Managerial Accounting Final Exam Review. – Flashcards
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What is Managerial Accounting?
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Area of accounting aimed mainly at serving the decision-making needs of internal users. (p. 600)
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What is Financial Accounting?
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Area of accounting aimed mainly at serving external users.(p.5)
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What is a manufacturer?
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A company that uses labor and operating assets to convert raw materials to finished goods.
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What is a retailer?
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An intermediary that buys products from manufacturers or wholesalers and sells them to consumers.( p. 156)
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What is a service provider?
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Organization that provides services instead of tangible products.
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What is Planning and Control?
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The process of setting goals and preparing to achieve them, and the process of monitoring planning decisions and evaluating the organization's activities and employees. (pp. 600-601)
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What are internal users?
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Persons using accounting information who are directly involved in the managing the organization.(p.6)
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What are external users?
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Persons using accounting information who are not directly involved in running the organization.(p. 5)
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What are elements of fraud?
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1. Is done to provide direct or indirect benefit to the employee. 2. Violates the employee's obligations to the employer. 3. Costs the employer money or loss of other assets. 4. Is hidden from the employer.(p. 604)
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What are product costs?
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Costs that are capitalized as inventory because they produce benefits expected to have future value (Direct materials, Direct labor, and Overhead). (p. 606)
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What are Direct Materials?
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Raw material that physically becomes part of the product and is clearly identified with specific products or batches of product. (pp. 610)
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What is Manufacturing Overhead?
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Factory activities supporting the production process that are not direct material or direct labor. (p. 610)
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What are period costs?
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Expenditures identified more with a time period than with finished product costs. (Selling & Admin expenses) (p.606)
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What are Selling costs (expenses)?
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Expenses of promoting sales, such as displaying and advertising merchandise, making sales, and delivering goods to customers. (p. 169)
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What are Administrative costs (expenses)?
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Expenses that support the operating activities of a business. (p.169)
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What are sunk costs?
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A cost already incurred and cannot be avoided or changed. (p. 606)
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What are incremental costs?
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Additional cost incurred only if a company pursues a specific course of action. (p. 970)
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What are direct costs?
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Expenses traced to a specific department (object) that are incurred for the sole benefit of that department.(p. 927)
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What are indirect costs?
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Expenses incurred for the joint benefit of more than one department (or cost object). (p. 927)
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What is a job order cost system?
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Cost accounting system to determine the cost of producing each job or job lot. (pp 685 & 817)
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What is a job cost sheet?
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A separate record maintained for each job (p. 778)
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What is a Material Requisition?
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A source document production managers use to request materials for production; used to assign materials costs to specific jobs or overhead. (p. 781)
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What is a time sheet (ticket)?
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A source document used to report the time an employee spent working on a job or on overhead activities and then to determine the amount of direct labor to charge to the job or the amount of indirect labor to charge to overhead. (p. 782)
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What is process costing?
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System of assigning direct materials, direct labor, and overhead to specific processes; total costs associated with each process are then divided by the number of units passing through that process to determine the cost per equivalent unit. (p. 685)
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What is Cost-Volume-Profit (CVP) analysis?
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Planning method that includes predicting the volume of activity, the costs incurred, sales earned, and profits it received. (p. 766)
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What is a CVP chart/graph?
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Graphic representation of cost-volume-profit relations. (p. 774)
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What is contribution margin?
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Sales revenue less total variable costs. (CM= Sales-VC) (p. 772)
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What is the relevant range?
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A company's normal operating range; excludes extremely high and low volumes not likely to occur. (p. 775)
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What is budgeting?
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Process of planning future business actions and expressing them as formal plans. (p. 836)
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What is a master budget?
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A comprehensive business plan that includes specific plans for expected sales, product units to be produced, merchandise (or materials) to be purchased, expenses to be incurred, plant assets to be purchased, and amounts of cash to be borrowed or loans to be repaid as well as budgeted income statement and balance sheet. (p. 840)
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What is an operating budget?
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Budget that consists of the sales budget, purchases budget, selling expenses budget, and general administrative budget. (p. 842)
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What is a production budget?
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Plan that shows the units to be produced each period.(p. 856)
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What is a cash budget?
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Plan that shows expected cash inflows and outflows during the budget period, including receipts from loans needed to maintain a minimum cash balance and repayments of such loans (p. 846)
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What is standard costing?
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Process in which costs are recognized that should be incurred under normal conditions to produce a product or component or to perform a service.(p. 885)
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What is a flexible budget?
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A budget prepared (using actual volume) once a period is complete that helps managers evaluate past performances; uses fixed and variable costs in determining total costs. (p. 882)
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What is responsibility accounting?
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System that provides information that management can use to evaluate the performance of a department's manager (p. 926)
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What is a cost center?
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Department that incurs costs but generates no revenues; common example is the accounting or legal department. (p. 927)
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What is a profit center?
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Business unit that incurs costs and generates revenues. (p. 927)
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What is an investment center?
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Center of which a manager is responsible for revenues, costs, and asset investments. (p. 927)
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What is capital budgeting?
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Process of analyzing alternative long-term investments and deciding which assets to acquire or sell. (p. 998)
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What is payback?
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A time-based measurement used to evaluate the acceptability of an investment; equals the time expected to pass before an investment's net cash flows equal its initial cost. (p. 999)
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What is accounting rate of return?
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Rate used to evaluate the acceptability of an investment; equals the after-tax periodic income from a project divided by the average investment in the asset. ARR= Net Income/Annual Avg. Investment (p. 1001)
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What is the Net present value (NPV) of an investment/
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Dollar estimate of an asset's value that is used to evaluate the acceptability of an investment; NPV= (Net Cash flow X PV factor)- Initial investment. (p. 1003)
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What is Internal Rate of Return (IRR)
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Rate used to evaluate the acceptability of an investment; equals the rate that yields a net present value of zero for an investment. IRR=Capital investment/annual CF. (pp. 1005 & 1006)
