[ACYCST1] Nature and Scope of Cost Accounting

Financial Accounting

accounting focused on reporting financial information to external parties

Management Accounting

process of measuring, analyzing, and reporting financial and nonfinancial information that helps managers make decisions

Strategy

specifies how the organization matches its own capabilities with the opportunities in the marketplace

Target customers

should be the focal point of a company’s strategy

Leadership Strategy

a strategy wherein companies provides quality product or services at low price

Differentiation Strategy

a strategy wherein companies offer unique products or services that appeal to their customers and are often priced higher than the less-popular products or service of their competitors

Value chain

the sequence of business functions by which a product is made progressively more useful to customers

Supply chain

flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers

Controller

the accounting executive primarily responsible for management accounting and financial accounting

Line positions

directly related to achievement of the basic objectives of an organization

Staff positions

support and assist line positions

Competence

Confidentiality

Integrity

Credibility

4 IMA Guidelines for Ethical Behavior

Actual cost

pertains to a cost that has occurred

Budgeted cost

pertains to a predicted cost

Cost accumulation

pertains to a collection of cost data in an organized manner

Cost assignment

pertains to a general term that includes gathering accumulated costs to a cost object

Cost object

pertains to anything of interest for which a cost is desired

Direct costs

related to the particular cost object and can be traced to it in an economically feasible (cost-effective) way

Indirect costs

related to the particular cost object but cannot be traced to it in an economically feasible (cost-effective) way

Relevant range

the band or range of normal activity level or volume in which there is a specific relationship between the level of activity or volume and the cost

Manufacturing

sector companies purchase materials and components and convert them into various finished goods

Merchandising

sector companies purchase and then sell tangible products without changing their basic form

Service

sector companies provide intangible products

Product costs

costs that are a necessary and integral part of producing the product

Product costs

costs that are recorded as inventory when incurred

Product costs

costs that are not an expense until the finished goods inventory is sold then cost of goods sold

Period costs

costs that are matched with revenue of a specific time period and charged to expense as incurred

Beginning raw materials + purchases - ending raw materials

Direct materials

Direct materials + direct labor + manufacturing overhead

Total manufacturing costs

Total manufacturing costs + beginning work in process - ending work in process

Cost of goods manufactured

Cost of goods manufactured + beginning finished goods - ending finished goods

Cost of goods sold

Finished goods

transferred from the production departments to the finished goods warehouse when a job has been completed

Product costs

assigned to inventories and are considered assets until the products are sold

Product costs

become cost of goods sold on the income statement at point of sale

Fixed cost

costs that remains constant, in total regardless of changes in the level of activity within the relevant range

Variable costs

costs that vary in total based on changes in the level of activity within the relevant range

Cost accounting

serves as a comprehensive and systematic process integral to the management and stewardship of organizational resources. It encompasses the measurement, detailed analysis, and comprehensive reporting of both financial and nonfinancial information pertaining to the acquisition or utilization of resources within an organization.

Line management

directly responsible for attaining the goals of the organization

Cost of completed goods

The final figure in the Schedule of Cost of Goods Manufactured