activities that neither enhance the customer's image of the product or service nor provide a competitive advantage; also known as waste activities

question

plantwide overhead rate

answer

when overhead is allocated to every product using the same manufacturing overhead rate

question

prevention costs

answer

costs incurred to avoid poor-quality goods or services

question

product-level activities

answer

activities and costs incurred for a particular product, regardless of the number of units or batches of the product produced

question

unit-level activities

answer

activities and costs incurred for every unit produced

question

value engineering

answer

eliminating waste in the system by making the company's processes as effective and efficient as possible

question

value-added activities

answer

activities for which the customer is willing to pay because these activities add value to the final product of service

question

Professional Ethics

answer

Competence, Confidentiality, Integrity, and Credibility

question

Competence

answer

Competent knowledge and skills, perform duties lawfully, provide support info that is clear, concise, accutate, convey professional limitations that would hinder activity or productivity.

question

Confidentiality

answer

Keep info confidential, Inform all relevant parties regarding use of confidential information, do not use confidential information for unethical or illegal advantages.

question

Credibility

answer

Commicate information fairly and objectively, disclose all relevant information that could influence decision making, disclose delays or inefficiencies in anything.

question

Integrity

answer

Mitigate actual conflicts of interest, refrain from supporting in activities that would discredit the company, refrain from engaging in conduct that would prejucice carrying out duties ethically

question

Shifting Economy

answer

The Economy is moving away from manufacuring to more service.

question

Globalization

answer

Creates more competition and opportunity

question

Cost

answer

Use of Company resources

question

Expense

answer

Used-up costs

question

Product Cost

answer

All costs related to making the product

question

Manufacturing Product Costs

answer

Direct Materials, Direct Labor, MO

question

Cost flow: Direct Materials Used

answer

Beg. DM + DM Purchased = Available - End DM = DM Used

question

Cost flow: Cost of goods manufactured

answer

Beg WIP + DM Used + DL + MO = Available - End WIP = Cost of goods manufactured

question

Cost flow: Cost of goods sold

answer

Beginning FG + Cost of goods manufactured = available - end. FG = Cost of goods sold

question

Cost flow: Net Income

answer

Sales - Cost of goods sold = Gross profit - period costs = net income

question

Cost Pools

answer

Grouping of similar overhead costs

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