Fast Track: Chapter 9
—The costs that are assigned to a particular product or segment but that are not actually caused by that product or segment. If a product or segment is dropped, the indirect costs assigned to that product or segment will remain.
Indirect
Assume that Lily Company has total fixed costs of $48,000 for the period. Each unit sells for $40. The variable cost per unit is $24. How many units must be sold to break even?
Answer: 3,000 Break even: $40x - $24x - $48,000 = $0 x = 3,000
What is the first step a business professional should take when confronted with a situation that may involve an ethical conflict?
Answer: All of these are correct
Long-run planning involves which one of the following processes?
Answer: Capital budgeting
The top accountant in most large organizations is usually called the:
Answer: Controller
The first step in management planning is:
Answer: Defining the problem
Costs that are specifically traceable to a unit of business are known as which of the following costs to that unit?
Answer: Direct
Which of the following would NOT be included in manufacturing overhead?
Answer: Direct labor
What is the first step a business professional should take when confronted with a situation that may involve an ethical conflict?
Answer: Discuss the problem with the immediate supervisor.
The cost of milk for an ice cream manufacturer would be considered all of the following EXCEPT:
Answer: Indirect cost
Providing information for planning, controlling, and evaluating is a function of:
Answer: Management accounting
Good management accounting is motivated by:
Answer: Management's desire to improve
Utility expense in a merchandising company would be considered a(n):
Answer: Period cost
The process of making decisions about future operations is called:
Answer: Planning
Miscellaneous materials used by sales managers should be accounted for as:
Answer: Selling expense
Production prioritizing is:
Answer: The continual evaluation of the profitability of the various product lines and divisions.
___________ involves a process of tracking actual performance.
Controlling
—A future cost that can be changed by a decision made now. An example is monthly rent for an apartment.
Differential
—The costs that are created by a particular product or segment that is being analyzed. If a product or segment is dropped, the direct costs created by that product or segment will disappear.
Direct
—The cost of the wages of the workers who are assembling the direct materials into the finished product. In producing an automobile, the direct labor cost is the compensation cost of the auto workers on the assembly line.
Direct labor
—The cost of the primary raw materials used in production. In producing french fries, the direct materials cost is the cost of the potatoes.
Direct materials
involves analyzing results, providing feedback to managers and other employees, rewarding performance, and identifying problems.
Evaluating
Exists to serve the need for organizations to periodically report results to outside investors and lenders in a consistent and comparative manner
Financial Accounting
Is legislated and governed by regulatory agencies and professional institutions
Financial Accounting
Results in only financial data that are public and reported in a consistent manner to investors and creditors
Financial Accounting
Uniform across companies (generally accepted accounting principles) Restricted to financial data Data often made public Used primarily by investors and creditors in deciding whether to provide capital to the company
Financial Accounting:
—A cost that doesn't change based on changes in the level of sales or production. Examples are building rent and executive salaries.
Fixed
Strategic planning Capital budgeting
Long-run planning
Evolves from the best practices of companies working to be competitive
Management Accounting
Exists to serve the competitive needs of organizations working to uniquely serve specific customers in specific markets
Management Accounting
Results in both financial and nonfinancial data that are proprietary (ie., guarded from becoming available to competitors and the general public)
Management Accounting
Unique competitive tool Both financial and nonfinancial data Usually kept secret within the company Used for internal planning, control, and evaluation
Management Accounting:
—All factory costs that are not direct materials or direct labor. Examples are factory supervisor salaries, factory building depreciation, and miscellaneous indirect materials such as glue or screws.
Manufacturing overhead
—The benefits not received because of actions NOT taken. For example, the opportunity cost of going to a basketball game is the increased points that you could have received on the next day's accounting exam if you had spent that time studying.
Opportunity
—Costs that involve the outlay of cash or the use of some other asset (like equipment).
Out-of-pocket
—A cost incurred outside the factory or production facility. These costs are reported as an expense in the period in which they are incurred.
Period
—A cost incurred as part of the production process. Operationally, these are the costs incurred in the factory. These costs are first reported as an asset (inventory) and then as an expense (cost of goods sold) when the product is sold.
Product
Production and process prioritizing Operational budgeting (profit planning)
Short-run planning
—A past cost that cannot be changed by any decision made now. An example would be last month's paid rent.
Sunk
_________, on the other hand, are past costs that cannot be changed as the result of a future decision.
Sunk costs
—A cost that changes directly with changes in the level of sales or production. Examples are materials costs and sales commissions.
Variable
Product cost: manufacturing company
cost of manufacturing the product, including direct materials, direct labor and manufacturing overhead.
Good management accounting is a ______ tool.
competitive
The chief accountant in most organizations is the ._________
controller
Product Cost: Merchandising company
cost incurred in purchasing goods from suppliers
Product cost: service company
cost of providing services, including direct labor and service overhead
Those persons involved with _____ management accounting information will occasionally confront ethical issues inside the organization.
creating
__________ of a decision—sometimes called avoidable costs, incremental costs, or relevant costs—are the future costs that change as a result of that decision
differential costs
The Institute of Management Accountants (IMA) provides guidance on_________ professional practice to help professionals involved in management accounting processes.
ethical