Chapter 1 Managerial Accounting study guide

Managerial Accounting

Provides financial and nonfinancial information to an organization's managers.

Purpose of Managerial Accounting

Determining costs of products/services, planning future activities, comparing actual results to planned results.

Planning

The process of setting goals and making plans to achieve them.

Control

The process of monitoring planning decisions and evaluating an organization's activities and employees.

Internal Control System

A way to monitor and control business activities.

Ethics

Beliefs that distinguish right from wrong.

Institute Of Management Accountants (IMA)

Issued a code of ethics to help accountants solve ethical dilemmas.

Fixed Costs

Do not change with changes in the volume of activity.

Variable Costs

Change in proportion to change in the volume of activity.

Cost Object

A product, process, department, or customer to which costs are assigned.

Direct Costs

Traceable to a single object.

Indirect Costs

Cannot be easily and cost-beneficially traced to a single cost object.

Product Costs

Those costs necessary to create a product.

Period Costs

Non Production costs usually linked to time periods.

Direct Materials

Tangible components of a finished product.

Direct Labor

Employees who physically convert materials to finished products.

Factory Overhead

All manufacturing costs that are not direct materials or direct labor.

Prime Costs

Costs directly associated with the manufacture of finished goods.

Conversion Costs

Costs incurred in the process of converting raw materials to finished goods.

Finished Goods Inventory

Consists of completed products ready for sale.

Cost of Goods Manufactured

The cost of finished products.

Total Manufacturing Cost

Direct materials used + Direct labor used + Factory overhead used.

Lean Business Model

A principle whose goal is to eliminate waste while satisfying customers and providing a positive return.

Continuous Improvement

Rejects 'good enough' and continually experiments with new business practices.

Total Quality Management

Focused on quality improvement of business activities.

Just-In-Time Manufacturing

A system that acquires inventory and produces only when needed.

Corporate Social Responsibility (CSR)

Integrates social and environmental concerns in business operations.

Triple Bottom Line

Focuses on financial (profits), social (people), and environmental (planet) measures.

Sustainability Accounting Standards Board (SASB)

Develops reporting standards for businesses' sustainability activities.