Term
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Definition
| Philosophy, an attitude, and a set of techniques to create more value at a lower cost. |
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Term
| A cost management system is : |
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Definition
| the set of cost management techniques that function together to support the organizations goals and activities. |
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Term
| unethical behavior can lead to: |
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Definition
| wasted resources, lost time, ruined reputations, and legal penalties. |
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Term
| Individuals can be pressured to misstate financial information or results regarding strategic decisions because of: |
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Definition
bias from personal committment to a decision.
fear of loss of prestige, position, or compensation from a failed strategy, greed and intentional behavior to defraud an organization or its stakeholders. |
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Term
| Cost management analysts can subscribe to the code of ethics developed by: |
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Definition
| IMA- Institute of management accountants. |
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Term
| SOX does what two things for cost management? |
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Definition
1) Makes CEO/ CFO sign off on their companies financial statement indicating they did not omit information.
2) CEO/ CFO must indicate that they are responsible for the company's system of internal controls over financial reporting. |
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Term
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Definition
A process designed to provide reasonable assurance that an organization will achieve its objectives in the following categories:
- effectiveness and efficiency of operations.
- Reliability of financial reporting.
- compliance with applicable laws and regulations.
Ex: Setting limits on expenditures, requiring mgmt authorization, reconciling various sets of books, prohibiting particular behaviors, rotating personnel and requiring employees to take vacations. |
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Term
| Internal auditors do what? |
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Definition
play two roles, consultants, and watchdogs.
- first defense against fraud.
- report to a level higher than the controller. |
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Term
| An organizations strategy is: |
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Definition
| overall plan or policy to achieve its goals. |
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Term
| To develop a strategy, managers answer what two questions? |
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Definition
1) Where do we want to go?
2) How do we want to get there? |
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Term
| Strategic decision making determines: |
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Definition
| "where" and how by choosing and implementing actions that will affect an organizations future abilities to achieve its goals. |
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Term
| The four common types of strategic missions are: |
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Definition
Build- ( growth, market potential high, important to early entrance, focus on capturing market share)
Hold-( Need to maintain high growth, market continuing, need to be a major player, focus on protecting market share)
Harvest- ( need to maintain cash flow, mature market, need to maintain volume, focus on cutting costs)
Divest- ( need to exit at lower costs, market declining or bad fit, need to minimize losses, focus on finding buyer quickly) |
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Term
| Finding the best route can be more successful when managers: |
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Definition
1) understand sources and threats to competitive advantages,
2) use effective decision making technqiues. |
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Term
| A competitive advantage is: |
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Definition
| a resource, process, or value chain that enables the organization to provide more value, perhaps at a lower cost, than its competitors. |
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Term
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Definition
| Is a related set of tasks, manual or automated that transforms inputs into identifiable outputs. |
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Term
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Definition
| the relation of an organizations processes that links ideas, resources, suppliers, and customers; a competitive value chain does so in a superior way. |
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Term
| Each part of the value chain should focus on: |
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Definition
| improving customer value. |
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Term
| Organizations can find competitive advantages by: |
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Definition
1) Creating new knowledge
2) imitating other's ideas and implementing them in a superior way. |
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Term
| 3 basic ways to use resources to create a competitive advantage: |
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Definition
1) Low cost production
2) Product differentiation
3) Market focus. |
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Term
| The porters five forces model is: |
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Definition
| existing competitors, customers, new competitors, suppliers, substitutes. |
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Term
| What are the eight elements of leading and managing change? |
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Definition
1) Identify need for change.
2) create team to lead and manage.
3) Create vision of the change and a strategy for achieving the vision.
4) communicate the vision and strategy
5) Encourage innovation
6) ensure that short term achievments are frequent and obvious.
7) use successes to create opportunities for improvement in the entire organization.
8) reinforce a culture of more improvement, better leadership, and more effective mgmt. |
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Term
| What are two ways to evaluate a plans success or failure? |
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Definition
1) operational performance analysis.
2) Strategic performance analysis. |
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Term
| Benefit cost analysis measures: |
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Definition
| the effects of a plan by comparing its expected benefits and costs, which can be quantitative or qualitative. |
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Term
| the explosion in technology we are experiencing, coupled with increasing worldwide competition is forcing organizations to produce: |
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Definition
| high quality goods and services and do so at the lowest possible cost. |
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Term
| What are the five distribution channels of a value chain? |
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Definition
| Design, supply, production, marketing, distribution, customer service. |
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Term
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Definition
| the sacrifice made, usually measured in the resources given up, to achieve a particular purpose. |
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Term
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Definition
| the cost incurred when an asset is used up or sold for the purpose of generating revenues. |
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Term
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Definition
| a cost assigned to goods that were either purchased or manufactured for resale; it is used to value the inventory of manufactured goods or merchandise until the goods are sold. |
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Term
| In the period of the sale, the product costs are recognized as an expense called: |
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Definition
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Term
| Any cost that is not a product cost is a: |
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Definition
| period costs, these costs are identified with the period of time in which they are inccured rather than with units of purchased or produced goods. they are not included in the cost of inventory. |
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Term
| What are the main elements of an income statement for a retailer. |
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Definition
Sales Revenue
-COGS =
Gross Margin
- S and A =
Operating profit |
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Term
| What does a basic cost of goods sold chart look like? |
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Definition
Beg Inv
+ Cost of good sold purchased ( freight in)
= Total cost of goods purchased
Cost of goods available for sale
- cost of goods in ending inventory
= cost of goods sold |
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Term
| What are the three main categories of manufacturing costs? |
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Definition
1) Direct Materials: resources such as raw materials, parts, and components that one can feasibly observe being used to make a product.
2) Direct labor: the cost of compensating employees who transform direct materials into a finished product.
3) Manufacturing overhead : includes all other costs of transforming materials into a finished product.
- indirect material costs includes all materials that are not part of the finished product but are necessary to manufacture it, or part of the finished product but are insignificant in cost.
- Indirect labor costs consists of the wages of the employees who do not work directly on the product yet are required for the manufacturing facility's operations. |
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Term
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Definition
| are direct costs, namely the costs of direct material and direct labor. |
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Term
| What are conversion costs? |
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Definition
| costs incurred to convert direct materials into the final product, namely, costs for direct labor and manufacturing overhead. |
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Term
| What are two nonmanufacturing costs: |
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Definition
| selling costs, and administrative costs. |
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Term
| Manufacturing organizations use cost accounting systems in three production stages, what are these three production stages? |
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Definition
1) Raw Material- material not yet been put into production
2) WIP- partially completed products.
3) FG- products ready for sale. |
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Term
| How do manufacturing costs flow? |
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Definition
WIP->FG->COGS
WIP= DM+DL=OH |
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Term
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Definition
| a characteristic of an activity or event that causes that activity or event to incur costs. |
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Term
| What are fixed and variable costs? |
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Definition
variable costs - change in total proportion to a change in the activity volume.
fixed costs remain unchanged in total as the volume of activity changes. |
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Term
| What is the relevant range? |
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Definition
| range of activity over which the company expects to operate |
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Term
| As the units produced goes up, what happens to the unit fixed cost? |
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Definition
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Term
| What are unit level costs? |
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Definition
| are incurred for every unit of product manufactured or service produced. |
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Term
| What are batch level costs? |
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Definition
| are incured for every batch of product or service produced. |
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Term
| What are product level costs? |
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Definition
| are incurred for each line of product or service. |
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Term
| What are customer level costs? |
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Definition
| costs incurred for specific customers. |
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Term
| What are facility level ( or general operations level ) costs? |
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Definition
| are incurred to maintain the organizations overall facility and infrastructure. |
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Term
| What is a committed cost? |
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Definition
| a cost for which management has taken actions that result in some level of commitment to incur the costs. ex: Labor cost |
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Term
| What are opportunity costs? |
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Definition
| What you give up to recieve a certain benefit. ie; college. |
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Term
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Definition
| Past payments for resources that cannot be changed by any current or future decision. |
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Term
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Definition
| a direct cost of an object is traceable to that cost object. |
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Term
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Definition
| an indirect cost of a cost object is not feasibly traceable to that cost object. also known as overhead, common costs, and burden |
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Term
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Definition
| is any entity to which a cost is assigned. For example, a decision, a unit of inventory, a department, or product line. |
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Term
| What is a controllable cost? |
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Definition
| If a manager can control or heavily influence the level of a cost, that cost is classified as a controllable cost of that manager. |
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Term
| What are absorption or full costing? |
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Definition
| applies all manufacturing overhead costs to manfactured goods along with direct material and direct labor costs. |
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Term
| What is variable or direct costing? |
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Definition
| applies only variable manufacturing overhead to manufactured goods as a product cost along with direct material and direct labor costs. |
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Term
| The biggest difference between absorbtion and variable costing is: |
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Definition
| absorbtion applies all manufacturing overhead, while variable only applies variable manufacturing overhead. |
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Term
| What is the shortcut to reconciling income? |
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Definition
| Difference in fixed overhead expensed under absorbtion and variable costing = change in inventory units x fixed overhead rate per unit. |
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Term
| Absorbtion costing is generally used where? |
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Definition
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Term
| What is throughput costing? |
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Definition
| assigns only the unit level spending for direct costs as the cost of products or services. |
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Term
| What is job order costing? |
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Definition
| treats each individual job as the unit of output and assigns costs to it as it uses resources. |
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Term
| What is a product costing system? |
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Definition
| accumulates the costs of a production process and assigns them to the products or services that contitute the organizations output. |
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Term
| Why is job order costing important? |
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Definition
| it is important for both pricing and cost management. Businesses must be able to estimate costs accurately if they are to be competitive and profitable. |
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Term
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Definition
| Treats all units processed during a time period as the output to be costed and does not separate and record costs for each unit produced. |
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Term
| Job order costing is appropriate for which production processes? |
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Definition
1) each unit or batch of products is distinct and clearly distinguishable from other products.
2) each unit is of relatively high value, which makes the benefits of separately assigning production costs worth the cost of doing so.
3) Each unit or batch of products is often priced differently, frequentyl in accordance with a bidding process.
4) Each unit or batch of products can feasibly have its direct costs traced. |
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Term
| Process costing is appropriate for: |
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Definition
Units of output that are relatively homogeneous and indistinguishable from one another.
individual product units that are relatively low value.
individual product units for which it is not feasible to trace direct costs. |
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Term
| What is operation costing? |
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Definition
| a hybrid of job order and process costing used when companies produce large batches of similiar products in which significantly different types of materials are used. ie cotton and wool shirts. |
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Term
| What is the cost flow formula? |
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Definition
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Term
| What is the job cost record? |
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Definition
| records the costs of all production related resources used on the job to date. |
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Term
| Transfers in to WIP include: |
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Definition
| Direct material, direct labor, and manufacturing overhead costs. |
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Term
| How would you record a purchase of RM inventory? |
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Definition
| Debit RM, Credit AP or Cash |
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Term
| What is the journal entry to record the transfer of the costs from the raw material to the WIP? |
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Definition
Dr WIP inv
Cr RM inventory |
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Term
| What is a predetermined overhead rate? |
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Definition
| the budgeted manufacturing overhead divided by the cost driver. |
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Term
| process costing does what? |
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Definition
| treats all units processed during a time period as the output to be costed and does not separate and record costs for each unit produced. |
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Term
| Job shops record costs for: |
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Definition
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Term
| Why is process costing useful? |
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Definition
| The costs assigned to products are commonly used to help set prices, particularly in periods of severe competition or ecnomic downturn. Product costs also are used to identify which products appear to be too costly and need to be redesigned or dropped. |
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Term
| What are conversion costs? |
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Definition
| include direct labor and manufacturing overhead. They can be applied to all levels of the cost hierarchy system. For example, temporary labor is typically a unit level conversion costs, and machine setup is an example of a batch level cost. |
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Term
| What are equivalent units? |
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Definition
| represent the amount of work actually performed on products not yet complete translated to the work required to complete an equal number of whole units. |
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Term
| What is the production cost report? |
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Definition
| summarizes the production and cost results for a period. |
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Term
| What is the production cost report? |
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Definition
| summarizes the production and cost results for a period. |
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