Flashcards

Cost Exam 1

cat kim English 43 cards

Cards in this deck (43)

11: Management Accounting Information:D
2What is financial accounting?Financial accounting focuses on reporting financial information to external parties such as investors, government agencies, banks, and suppliers based on Generally Accepted Accounting Principles (GAAP); affects managers’ decisions and actions is through compensation
3What is management accounting?Management accounting is the process of measuring, analyzing, and reporting financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization. Managers use management accounting information to develop, communicate, and implement strategies; coordinate design, operations, and marketing decisions and evaluate a company’s performance. Do NOT follow GAAP
4What is cost accounting?the process of measuring, analyzing, and reporting financial and nonfinancial information related to the costs of acquiring or using resources in an organization. For example, calculating the cost of a product is a cost accounting function that meets both the financial accountant’s inventory-valuation needs and the management accountant’s decision-making needs (such as deciding how to price products and choosing which products to promote)
5What is cost management?describe the activities managers undertake to use resources in a way that increases a product’s value to customers and achieves an organization’s goals.
6Management accountant strategic decisions:D
7What is strategy?specifies how the organization matches its own capabilities with the opportunities in the marketplace. In other words, strategy describes the integrated set of choices an organization makes to create value for its customers while distinguishing itself from its competitors.
8What are the two broad strategies company follow?1. Cost leadership strategy: providing quality products or services at low prices
2. Product differentiation strategy: generate profit by offering differentiated or unique products or services (priced higher)
9What is strategic cost management?describes cost management that specifically focuses on strategic issues
10Questions that help managers formulate strategy1. Who are our most important customers? / What critical capability do we have to be competitive and deliver value to our customers?
2. Bargaining power of customers?
3. Bargaining power of our suppliers?
4. Substitute product?
5. Do we have enough cash or do we need more to fund the strategy?
11What is a value chain?sequence of business functions by which a product (including a service) is made progressively more useful to customers
12Primary Business Functions Definitions Secondary business functions?1. research and development: generating and experimenting with ideas related to new products, services, or processes.
2. Design of products and processes: detailed planning, engineering, and testing of products and processes.
3. Production: procuring, transporting, and storing (“inbound logistics”) and coordinating and assembling (“operations”) resources to produce a product or deliver a service.
4. Marketing (incl. sales): promoting and selling products or services to customers or prospective customers.
5. Distribution: processing orders and shipping products or delivering services to customers (“outbound logistics”).
6. Customer Services: providing after-sales service to customers.
Administration, IT, HR, and Procurement
13What is CRM?strategy that integrates people and technology in all business functions to deepen relationships with customers, partners, and distributors.
14What is supply chain?describes the flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers, regardless of whether those activities occur in one organization or in multiple organizations.
15Concepts for the Standards of Ethical onduct1. Competence: have some amount of expertise and leadership. follow the law, have information that is accurate, clear, and timely
2. Confidentiality: keep information confidential, inform all relevant parties, refrain using info for illegal reasons
3. Integrity: mitigate actual conflicts of interest, refrain by actions that would could prejudice carrying out duties ethically, do not discredit profession, positive ethical culture
4. Credibility: report info fairly and objectively, provide relevant info, report any delays, communicate professional limitations of a performance
16Chapter 2:D
17What are fixed costs?remains unchanged in its total level for a given time period, despite wide changes in the volume, or number of units achieved, of the cost object.
18What is a variable cost?changes in its total level in proportion to changes in the volume, or number of units achieved, of the cost object.
19What is a direct cost?directly related to the particular cost object and can easily and unambiguously be traced to it.
i.e. cost of steel or tires of a car
20What are indirect costs?they cannot easily and unambiguously be traced to it.
i.e. salaries of plant administrators who oversee the manufacturing
21What is a cost driver?is a metric, such as the amount or volume of something or the level of an activity, that causally affects the level of a cost over a given time span.
i.e. miles driven by trucks to deliver products is a COST driver of distribution costs
22(Total Manufacturing Costs)/(Number of units manufactured)= Unit Cost
23What does COGS consist of?ALL manufacturing costs (direct materials, direct labor, manufacturing overhead costs incurred to produce them)
24What is COGM? How to Calculate it?the cost of goods brought to completion during the period, regardless of whether they were started before or during the current accounting period.
25How to calculate Direct Materials AND Total Total Manufacturing Costs?
26How to calculate period costs?all costs in the income statement other than cost of goods sold. Period costs, such as design costs, marketing, distribution, and customer service costs, are treated as expenses of the accounting period in which they are incurred because managers expect these costs to increase revenues in only that period and not in future periods.
Revenues - COGS = Gross Margin - Period Costs = Operating Income
27Chapter 10:D
28What is a cost function?Mathematical description of how a cost changes with changes in the level of activity related to that cost
x-axis: activity/cost driver
y-axis: total costs
(LINEAR)
the variations in the activity explain variations in the total costs and cost behaviors is estimated by linear cost function within relevant range
29Linear Cost Functiony= a + bX
y=dependent variable
a= fixed costs
b=variable cost per unit
X=independent variable
30What is regression analysis?the statistical method that measures the average amount of change in the dependent variable associated with a unit change in one or more independent variables. More accurate than high-low method because it uses ALL observations and NOT just 2
31What does R^2 mean?Coefficient of determination
measures of the goodness of fit that ranges from 0 to 1 (perfect explanatory power)
32How to calculate using the high/low method?1. Slope coefficient = (difference in the y)/(difference in the x) = b
2. Plug in the x with either the high OR low x and y
3. highest y - (slope x highest x) = Fixed Costs
33Chapter 3:D
34What is CVP Analysis? and Why do we do it ?(COST-VOLUME-PROFIT)
Examines the behavior of total revenues, total costs, and operating income as changes occur in the number of units sold, the selling price, the variable cost per unit, or the fixed costs of a product
Managers use it find out:
1. How many units must we sell to break even?
2. How much does income increase if we install a new machine to reduce labor costs?
3. What is the change in income if I reduce selling prices to increase sales volume?
3. What sales volume is needed to earn a target income?
35What is the contribution margin income statement?income statement that groups cost into variable costs and fixed costs to highlight the contribution margin
Operating income = contribution margin - Fixed Costs
36What is break-even point?that quantity of output sold at which total revenues equal total costs—that is, the quantity of output sold that results in $0 of operating income.
37How to calculate contribution margin?Sales - Variable Costs
38How to calculate breakeven point?Units: Fixed Costs/CM per unit
Dollars: Fixed Costs/CM ratio
39How to calculate Operating Leverage?Contribution Margin/Operating Income
40How to calculate break-even point with sales mix?Sales mix: quantities (or proportion) of various products that constitute a company's total unit sales
BUNDLES
Fixed Costs/(Contribution margin per bundle)
41Workout Problem 1: Calculate CONTRIBUTION MARGIN, GROSS MARGIN, OPERATING INCOME (using either gross margin or contribution margin method) COGM
42Calculate COGS Calculate Operating Income using GGAAP (gross) methodRevenues for 2020 were $310 million
43Workout Problem 2: Calculate Break-Even points Calculate units needed to reach Target IncomeBE @ Target units = (Fixed costs + operating income)/(CM per unit)