Managerial ACC Key Terms Test 1

Managerial Acounting

focuses on providing information for internal decisions makers, concentrates on both financial and nonfinancial information for managers and other business users, such as supervisors and directors

Service Companies

sell their time, skills and knowlege

Merchandising Companies

resell products they buy from suppliers, keep an inventory of products and managers are accountable for the purchase, storage, and sale of the products

Manufacturing Companies

use labor, equipment, supplies, and facilities to convert raw materials into finished products, must use these resources to create a product that customers want at a price customers are willing to pay

Direct Cost

a cost that can be easily and cost-effectively traced back to a cost object

Cost Object

anything for which managers want a separate measurement of cost and may be a product, department, sales territory, or activity

Indirect Cost

costs that cannot be easily or cost-effectively traced directly to a cost object

raw material inventory(RM)

includes materials used to make a product

work-in-process inventory(WIP)

includes goods that are in the manufacturing process but are not yet complete, some production activiites have taken place that transformed the materials, but the product is not yet finished and ready for sale

finished goods inventory(FG)

includes completed goods that have not yet been sold, the products that the manufacturer sells

direct materials(DM)

cost of raw materials that are converted into the finished product and are easily traced to the product

direct labor(DL)

the cost of wages and salaries of employees who convert the raw materials into the finished product

manufacturing overhead(MOH)

refers to indirect manufacturing costs that cannot be easily traced to specific products, includes all other costs than direct materials and direct labor

indirect matrials(IM)

the cost of raw materials that are difficult or not cost-effective to trace directly to the product

indirect labor(IL)

includes the cost of wages and salaries in the factory for persons not directly producing the product

prime costs

combine the direct costs:direct materials and direct labors, work is typically labor-intensive

Conversion costs

combines direct labor with manufacturing overhead, these are the costs to convert the direct materials into the finished product, machine intensive, cost of DL is minmal because machines do most of the work, overhead costs can be susbstansial though

product costs

includes the costs of purchasing or making a product, recorded as assets in inventory accounts on balance sheets when they are incurred

period costs

non-manufacturing costs, selling and administrative expenses and others such as taxes and interest

Cost of goods manufactured

cost of manufacturing the finished goods

Cost accounting systems

measure, record, and report product costs, used to accumulate product cost information so that managers can measure how much it costs to produce each unit of product

job order costing system

accumulates costs for each unique batch or job

job

may be a single unique product or specialized service, or a batch of unique products

process costing system

accumulates the costs of each process needed to complete the product over a period of time

materials requisition

the request to transfer raw materials to the prodcution floor

labor time record

indicates the amount of time spent on each job

predetermined overhead allocation rate

calculated before the period begins, companies use this to allocate estimated overhead costs to individual jobs throughout the accounting period

allocation base

the denominator that links overhead costs to the products, the primary cost driver to manufacturing overhead

cost driver

the primary factor that causes(drives) a cost

Underallocated overhead

when the actual manufacturing overhead costs are more than allocated manufacturing overhead allocated costs because the compnay allocated less costs to jobs than actual costs incurred

Overallocated overhead

occurs when the actual manufacturing overhead costs are less than allocated manufacturing overhead costs