Managerial Accounting

3 guidelines that help management accountants provide the most value to managers

(1) Employ a​ cost-benefit approach,​ (2) Recognize behavioral and technical​ considerations, and​ (3) Apply the​ "different costs for different purposes" notion

How can a company with multiple products compute its breakeven​ point?

The breakeven point can be computed by assuming there is a constant sales mix of products at different levels of total revenue

In CVP​ analysis, gross margin is a​ less-useful concept than contribution​ margin

gross margin calculations emphasize the distinction between manufacturing and nonmanufacturing costs. Contribution margin calculations emphasize the distinction between fixed and variable costs.​ Hence, contribution margin is a more useful concept than gross margin in CVP analysis

5 step decision making process

1) Identifying the problem and​ uncertainties, (2) Obtaining​ information, (3) Making predictions about the​ future, (4) Making decisions by choosing among​ alternatives, and​ (5) Implementing the​ decision, evaluating performance and learning.

example of how a manager can decrease variable costs while increasing fixed costs

Changing a sales force compensation plan from a percent of sales dollars to a fixed salary.

what are three types of inventory that manufacturing companies hold?

Direct​ materials, work-in-process, and finished goods

T/F) management accounting has to comply with the generally accepted accounting principles

F

what organization supports the growth and professionalism of management accounting practice?

IMA

does management accounting only deal with costs?

No. It also measures, analyzes, and reports financial and​ non-financial information that helps managers define the​ organization's goals, and make decisions to fulfill them

How does an increase in the income tax rate affect the breakeven​ point?

TRICK QUESTION. An increase in the income tax rate does not affect the breakeven point.

Why must unit costs often be interpreted with​ caution?

Unit costs are computed by dividing some amount of total costs by the related number of units. In many​ cases, the total costs include a fixed cost that will not change despite changes in the number of units.​ Therefore, it can be misleading to multiply the unit cost by activity or volume change to predict changes in total costs at different activity or volume levels.

period costs

all costs in the income statement other than cost of goods sold and are treated as expenses of the accounting period in which they are incurred because they are expected to not benefit future periods

inventorial costs

all costs of a product that are considered as assets in the balance sheet when they are incurred and that become cost of goods sold when the product is sold.

indirect costs

are related to the particular cost object but cannot be traced to that cost object in a​ cost-effective way

cost driver

a​ variable, such as the level of activity or​ volume, which causally affects total costs over a given time span

What four areas of ethical conduct are set forth by the IMA

competence, confidentiality, integrity, credibility

Planning decisions

focus on selecting organization​ goals, predicting results under various alternative ways of achieving those​ goals, deciding how to attain the desired​ goals, and communicating the goals and how to attain them to the entire organization

control decisions

focus on taking actions that implement the planning​ decisions, deciding how to evaluate​ performance, and what related feedback to provide that will help future decision making

determining if a cost is direct or indirect

materiality of the​ cost, available​ information-gathering technology, and design of operations

What are three common features of cost accounting and cost​ management?

obtaining information for planning and control and performance evaluation, calculating the cost of products, services, and other cost objects, and analyzing the relevant information for making decisions

Direct costs

related to the particular cost object and can be traced to that cost object in a​ cost-effective way

Business functions in the value chain

research and development, design of products, services or processes, production, marketing, distribution, customer service

relevant range

the band of normal activity level or volume in which there is a specific relationship between the level of activity or volume and the cost in question