Difference between Managerial Accounting and Financial Accounting - Managerial = internal decision makers, help managers plan, direct and control. For
... [Show More] the future
Financial = external decision makers, help the external users (like board of directors investors) make decisions...based on previous and past
Decision Making, Planning, Directing, and Controlling - These are all responsibilities of management
Decision Making - Identifying alternative courses of action and choosing among them
Directing - Running the company on day to day basis
Controlling - Determining whether the company's units are operating according to plan
Planning - Setting goals and objectives for the company and strategizing ways to achieve them
Who uses "work in process inventory"? - Manufacturing
A cost that can be traced to a cost object is a...? - Direct Cost
Period costs are also referred to as... - Operating expenses
What does manufacturing overhead include? - Indirect materials (like machine lubricants), Indirect labor (like plant forklift operator wages), and other indirect manufacturing costs like plant utilities, rent, and depreciation.
What type of companies include Cost of Goods Sold account on their income statement? - Merchandising and manufacturing companies...because service companies don't have goods/products being made and sold.
Why is a wage of an assembly line worker considered a direct cost? - The worker can be DIRECTLY traced to the product unit they produce
Period Costs - -Include all selling and administrative expenses
-related to non-manufacturing activities
-recorded as operating expenses
-example: salaries for engineers, rent, website, utilities, depreciation
Product Costs - -direct materials, direct labor and manufacturing overhead
-related to manufacturing, shipping, purchasing merchandise
-recorded as inventory and then once goods are sold it is recorded as cost of goods sold
Fixed Cost - Remains constant in total.
The fixed cost per unit decreases if the level of activity increases.
Variable Cost - Varies in total when activity level changes. Variable cost per unit remains constant.
Direct Cost - Can be easily traced to a unit of product or other cost object.
Example: Direct materials and direct labor
Indirect Costs - Costs that cannot be easily traced to a unit of product or other cost object. Need an ALLOCATION METHOD to allocate indirect costs to cost objects...
Example: manufacturing overhead
Job Costing - A system that assigns costs to individual jobs, usually for a small batch or one unit of a unique product or service. Manufactured to order.
Process Costing - Large quantity of the same product. Example: processed foods. Mass production.
predetermined overhead rate (POHR) - total estimated manufacturing overhead / total allocation base
How do u identify the allocation base? - It is the cost driver, what is driving overhead costs up...It usually is labor hours, labor cost dollars, or machine hours.
How to calculate overhead cost for the job? - Allocation base used by the job x POHR
A ____ is used to accumulate the costs for a job - job cost record
A bill of materials indicates...? - what materials are needed to complete the job
When direct materials are requisitioned, the flow directly into...? - finished goods inventory account [Show Less]