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Financial Accounting

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the summarizing and recording of the financial transactions of a company

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Managerial Accounting

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the summarizing of various types of data for managers to use

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Financial Accounting includes

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creation of financial statements internal and external decision-makers focus on the past

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Managerial Accounting includes

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various internal reports internal decision-makers focus on the future

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Management Accountants

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strategic business partners who understand the financial and operational sides of the business

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Management Accountants report and analyze both ___________ and _______________ measures.

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financial, non-financial

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Profits, Processes, People, Planet

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The four Ps of managerial accounting

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Managers 3 vital activities, also known as the 3 pillars of managerial accounting

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Planning, Controlling, Decision-making

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Planning

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establishing goals and specifying how to achieve them

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Controlling

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gathering feedback to ensure that the plan is being properly executed or modified as circumstances change

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Decision-making

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selecting a course of action from competing alternatives

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Enterprise Risk Management

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process used by a company to identify risks and develop responses to them that enable the company to more likely meet its goals

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Managerial accounting provides the __________ needed for the 3 pillars.

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data

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Corporate Social Responsibility (definition)

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the concept that organizations should consider needs of all stakeholders when making decisions, not just the needs of the stockholders

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Examples of stakeholders

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customers, community, employees, suppliers, environmental activists, human rights activists

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Corporate Social Responsibility (importance)

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Extends the responsibility of an organization beyond legal compliance to include voluntary actions, because a company's social performance can impact its financial performance

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Value Chain

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the major functions/steps that add value to a company's products or services

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Manufacturing Costs

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all of the inventorial costs of producing a finished product

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3

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There are ___ kinds of manufacturing costs.

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Direct Materials, Direct Labor, Manufacturing Overhead

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What are the kinds of manufacturing costs?

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Direct Materials

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cost of materials that become an integral part of the finished product

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Direct Labor

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labor costs that can be easily and physically traced to units of the finished product

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Manufacturing Overhead

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all of the indirect costs of producing the company's finished products

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Types of manufacturing overhead

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indirect materials, indirect labor, other indirect costs

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Indirect Materials

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costs of materials used in processing the product or that become part of the finished product but aren't significant enough to count as direct materials

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Indirect Labor

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costs for labor that are necessary for making the product but can't be traced to particular products

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Other Indirect Costs

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costs for factory insurance, property taxes, depreciation, factory maintenance, repairs, etc.

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Operating the factory

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Only costs associated with ___________ _____ ___________ are considered Manufacturing Costs.

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Non-manufacturing costs

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costs for advertising, utilities, property taxes, insurance, depreciation, etc. with a company's selling and administrative functions

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Product costs v. Period costs

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for GAAP, another way to say Manufacturing v. Non-manufacturing costs, because GAAP requires all manufacturing costs to be assigned to the product

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Prime Cost

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the direct materials + the direct labor costs

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Conversion Cost

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the direct labor costs + the manufacturing overhead costs

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Cost Behavior

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how costs respond in total to changes in the volume of a given activity base

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Variable Costs

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costs that change in total, proportionately and directly, with changes in the volume of an activity base. ex. direct materials

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Variable Cost per unit

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constant per unit (no matter how many)

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Fixed Costs

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costs that remain constant in total regardless of changes in the volume of an activity base

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Fixed Cost per unit

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changes proportionately and indirectly with changes in the volume of the activity base

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Committed, Discretionary

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Two types of fixed costs

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Committed Fixed Costs

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Multi-year costs that can't be reduced in the short term (ex. factories, equipment, property taxes, high-salary contracts)

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Discretionary Fixed Costs

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Fixed costs that result from annual decisions by management (ex. advertising, research, temporary employees)

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Relevant Range

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the range of activity where the total fixed costs remain constant and the variable cost per unit remains constant (variable costs act like variable costs, fixed costs like fixed costs)

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Mixed Costs

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costs that have both fixed and variable components

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High-low method (purpose)

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to separate the fixed component from the variable component within a mixed cost

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High-low Method... Variable cost per unit =

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Cost at highest activity level - cost at lowest activity level ________________________________________________________________________________ Highest activity level - lowest activity level

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High-low Method... Total Fixed Cost =

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Total cost at highest activity - (variable cost per unit x highest activity)

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Income Statement Formats

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Traditional, Contribution

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Traditional Format Income Statement (definition)

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Income statement format that divides expenses into 2 classifications: COGS and Operating expenses

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Traditional Format Income Statement is good for _____________ reporting purposes.

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external

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Contribution Format Income Statement

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Income statement format that divides expenses into these two classifications: variable expenses and fixed expenses

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Variable, fixed

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The Contribution Format Income Statement divides expenses into these two classifications:

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planning, decision-making

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Contribution Format Income Statement is good for internal _____________ and _____________-_______________ purposes.

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sales- variable expenses

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Contribution Margin (Formula)

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Contribution Margin (Definition)

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the amount that "contributes" to covering fixed expenses and then provides a profit (NI) for the period

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Differential, Opportunity, Sunk

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Classifications of Cost

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Differential Cost

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the difference in costs between any two alternatives

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incremental

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Differential Costs are also referred to as __________________ costs.

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Opportunity Cost

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the potential benefit that is given up when one alternative is selected over another

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Sunk Cost

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a cost that has already been incurred and cannot be changed by any decision made now or in the future, therefore, it shouldn't be considered in the current decision between alternatives

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Product costing

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how products and services are costed

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reported profits

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Product costing can have a substantial impact on ____________ _______________.

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absorption

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Most countries require a company to use ________________ costing.

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Absorption costing

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assigns all manufacturing costs, both fixed and variable, to units of product or services for external reporting purposes (GAAP)

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Job-Order Costing (definition)

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accumulates product costs for manufacturing a batch of product, or a job

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job order

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_________-_____________ costing is best used when producing many different products.

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product cost

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In job-order costing, costs are traced and allocated to jobs by being divided by the number of units in the job to arrive at the __________ _________ per unit

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Job Cost Sheet

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a form created fir each job that lists each of the 3 manufacturing costs the job accumulates.

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Direct materials are posted to the job cost sheet using a _____________ ______________ form.

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materials requisition

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Cost of Goods Manufactured (definition)

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the manufacturing cost of all the goods that were completed during the period

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Cost of Goods Manufactured (calculation)

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amounts transferred from the WIP inventory to the finished goods inventory

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Schedule of Cost of Goods Manufactured

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DM used: RM beg. balance +RM purchases -RM end. balance -indirect RM in MOH _____________________________ DM used +DL used +OH applied actual DLH x Predetermined OH rate ____________________________________________________ Applied OH ____________________________________________________________ Total Manufacturing Costs Used + WIP inventory, beg. balance -WIP inventory, end. balance __________________________________________ Cost of Goods Manufactured

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Cost of Goods Sold for a Manufacturer

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Finished goods beg. balance + cost of goods manufactured - finished goods end. balance __________________________________________ Cost of goods sold less: (over-applied or under-applied) OH __________________________________________ Adjusted Cost of Goods Sold

Managerial Accounting Exam 1 Ch. 1-3 – Flashcards

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