Chapter 1

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Developing short-term actions for managing the day-to-day operations of a company.

operational planning

Selling and administrative expenses incurred in marketing the product, delivering the product, or managing the company and not directly related to manufacturing the product.

period costs

A phase of the management process whereby objectives are outlined and courses of action determined.

planning

The direct materials costs, the direct labor costs, and the applied factory overhead costs that have entered into the manufacturing process but are associated with products that have not been finished.

work in process inventory

Monitoring the operating results of implemented plans and comparing the actual results with expected results

Controlling

Departments within a company that do not develop products but provide services to the various verticals and other horizontals.

Horizontals

The branch of accounting that uses both historical and estimated data in providing information that management uses in conducting daily operations, in planning future operations, and in developing overall business strategies.

Managerial accounting

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

Managerial accounting is not restricted to generally accepted accounting principles, while financial accounting is restricted to GAAP.

For the month of May, Latter Company has beginning finished goods inventory of $50,000, ending finished goods inventory of $35,000, and cost of goods manufactured of $125,000. What is the cost of goods sold for May?

$140,000

Identify the following costs as a prime cost (P), conversion cost (C), or both (B) for an automobile manufacturer: Wages of employees that operate painting equipment

B

Identify the following costs as a prime cost (P), conversion cost (C), or both (B) for an automobile manufacturer: Oil used for assembly line machinery

C

Identify the following costs as a prime cost (P), conversion cost (C), or both (B) for an automobile manufacturer: Wages of the plant manager

C

Direct Labor + Factory Overhead Cost

Conversion Costs Calculation

Beginning FG Inventory + COGM - Ending FG Inventory

Cost of Goods Sold Calculation

Total Manu. + Beginning Work In Prog - Ending Work In Prog

Cost of goods manufactured Calculation

Identify the following costs as direct materials (DM), direct labor (DL), or factory overhead (FO) for an automobile manufacturer: Wages of employees that operate painting equipment

DL

Identify the following costs as direct materials (DM), direct labor (DL), or factory overhead (FO) for an automobile manufacturer: Steel

DM

Inherent in planning, directing, controlling, and improving

Decision making

Which of the following costs would be included as part of the factory overhead costs of a microcomputer manufacturer?

Depreciation of testing equipment

Beginning DM Inventory + Purchases - Ending DM Inventory

Direct Materials Used Calculation

Identify the following costs as direct materials (DM), direct labor (DL), or factory overhead (FO) for an automobile manufacturer: Oil used for assembly line machinery

FO

Identify the following costs as direct materials (DM), direct labor (DL), or factory overhead (FO) for an automobile manufacturer: Wages of the plant manager

FO

The branch of accounting that is concerned with recording transactions using generally accepted accounting principles (GAAP) for a business or other economic unit and with a periodic preparation of various statements from such records.

Financial accounting

Which of the following is not one of the five basic phases of the management process?

Operating

Identify the following costs as a prime cost (P), conversion cost (C), or both (B) for an automobile manufacturer: Steel

P

Identify the following costs as a product cost or a period cost for an automobile manufacturer: Rent on office building

Period cost

Identify the following costs as a product cost or a period cost for an automobile manufacturer: Sales staff salaries

Period cost

Long-range courses of action

Planning

Direct Materials + Direct Labor Cost

Prime Cost Calculation

Identify the following costs as a product cost or a period cost for an automobile manufacturer: Steel

Product cost

Identify the following costs as a product cost or a period cost for an automobile manufacturer: Wages of employees that operate painting equipment

Product cost

Which of the following is not considered a cost of manufacturing a product?

Sales salaries

Direct Materials used + Direct Labor + Manu. OH Costs

Total Manufacturing Cost Calculation

Business units often structured as separate businesses within a parent company that develop products sold directly to consumers.

Verticals

Developed in the planning stage, these reflect the direction and desired outcomes of certain courses of action.

objectives (goals)

The philosophy of continually improving employees, business processes, and products with the objective of eliminating the source of problems and delivering the right products (services) in the right quantities at the right time.

continuous process improvement

The manager of the accounting function of a vertical (business unit).

controller

A phase in the management process that consists of monitoring the operating results of implemented plans and comparing the actual results with the expected results.

controlling

The combination of direct labor and factory overhead costs; in lean accounting, the account in which is accumulated the costs of direct labor and factory overhead.

conversion costs

A sacrifice made to obtain some benefit.

cost

A product, sales territory, department, or activity to which costs are assigned, depending on the decision-making needs of management.

cost object

The total cost of making and finishing a product.

cost of goods manufactured

The cost of merchandise sold recognized as an expense; the cost of finished goods available for sale minus the ending finished goods inventory.

cost of goods sold

Choosing among alternative actions; a component inherent in the other management processes of planning, directing, controlling, and improving.

decision making

Costs that are identified with and traced to a cost object.

direct costs

The wages of factory workers who are directly involved in converting materials into a finished product.

direct labor cost

The cost of materials that are an integral part of the finished product.

direct materials cost

The process by which managers, given their assigned level of responsibilities, run day-to-day operations.

directing

Another term for manufacturing overhead or factory overhead.

factory burden

All of the costs of producing a product except for direct materials and direct labor.

factory overhead cost

Measures provided to operational employees or managers on the performance of subunits of the organization. These measures are used by employees to adjust a process or a behavior to achieve goals.

feedback

The direct materials costs, direct labor costs, and factory overhead costs of finished products that have not been sold.

finished goods inventory

Costs that are not identified with or traced to a cost object.

indirect costs

The philosophy of controlling by comparing actual and expected results and isolating areas for further investigation and possible remedial action.

management by exception

Planning Directing Controlling Improving Decision making

management process

Costs, other than direct materials and direct labor costs, that are incurred in the manufacturing process.

manufacturing overhead

The cost of materials that have not yet entered into the manufacturing process.

materials inventory

The combination of direct materials and direct labor costs.

prime costs

The three components of manufacturing cost: direct materials, direct labor, and factory overhead costs.

product costs

A statement prepared by manufacturing companies that summarizes the cost of goods manufactured during the period.

statement of cost of goods manufactured

Developing long-term actions to achieve a company's objectives.

strategic planning

Planned long-term actions by which business goals and objectives will be achieved.

strategies

A measure of the use of a fixed asset in serving customers relative to the asset's capacity.

utilization rate


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