Accounting CH 1

Sustainability accounting

Aimed to provide managers with broader set of info to meet needs of multiple stakeholders, with goal to ensure company's long term survival in uncertain & resource constrained world

Which of the following statements best describes the difference between financial accounting and managerial accounting?

Managerial accounting tends to focus on relevant, subjective, and future-oriented information while financial accounting relies primarily on objective, reliable, and historical information.

Conversion costs

Sum of direct labor & manufacturing overhead. Total cost incurred to convert direct materials into finished product

Prime costs

Sum of direct materials & direct labor represents cost that can be directly traced to product

Triple bottom line

Tool used to measure performance of society, economy, environment or people, profit, and planet

Which type of cost changes in total, in direct proportion to changes in activity level?

Variable

Opportunity costs

benefit that you forgo when you select one alternative over another

To calculate total manufacturing costs you?

cannot add prime costs to conversion costs

Product costs

costs that are attached to the product as it is produced and included in inventory until the product is sold

Period costs

costs that are expensed in the period they are incurred

Manufacturing costs

costs that are incurred while making a physical product, such as direct materials, direct labor, and manufacturing overhead

Nonmanufacturing costs

costs that are not related to producing a product, such as selling administrative costs

Direct costs

costs that can be directly and conveniently traced to a specific cost object

Indirect costs

costs that cannot be directly or conveniently traced to a specific cost object

Variable costs

costs that change in total in direct proportion to a change in activity level

Sunk costs

costs that have already been incurred and thus are not relevant to future decisions

Out-of-Pocket costs

costs that involve an outlay of cash for items such as rent, utilities, and salaries

Fixed Cost

costs that remain the same in total regardless of activity level

A laptop computer manufacturer would consider the computers processor chip to be what type of cost?

direct material

General and administrative expenses include?

general management salaries and legal department

Period costs are expensed?

in period in which they occur

Direct materials and direct labor are both?

manufacturing costs

Factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as?

manufacturing overhead

The distinction between manufacturing and non manufacturing costs applies?

only to companies that make a physical product

What type of cost is irrelevant and should be disregarded when making decisions?

sunk cost