CMA (Certified Management Accountant)

Cost pools

Account into which variety of similar costs elements w/common cause are accumulated. Indirect costs are often collected in cost pools. Man.OH is an example

Imputed Cost

An imputed cost does not entail any dollar outlay but is relevant to the decision-making process.

Direct Costs

Associated directly with a particular cost object, traceable

Avoidable costs

Avoidable costs are those that may be eliminated by not engaging in an activity or by performing it more efficiently.

Total manufacturing costs

Beginning direct materials inventory Add: purchases less: purchase returns add: transportation-in = total direct materials available less: ending direct materials inventory =direct materials used add: direct labor add: factory OH (% of labor) =COGM

Cost of Goods Manufactured

Beginning work-in-process inventory $xx add: total manufacturing costs xx less: ending work-in-process inventory (xx) Cost of goods manufactured $xx

Committed Costs

Committed costs are those for which management has made a long-term commitment. They typically result when a firm holds fixed assets. Examples include long-term lease payments and depreciation. Committed costs are typically fixed costs.

Credibility

Communicate information fairly and objectively

Cost of goods sold calculation (manufacturing)

Cost of goods manufactured + Beginning finished goods inventory - ending inventory of finished goods = COGS

Carrying Costs

Costs of holding or story inventory. Ex: capital, insurance, warehousing, breakage, absolescence

Prime costs

Direct (raw) materials plus direct labor

Conversion Costs

Direct labor plus manufacturing OH

Discretionary costs

Discretionary costs refer to fixed costs that are not absolutely necessary to operate in the current period. The level of these costs is subject to a decision made by management each period. A key characteristic of discretionary costs is that there is no clearly measurable relationship between input (the costs) and output. Advertising is a good example of a discretionary fixed cost.

Cost object

Entity to which costs can be attached.

Competence

Expertise in performance of member's duties

Manufacturing OH consists of

Indirect materials, indirect labor and factory op costs

Process Costing

Like products that are mass produced should be accounted for using process costing techniques to assign costs to products. Costs are accumulated by departments or cost centers rather than by jobs, work-in-process is stated in terms of equivalent units, and unit costs are established on a departmental basis. Process costing is an averaging process that calculates the average cost of all units.

Manufacturing costs defined

Manufacturing costs consist of direct materials, direct labor, and manufacturing overhead.

Process Costing

Mass produced/same items

Calculate purchases in a period

Materials used - BI + EI

Confidentiality

Members not to share or divulge info gained during the course of their duties unless legally or professionally required to do so.

Variable Costing (direct costing)

Only VARIABLE manufacturing costs are capitalized as product costs. Period costs are variable S&A, fixed production and S&A costs. Internal reporting

Opportunity costs

Opportunity cost, also called implicit cost, is the maximum benefit forgone by using a scarce resource for a given purpose and not for the next-best alternative.

Absorption Costing

Product costs are direct materials, direct labor, variable AND fixed OH. Period costs are S&A costs. External reporting

Cost of Goods Manufactured calculation

Sales Less: gross profit =Cost of goods sold Add: ending finished goods =Goods available for sale Less: beginning finished goods =Cost of goods manufactured

Standard Costs

Standard costs are predetermined, attainable unit costs. Standard cost systems isolate deviations (variances) of actual from expected costs. One advantage of standard costs is that they facilitate flexible budgeting. Accordingly, standard and budgeted costs should not differ when standards are currently attainable. However, in practice, budgeted (estimated actual) costs may differ from standard costs when operating conditions are not expected to reflect those anticipated when the standards were developed.

Standard Costing

System designed to alert mngmt when actual costs of production differ significantly from target (standard) costs ( predetermined, attainable costs)

Indirect costs

Tangible inputs to manufacturing process that cannot be traced to product. 1 of 3 components of manufacturing OH besides indirect labor and factory OH costs, must be allocated to object.

Target Costing

Target costing begins with a target price, which is the expected market price given the company's knowledge of its customers and competitors. Subtracting the unit target profit margin determines the long-term target cost. If this cost is lower than the full cost, the company may need to adopt comprehensive cost-cutting measures.

Carrying costs

The costs of holding or storing inventory are carrying costs. Examples include the costs of capital, insurance, warehousing, breakage, and obsolescence.

Variable cost within the relevant range

Variable cost per unit remains constant in the short run regardless of the level of production.

Integrity

Which requires members to avoid actual and report potential conflicts of interest

Cost driver

basis used to assign costs to a cost object. the cause of the cost.

Product costs

capitilized as part of finished goods inventory. Component of COGS

Mixed (semivariable) costs

combine fixed and variable elements. high-low method used to seperate fixed and variable elements

Marginal cost

cost incurred by one-unit increase in activity level of particular cost driver. remains constant across relevant range.

Relevant Range

defines limits within which per-unit variable costs remain constant and fixed costs are not changeable. Synonymous with short run.

Costs of manufacturing include

direct materials, direct labor and manufacturing OH

Period Costs

expensed as incurred. Excluded from COGS and not capitalized in finished goods inventory

Job-order costing

for manufacturing customized products

Fixed costs in total/per unit

in total - remain unchanged in short run regardless of production level. per unit - varies indirectly w/activity level

Cost drivers

measure of activity, such as direct labor hours, machine hours, beds occupied, computer time used, flight hours, miles driven, or contracts, that is a causal factor in the incurrence of cost to an entity

Variable cost per unit/in total

per unit -remains constant in short run regardless of level pf production. in total - vary directly/proportionally with changes in volume

Life-cycle costing

track product's lifetime costs

Activity based costing (ABC)

when OH is high proportion of total cost