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American Institute of Certified Public Accountants (AICPA)

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the world's largest association representing the accounting profession; together with the Chartered Institute of Management Accountants (CIMA) offers the Chartered Global Management Accountant (CGMA) designation.

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audit committee

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a subcommittee of the board of directors that is responsible for overseeing both the internal audit function and the annual financial statement audit by independent CPAs.

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Board of Directors

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the body elected by shareholders to oversee the company

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budget

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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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Chartered Global Management Accountant (CGMA)

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a designation available to qualifying American Institute of Certified Public Accountants (AICPA) members that is meant to recognize the unique business and accounting skill set possessed by those CPAs who work, or have worked in business, industry or government

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Chief Executive Officer (CEO)

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

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Chief Financial Officer (CFO)

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the position responsible for all of the company's financial concerns

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Chief Operating Officer (COO)

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the position responsible for overseeing the company's operations

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controller

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

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controlling

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one of management's primary responsibilities; evaluating the results of business operations against the plan and making adjustments to keep the company pressing toward 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

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identifying possible courses of action and choosing among them

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directing

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one of management's primary responsibilities; running the company on a day-to-day basis

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Enterprise Resource Planning (ERP)

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software systems that can integrate all of a company's worldwide functions, departments, and data into a single system

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Extensible Business Reporting Language (XBRL)

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a 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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Institute of Management Accountants (IMA)

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

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integrated reporting

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a process resulting in a report the describes how a company is creating value over time using financial, manufactured, intellectual, human, social, and natural capital

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internal audit function

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

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International Financial Reporting Standards (IFRS)

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the SEC is considering whether to require all publicly traded companies to adopt IFRS. In many instances, IFRS vary from GAAP

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just-in-time

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an inventory philosophy first pioneered by Toyota in which a product is manufactured just in time to fill customer orders. Companies adopting JIT are able to substantially reduce the quantity of raw materials and finished products kept on hand

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lean thinking

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a philosophy and business strategy of operation without waste

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planning

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one of management's primary responsibilities; setting goals and objectives for the company and deciding how to achieve them

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Sarbanes-Oxley Act of 2002 (SOX)

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a congressional act that enhances internal control and financial reporting requirements and establishes new regulatory requirements for publicly trades companies and their independent auditors

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sustainability

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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

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the time between buying raw materials and selling finished products

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Total Quality Management (TQM)

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a management philosophy of delighting customers with superior products and services by continually setting higher goals and improving the performance of every business function

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treasurer

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the position responsible for raising the firm's capital and investing funds

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triple bottom line

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evaluating a company's performance not only by its ability to generate economic profits, but also by its impact on people and on the planet

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allocate

answer

to assign an indirect cost to a cost object

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assign

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to attach a cost to a cost object

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average cost

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the total cost divided by the number of units

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biomimicry

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a means of product design in which a company tries to mimic, or copy, the natural biological process in which dead organisms (plants and animals) become the input for another organism or process

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controllable costs

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costs that can be influenced or changed by 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

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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

answer

the cost of compensating employees who physically convert raw materials into the company's products; labor costs that are 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

answer

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

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costs that stay constant in total despite wide changes in volume

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greenwashing

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the unfortunate practice of overstating a company's commitment to sustainability

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indirect cost

answer

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

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indirect labor

answer

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 (inventory) for external financial reporting. these costs are not expensed until the product is sold

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life-cycle assessment

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a method of product design in which the company analyzes the environmental impact of a product, from cradle to grave, in an attempt to minimize negative environmental consequences throughout the entire lifespan of the product

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manufacturing company

answer

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

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manufacturing overhead

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

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marginal cost

answer

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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operating income

answer

earnings generated from the company's primary ongoing operations; the company's earnings before interest and taxes

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other indirect manufacturing costs

answer

all manufacturing overhead costs aside from indirect materials and indirect labor

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period costs

answer

costs that are expensed in the period in which they are incurred; often called operating expenses or selling, general, and administrative expenses

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perpetual inventory

answer

an inventory system in which both costs of goods sold and inventory are updated every time a sale is made

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periodic inventory

answer

an inventory system in which costs of goods sold is calculated at the end of the period, rather than every time a sale is made

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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 resale

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raw materials inventory

answer

all raw materials (direct materials and indirect materials) not yet used in manufacturing

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research and development (R&D)

answer

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

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retailer

answer

merchandising company that sells to consumers

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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

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total cost

answer

the cost of all resources used throughout the value chain

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trace

answer

to assign a direct cost to a cost object

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triple bottom line

answer

evaluating a company's performance not only by its ability to generate economic profits, but also by its impact on people and the planet

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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

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wholesaler

answer

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

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work in process inventory

answer

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

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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

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cost-plus pricing

answer

a pricing approach in which the company adds a desired level of profit to the product's cost

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job cost record

answer

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

question

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

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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

question

materials requisition

answer

a written or electronic document requesting that 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 overheads costs actually incurred; results in jobs being overcosted

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pick

answer

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

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predetermined manufacturing overhead rate

answer

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

question

process costing

answer

a system for assigning costs to a large number 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 indicating the quantity and types of inventory that will be manufactured during a specified time frame

question

purchase order

answer

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

question

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

question

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 pre-listed on the form

question

stock inventory

answer

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

question

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

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R&D design production or purchases marketing distribution customer service

answer

parts of the value chain (6)

question

cost of merchandise freight-in customs/duties

answer

components of inventorial product cost for a MERCHANDISING company

question

indirect materials indirect labor other indirect costs

answer

components of manufacturing overhead for a MANUFACTURING company

question

operating expenses

answer

period costs are also known as

question

R&D design marketing distribution customer service

answer

period costs (5)

question

controllable

answer

costs in the long run are usually

question

uncontrollable

answer

costs in the short run are mostly

Managerial Accounting Exam #1- Pannell – Flashcards

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