ACC 241 Exam 1
IMA (Institute of Management Accountants
A forum for research, practice development, education, knowledge sharing, and the advocacy of the highest ethical and best business practices in management accounting and finance.
Cost of quality reporting
A report that details appraisal cost, prevention cost, internal failure cost, and external failure cost.
Just-in-time inventory system
An inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs.
Cost Objects
Anything for which cost data is desired by a manager, e.g., products, product lines, customers, jobs, and organizational sub-units such as departments or divisions of a company.
Controllable Costs vs Uncontrollable Costs
CC - Expenditures that are subject to the discretion of a manager and, hence, can be kept within predefined limits. UC -
Certified Management Accountant
CMA
Cost of quality categories (prevention, appraisal internal failure, external failure)
CofQ, p - avoiding producing low quality
Ethical decision-making framework
IMA's Statement of Ethical Professional Practice: Maintain professional competence, preserve confidentiality of info they handle, uphold integrity & perform duties with integrity.
Relevant Costs vs Irrelevant Costs
R - Are considered when allocating a price IR - are unnecessary when allocating price
Value Chain
Research&Development, Production, Distribution, Marketing, Design & Customer Service
Purpose and major provisions of the Sarbanes-Oxley
Restore trust in publicly traded corporations, their management, their financial statements, & their auditors.
Service, merchandising and manufacturing companies & their inventories
S - sell intangible things (medicare, coaching) generally don't have inventory Me - Like Walmart resell tangible products. Have inventory and incur inventory related costs (ads, travel) Ma - use labor, plant, and equipment to convert raw materials into a product. Like car companies. Have Raw materials inventory, work in process inventory, & finished goods inventory.
Shortened set up time and manufacturing time
ST - companies are more flexible in scheduling production MT - Competitive weapon in markets. Shorter production protects companies who have cheaper competing companies over seas
Controller (comptroller)
The chief accountant in a company or government. The controller is the head of the accounting department and is responsible for financial and managerial accounting.
Indications the old system is outdated
The company has diversified its product offerings since the allocation system was developed. They have re engineered their production process but hasn't changed their accounting system to account for it.
Employee cross-training
boosts moral, lowers costs, and creates a flexible and versatile workforce.
Supply-chain management
exchange of information between suppliers and customers to reduce costs, improve quality, and speed delivery of goods and services from the companies suppliers, through the company itself, and and on to the companys end cutomers.
Steps used to determine and use activity-based cost allocation rates
i. Activity selection and overhead cost pool estimation ii. Allocation base selection and estimation of usage iii. Calculation of activity cost allocation rates iv. Allocation of manufacturing overhead to individual jobs
Journal entries related to job costing
i. Purchase of raw materials ii. Use of direct and indirect materials iii. Use of direct and indirect labor iv. Incurring other manufacturing overhead costsAllocation of manufacturing overhead vi. Completion of jobs vii. Sale of units viii. Incurring operating expenses ix. Disposing of under / over applied manufacturing overhead.
Skills of management accountants
in order to become a certified management accountant, one must pass a series of tests sponsored by the Institute of Management Accountants. These tests examine one's knowledge in four subjects: business analysis, management accounting and reporting, strategic management, and business applications.
Small batch sizes
key element of lean production. customer response time can be reduced as batch size is reduced
Self-contained manufacturing cells
minimize the time and cost of physically moving parts from across the factory to different departments
financial accounting
produces annual and quarterly consolidated financial statements that will be used by investors and creditors to make investment and lending decisions. Must follow GAAP (Generally Accepted Accounting Principles)
Job cost system documents
production plan, bill of materials, raw materials, record, job cost record, materials requisition
Inventory flow
raw materials to work-in-process to finished goods
Activity-based management
refers to using activity-based cost info to make decisions that increase profits while satisfying customers needs
Adopting ABC or ABM
Get more precise product costs for product mix decisions and pricing. But get greater benefits from ABM cause pinpointed opportunities to cut costs.
Institute of Management Accountants
IMA
Direct Costs
A cost that can be directly related to producing specific goods or performing a specific service.
Inventoriable Costs (Direct Material, Direct Labor, and Manufacturing Overhead)
All costs of a product that are recorded as an asset (inventory) under US GAAP (direct materials, direct labor and manufacturing overhead). These costs are not expensed until the related product is sold.
Sustainability Pillars
Economics, Social, Environmental
Period Costs
Expenses recognized as costs in the period in which they were incurred; often referred to as operating expenses, or selling, general and administrative expenses.
Fixed Costs vs Variable Costs
FC - A cost that does not vary depending on production or sales levels, such as rent, property tax, insurance, or interest expense. VC - A cost that is directly proportional to the volume of output produced.
ISO 9001:2008
International Organization of Standardization (163 countries)
Value-chain
Linked set of all value-creating processes or activities that convert basic input materials into products or services for the final consumer.
Indications that an old system is distorting costs
Managers win bid they expected to lose and lose bids they expected to win. Competitors with similar high volume products price their products below the companies costs but still earn good profit. Employees do not believe the cost numbers reported by the accounting system.
Indirect Costs
Manufacturing cost that cannot be easily seen in the product. Electricity, hazard insurance on the factory building, and real estate taxes are examples of indirect costs.
Quality emphasis
No back up products to give customers in the mean time so doing it right the first time is key
Cost distortion
Overcosting some products while undercosting others. Occurs when indirect costs are allocated with cost drivers that do not relate well to the actual incurrence of those costs.
Process Costing vs Job Costing
PC - The process of allocating costs to products by averaging costs over large numbers of identical products that pass through a series of uniform production steps. JC - A system used for assigning costs to products or services that differ in the amount of materials, labor and overhead required. Typically used by manufacturers that produce unique or custom- ordered products in small batches.
Prime Costs vs Conversion Costs
PC - The sum of direct material and direct labor costs. CC - The combined total of direct labor cost and manufacturing overhead incurred in processing raw materials to a finished state.
Primary responsibilities of a manager
Planning - setting goals for company and determining how to achieve them Directing - overseeing companies day to day operation Controlling - evaluating results of the business operation against the plan and making adjustments to keep company pressing towards goal Evaluating
Value-added versus non-value-added activities
V - Activities for which a customer is willing to pay because they add value to the final product or service. NV - Activities that do not contribute to the product or the process and should therefore be eliminated. Non-value added activities include expediting, waiting, moving, counting, scheduling, and queue time.
management accounting
specializes in the study of how managers use accounting and/or financial information in current or future business decisions. Management accountants use both qualitative and quantitative information in their work. Unlike other accountants, they primarily report to the internal management of a company, rather than to an external body like shareholders or tax collection agencies.
Manufacturing cycle times
the time that elapses between the start of production and the products completion
Elements of the cost hierarchy
unit, batch, product and facility level activities