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
