Flashcards
Accounting Chapter 2 Cost Management
Cards in this deck (26)
- 1The Meaning and Uses of Cost - One of the most important tasks of m. accounting is to determine cost of products, services, customers, and other items of interest to managers- We need to understand the meaning of cost and ways in which costs can be used to make decisions, both for small entrepreneurial businesses and large international business.
- 2Cost: the amnt of cash or cash equivalent sacrificed for goods and/or services that are expected to bring a current or future benefit to the orgx
- 3Expenses: costs that are used up in the production of revenues - expired costsx
- 4- Relationship between cost and revenue can be determined by focusing on units sold - PRICE = Revenue/unitX
- 5Accumulating costs: the way that costs are measured and recorded
- 6Assigning costs: the way cost is linked to some cost object
- 7Costs objects: any item such as product, customer, dept, project, geographic region, plant, and so on, for which costs are assigned and measuredx
- 8Direct Costs: can be easily traced to a cost object - relationship can be physically observed - the more cots that can be traced to object, more accurate the cost assignmentx
- 9Indirect Costs: Costs that cannot be easily/accurately traced to a cost object (AKA - overhead/support costs)x
- 10Allocation means that an indirect cost is assigned to cost object by using reasonable and convenient method (estimation process)x
- 11Variable Costs: one that increases in total as output increases and decreases as total output decreasesx
- 12Fixed Costs: does not increase in total as output increases vice versax
- 13Opportunity cost: benefit given up/sacrificed when one alternative is chosen over anotherx
- 14Products: goods produced by converting raw materials through use of labor and indirect manufacturing resources (i.e. manufacturing plant, land, machinery)x
- 15Service Costs: tasks or activities performed for a customer or an activity performed by a customer using an org's products or facilities. (i.e. Insurance, coverage, medical etc.) - intangible, perishable, require direct contact between providers and buyersx
- 16Providing Cost Information: Managerial accountants must decide; - what types of info to provide to managers - how to measure info -when and to whom to communicate infox
- 17M. accountants must follow specific external reporting rules (GAAP) when their companies provide outside parties with cost info about amount of ending inventory on balance sheet and COGS on income statement. - these amounts can be calculated by dividing costs into production and period costsx
- 18Product (manufacturing) costs: those costs, both direct and indirect, of producing a product in manufacturing firm or acquiring a product in a merchandising firm and preparing it for sale- inventoried
- initially added to inventory account and remain until sold - then transferred to COGS
- can be further classified as Direct Materials, Direct labor, and manufacturing overhead - 19Direct Materials: those materials that are a part of the final product - can be directly traced to the goods being producedx
- 20Direct Labor: labor that can be traced to the goods being produced - can physically be measured - employees who convert DM into product are called this - indirect labor is included in overhead and is an indirect cost rather than directx
- 21Manufacturing overhead: all product costs other than direct materials and direct labor - factory burden or indirect manufacturing costs. - costs are included here if not directly traced to cost object of interest (i.e. unit of product) - Contains variety of items such as depreciation, property taxes, utilitiesx
- 22Calculation Total Product Cost Product cost = DM + DL + OHx
- 23Per-unit cost = Total Prod. Cost / # units producedx
- 24Period costs (SGA or GSA): not carried in inventory - all costs that are not product costs - (i.e. costs of office supplies, R&D activities, CEO's salary, advertising) - expensed in period they occur - recorded as asset if expected to provide economic benefit (i.e. revenues) allocated through depreciationx
- 25Selling costs: costs necessary to market, distribute, and service a product or servicex
- 26Administrative Costs: all costs associated with research, development, and general admin of the org that cannot reasonably be assigned to either selling or productionx
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- Flashcards on Accounting Chapter 2 Cost Management, created by Liyah on 14/04/2015.
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- Liyah
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