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is a field of accounting that provides economic and financial info for managers and other internal users.
Used by: internal users & managers, internal reports, special purpose, very detailed, doesn't use GAAP, no ind. audits.,
Establishing goals and how to achieve them. Often accompanied by a budget
Implementing plans and evaluating the results of business operations by comparing the actual results to the budget.
compares budgeted data to actual data in an effort to identify and learn from excellent performance and to identify and eliminate sources of unsatisfactory performance. Performance reports can also be used as one of many inputs to help evaluate and reward employees.
organizations need to take into consideration the needs of their stockholders when making decisions
is a management approach that organizes resources such as people and machines around the flow of business processes and that only produces units in response to customer orders
The major business functions that add value to a company’s products and services, such as research and development, product design, manufacturing, marketing, distribution, and customer service.
Any part or activity of an organization about which managers seek cost, revenue, or profit data.
A process used by a company to identify its risks and develop responses to them that enable it to be reasonably assured of meeting its goals.
a measure of whatever causes the incurrence of a variable cost. For example, the total cost of X-ray film in a hospital will increase as the number of X-rays taken increases. Therefore, the number of X-rays is the activity base that explains the total cost of X-ray film.
All executive, organizational, and clerical costs associated with general management.
Investments in facilities, equipment, and basic organizational structure that can’t be significantly reduced even for short periods of time without making fundamental changes.
A cost that cannot be traced directly to a cost object, but instead is incurred to support operations as a whole
An income statement format that organizes costs by their behavior. Costs are separated into variable and fixed categories rather than being separated into product and period costs for external reporting purposes.
the amount of profit that will be used to cover fixed costs.
the amount of revenue remaining after deducting variable costs
CM = Price - Variable Cost
The way in which the total costs change in response to changes in the level of activities.
Relative portion of fixed, variable and mixed costs in an organization
usually arise from annual decision by management to spend on certain fixed cost items, often referred to as managed fixed costs
Find variable cost
Change in cost divided by change in hours
Direct Labor+Direct Materials
All costs that are involved in acquiring or making a product. In the case of manufactured goods, these costs consist of direct materials, direct labor, and manufacturing overhead
All costs that are incurred to secure customer orders and get the finished product or service into the hands of the customer.
All manufacturing costs, both fixed and variable, are assigned to units of product
a measure such as DL hours or machine hours that is used to assign OH costs to products and services
A factor, such as machine-hours, beds occupied, computer time, or flight-hours, that causes overhead costs
include the manufacturing costs associated with the goods that were finished during the period
A manufacturer's inventory that is complete and ready for sale
a document or record used to accumulate manufacturing costs for a job.
A document that specifies the type and quantity of materials to be drawn from the storeroom and that identifies the job that will be charged for the cost of those materials.
A debit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost actually incurred exceeds the amount of overhead cost applied to Work in Process during a period.
A schedule that contains three elements of product costs—direct materials, direct labor, and manufacturing overhead—and that summarizes the portions of those costs that remain in ending Finished Goods inventory and that are transferred out of Finished Goods into Cost of Goods Sold.
Units of product that are only partially complete and will require further work before they are ready for sale to the customer.
A schedule, containining three elements of product costs—direct materials, direct labor, and manufacturing overhead—and that summarizes the portions of those costs that remain in ending Finished Goods inventory and that are transferred out of Finished Goods into Cost of Goods Sold.
A rate used to charge manufacturing overhead cost to jobs that is established in advance for each period. It is computed by dividing the estimated total manufacturing overhead cost for the period by the estimated total amount of the allocation base for the period.
A credit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost applied to Work in Process exceeds the amount of overhead cost actually incurred during a period.
The process of charging manufacturing overhead cost to job cost sheets and to the Work in Process account.
Direct Labor + Manufacturing Overhead
(cost to turn raw materials into a finished good)
A process costing method in which equivalent units and unit costs relate only to work done during the current period.
The units transferred to the next department (or to finished goods) during the period plus the equivalent units in the department’s ending work in process inventory.
blends together units and costs from the current period with units and costs from the prior period
the percent of a units selling price that exceeds total unit variable cost. interpreted as the percent of each sales dollar that remains after deducting the total unit variable cost.
contribution margin ratio =
contribution margin per unit
sales price per unit
the analysis of the impact of different pricing alternatives on the business's profitability
Actual or Budgeted Sales -
The excess of budgeted or actual dollar sales over the break-even dollar sales.
cost that will be shared by multiple segments and will be incurred even if a section is eliminated
Obtained by deducting the traceable fixed costs of a segment from the segment’s contribution margin
Represents the margin available after a segment has covered all of its own costs
A fixed cost that is incurred because of the existence of a particular business segment and that would be eliminated if the segment were eliminated.
The formula for computing the predetermined overhead rate is:Estimated total units in base / Estimated total manufacturing costs
1. The following entry would be used to record the transfer of material from the storeroom to production if 80% of the material was direct material and 20% was indirect material
Work in process 40,000
Manufacturing overhead 10,000Raw material inventory 50,000
Samantha Galloway is a managerial accountant in the accounting department of Mustang Industries, Inc. Samantha has just discovered evidence that some of the corporation’s marketing managers have been wrongfully inflating their expense reports in order to obtain higher reimbursements from the firm. Accordint to the Institute of Management Accountants’ Standards of Ethical Conduct, what should Samantha so upon discovering this evidence?
A detailed financial plan for the future is known as a:
A process cost system is employed in those situations where:
Where manufacturing involves a single, homogeneous product that flows evenly though the production process on a continuous basis
At a sales volume of 30,000 units, Carne Company’s total fixed costs are $30,000 and total variable costs are $45,000. The relevant range is 20,000 to 40,000 units. If Carne Company were to sell 32,000 units, the total expected cost would be:
Gabert Inc. is a merchandising company. Last month the company’s merchandise purchases totaled $68,000. The company’s beginning merchandise inventory was $17,000 and its ending merchandise inventory was $13,000. What was the company’s cost of goods sold for the month?
Sargent Company applies overhead cost to jobs on the basis of 80 percent of direct labor cost. If Job 210 shows $10,000 or manufacturing overhead cost applied, how much was the direct labor cost on the job?
Raw material inv, beginning 70
Raw material inv, end 40
Purchases of raw materials 190
Direct labor 150
Manufacturing overhead 210
Administrative expenses 90
Selling expenses 120
WIP inv, beginning 80
WIP inv, ending 70
Finished goods inv, beg 90
Finished goods inv, end 140
1.The net operating income for the year (in thousands of dollars) was:
2.The cost of the raw materials used in production during the year (in thousands of dollars) was:
3.The cost of goods manufactured (finished) for the year (in thousands of dollars) was:
4.Assume that the cost of goods manufactured was $690. The cost of goods sold for the year (in thousands of dollars) was:
When manufacturing overhead is applied to production, it is added to:
Which of the following entries would record correctly describe the monthly salaries earned by the top executive management of a manufacturing company?
Salaries Expense XXX
Salaries and XXX Wages Payable
Chelm Music Company manufactures violins, violas, cellos, and fiddles and uses a job-order cost system. What account should Chelm debit when the production manager is paid?
Compute the October cost of direct materials used if raw material purchases for the month were $30,000 and the inventories were as follows:
Direct Materials 7,000 4,000
Work In Process 6,000 7,500
Finished Goods 10,000 12,000
An example of a committed fixed cost is:
In describing the cost formula equation, Y= a + b x, which of the following is correct?
a. In the high-low method, “b” equals the change in cost divided by the change in activity
last five months of operations.
Month Meals served Utilities Cost
December 550 $410.00
January 300 $360.00
February 250 $347.50
March 400 $385.50
April 600 $414.00
Using the high-low method of analysis, the estimated variable utilities cost per meal served?
Using the high-low method of analysis, the estimated monthly fixed component of utility cost?
Solo Company is a small merchandising firm. During the next month, the company expects to sell 500 units. The company has the following revenue and cost structure.
Selling price per unit $60
Cost per unit $15
Sales commission 10% of sales
Advertising expense $5,000 per mo.
Administrative expense $3,000 per mo.+20% of sales
1.The expected gross margin next month is?
2.The expected contribution margin next month is?
DIRECT LABOR, MANUFACURING OVERHEAD
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