ACC241 Exam 1 Review

Vocabulary flashcards for ACC241 Exam 1 review, covering foundational managerial accounting concepts, inventory and cost flows, overhead allocation methods, and quality management principles.

Institute for Managerial Accountants (IMA)

The worldwide association of managerial accountants.

Cost of Goods Sold (COGS) for Manufacturing

Calculated as Beginning Finished Goods Inventory plus Cost of Goods Manufactured (COGM) minus Ending Finished Goods Inventory.

Job-Order Costing

A costing system used when producing unique, custom items or large individual jobs rather than mass-produced goods.

Process Costing

A costing system used when mass-producing continuous, homogeneous units of product.

Cost Hierarchy

A framework in activity-based costing that categorizes costs into four levels: Facility level, Product level, Batch level, and Unit level.

Financial Accounting

The field of accounting focused on reporting financial information to external users (such as investors and creditors) in compliance with GAAP.

Managerial Accounting

The field of accounting focused on providing internal users (such as managers and employees) with future-oriented information for decision-making without requiring GAAP compliance.

Planning

The management responsibility of establishing organizational goals and outlining steps to accomplish them.

Directing

The management responsibility of overseeing day-to-day operations and assigning specific tasks to individuals.

Controlling

The management responsibility of evaluating actual operational performance against plans, reviewing reports, and making course corrections.

Competency (IMA Ethics Standard)

The ethical standard requiring accounting professionals to maintain expertise, perform duties according to professional standards, and provide accurate, timely information.

Confidentiality (IMA Ethics Standard)

The ethical standard requiring accounting professionals to keep sensitive information private and prevent unauthorized disclosure or insider trading.

Credibility (IMA Ethics Standard)

The ethical standard requiring accounting professionals to present information objectively, fairly, and completely, including all relevant information.

Integrity (IMA Ethics Standard)

The ethical standard requiring accounting professionals to act honestly, avoid conflicts of interest, and refrain from conduct that discredits the profession.

Service Company

A company that provides intangible services rather than physical products and carries no or very little inventory.

Merchandising Company

A company that buys finished products from suppliers and resells them to customers without altering them.

Manufacturing Company

A company that converts raw materials into finished products through a production process involving labor and overhead.

Raw Materials Inventory

The inventory account containing materials on hand waiting to be used in the production process.

Work in Process Inventory (WIP)

The inventory account containing goods that are partially completed in the production process at the end of a period.

Finished Goods Inventory

The inventory account containing fully completed products ready for sale to customers.

Direct Costs

Costs tied directly to a specific cost object that can be easily traced to that object.

Indirect Costs

Costs shared among multiple cost objects that cannot be easily traced to a single object and must be allocated.

Direct Materials

Raw material items that go directly into the manufacturing process and can be physically traced to the finished unit.

Direct Labor

Wages paid to workers who physically convert raw materials into finished units of product.

Manufacturing Overhead (MOH)

All indirect manufacturing costs incurred during production that are not direct materials or direct labor.

Prime Costs

The combination of direct materials costs and direct labor costs.

Conversion Costs

The combination of direct labor costs and manufacturing overhead costs needed to convert raw materials into finished goods.

Predetermined Overhead Rate

Calculated as $\text{Predetermined Overhead Rate} = \frac{\text{Estimated Total Manufacturing Overhead Cost}}{\text{Estimated Total Amount of Allocation Base}}$.

Overapplied Overhead

The condition occurring when actual manufacturing overhead incurred is less than estimated/applied overhead (Actual MOH < Applied MOH).

Underapplied Overhead

The condition occurring when actual manufacturing overhead incurred is greater than estimated/applied overhead (Actual MOH > Applied MOH).

Plant-Wide Overhead Rate

A single manufacturing overhead rate applied across an entire company, usually based on labor hours.

Departmental Overhead Rate

Overhead rates calculated separately for each individual department based on department-specific allocation bases.

Activity-Based Costing (ABC)

An overhead allocation method that assigns manufacturing costs to products based on the specific activities they consume.

Lean Production

A management philosophy aimed at eliminating waste and reducing inventory, often utilizing Just-In-Time (JIT) systems.

Total Quality Management (TQM)

A management approach focusing on continuous process improvement to eliminate defects and ensure product quality.

Prevention Costs

Conformance quality costs incurred to prevent defects or quality problems from occurring in the first place.

Appraisal Costs

Conformance quality costs incurred to inspect, test, and detect defective goods before shipment.

Internal Failure Costs

Nonconformance quality costs incurred when defects are found prior to delivering the product to the customer.

External Failure Costs

Nonconformance quality costs incurred when defective products reach and are discovered by the customer.

Institute for Managerial Accountants (IMA)

The worldwide association of managerial accountants.

Cost of Goods Sold (COGS) formula for manufacturing

Calculated as Beginning Finished Goods Inventory plus Cost of Goods Manufactured (COGM) minus Ending Finished Goods Inventory.

Job-Order Costing

A costing system used when producing unique, custom items or large individual jobs rather than mass-produced goods.

Process Costing

A costing system used when mass-producing continuous, homogeneous units of product.

Cost Hierarchy

A framework in activity-based costing that categorizes costs into four levels: Facility level, Product level, Batch level, and Unit level.

Financial Accounting

The field of accounting focused on reporting financial information to external users (such as investors and creditors) in compliance with GAAP.

Managerial Accounting

The field of accounting focused on providing internal users (such as managers and employees) with future-oriented information for decision-making without requiring GAAP compliance.

Planning

The management responsibility of establishing organizational goals and outlining steps to accomplish them.

Directing

The management responsibility of overseeing day-to-day operations and assigning specific tasks to individuals.

Controlling

The management responsibility of evaluating actual operational performance against plans, reviewing reports, and making course corrections.

Competency (IMA Ethics Standard)

The ethical standard requiring accounting professionals to maintain expertise, perform duties according to professional standards, and provide accurate, timely information.

Confidentiality (IMA Ethics Standard)

The ethical standard requiring accounting professionals to keep sensitive information private and prevent unauthorized disclosure or insider trading.

Credibility (IMA Ethics Standard)

The ethical standard requiring accounting professionals to present information objectively, fairly, and completely, including all relevant information.

Integrity (IMA Ethics Standard)

The ethical standard requiring accounting professionals to act honestly, avoid conflicts of interest, and refrain from conduct that discredits the profession.

Service Company

A company that provides intangible services rather than physical products and carries no or very little inventory.

Merchandising Company

A company that buys finished products from suppliers and resells them to customers without altering them.

Manufacturing Company

A company that converts raw materials into finished products through a production process involving labor and overhead.

Raw Materials Inventory

The inventory account containing materials on hand waiting to be used in the production process.

Work in Process Inventory (WIP)

The inventory account containing goods that are partially completed in the production process at the end of a period.

Finished Goods Inventory

The inventory account containing fully completed products ready for sale to customers.

Direct Costs

Costs tied directly to a specific cost object that can be easily traced to that object.

Indirect Costs

Costs shared among multiple cost objects that cannot be easily traced to a single object and must be allocated.

Direct Materials

Raw material items that go directly into the manufacturing process and can be physically traced to the finished unit.

Direct Labor

Wages paid to workers who physically convert raw materials into finished units of product.

Manufacturing Overhead (MOH)

All indirect manufacturing costs incurred during production that are not direct materials or direct labor.

Prime Costs

The combination of direct materials costs and direct labor costs.

Conversion Costs

The combination of direct labor costs and manufacturing overhead costs needed to convert raw materials into finished goods.

Predetermined Overhead Rate formula

Calculated as $\text{Predetermined Overhead Rate} = \frac{\text{Estimated Total Manufacturing Overhead Cost}}{\text{Estimated Total Amount of Allocation Base}}$.

Overapplied Overhead

The condition occurring when actual manufacturing overhead incurred is less than estimated or applied overhead ($\text{Actual MOH} < \text{Applied MOH}$).

Underapplied Overhead

The condition occurring when actual manufacturing overhead incurred is greater than estimated or applied overhead ($\text{Actual MOH} > \text{Applied MOH}$).

Plant-Wide Overhead Rate

A single manufacturing overhead rate applied across an entire company, usually based on labor hours.

Departmental Overhead Rate

Overhead rates calculated separately for each individual department based on department-specific allocation bases.

Activity-Based Costing (ABC)

An overhead allocation method that assigns manufacturing costs to products based on the specific activities they consume.

Lean Production

A management philosophy aimed at eliminating waste and reducing inventory, often utilizing Just-In-Time (JIT) systems.

Total Quality Management (TQM)

A management approach focusing on continuous process improvement to eliminate defects and ensure product quality.

Prevention Costs

Conformance quality costs incurred to prevent defects or quality problems from occurring in the first place.

Appraisal Costs

Conformance quality costs incurred to inspect, test, and detect defective goods before shipment.

Internal Failure Costs

Nonconformance quality costs incurred when defects are found prior to delivering the product to the customer.

External Failure Costs

Nonconformance quality costs incurred when defective products reach and are discovered by the customer.

Scenario: A plant manager compares actual manufacturing overhead costs incurred in Q1 against budgeted overhead and investigates why spending exceeded expectations. Which management responsibility is being exercised?

Controlling

Scenario: The CEO outlines strategic targets to expand operations into two new geographic regions over the next three years. Which management responsibility does this represent?

Planning

Scenario: A department supervisor assigns daily production schedules and provides instructions to machine operators on the shop floor. Which management responsibility is this?

Directing

Scenario: An accountant is pressured by a supervisor to ignore a conflict of interest involving a vendor owned by the supervisor's relative, but refuses to comply. Which IMA ethical standard is being upheld?

Integrity

Scenario: A financial manager refrains from sharing non-public earnings figures with family members prior to the official earnings release. Which IMA ethical standard does this follow?

Confidentiality

Scenario: An internal accountant includes all relevant material facts in a financial report, even though some metrics highlight poor operational performance. Which IMA ethical standard is demonstrated?

Credibility

Scenario: An accountant actively attends professional education seminars annually to stay current on updated accounting standards. Which IMA ethical standard does this satisfy?

Competency

Scenario: A retail store purchases pre-packaged electronics from suppliers and resells them directly to end consumers without altering the products. What type of company is this?

Merchandising company

Scenario: When evaluating the cost of a single cup of handcrafted espresso, how are the wages paid to the barista who prepares that specific cup classified?

Direct cost (Direct labor)

Scenario: Electricity spent to illuminate and power an entire manufacturing plant where multiple distinct product lines are assembled is classified as what type of cost relative to a single product line?

Indirect cost (Manufacturing overhead)

Scenario: A furniture maker incurs costs for lumber used to build tables and wages for assembly line carpenters. Taken together, what are these two cost components called?

Prime costs

Scenario: A factory combines direct labor wages with manufacturing overhead costs (such as factory rent and equipment depreciation) to transform raw materials into finished items. What is this cost combination called?

Conversion costs

Scenario: Equipment setup performed prior to running a production batch of $500$ identical units is classified under which level of the activity-based cost hierarchy?

Batch-level cost

Scenario: Designing a custom prototype for a new product line is categorized under which level of the activity-based cost hierarchy?

Product-level cost

Scenario: A manufacturer pays third-party technicians to inspect and test incoming component parts before sending them to the assembly line. Which category of quality cost is this?

Appraisal cost

Scenario: A car manufacturer pays for warranty repairs and recalls after customers experience engine failures on delivered vehicles. Which category of quality cost is this?

External failure cost

Scenario: Scrap metal discarded during production because raw sheets were cut incorrectly before leaving the factory floor represents what type of quality cost?

Internal failure cost

Scenario: Conducting mandatory quality control training for new assembly employees prior to production represents which type of quality cost?

Prevention cost