ACC293 Management Accounting Flashcards

Flashcards for ACC293 Management Accounting lecture notes.

Management Accounting

Processes and techniques focusing on efficient organizational resource use, supporting managers in enhancing customer and shareholder value.

Financial Accounting

Accounting aimed at external stakeholders like investors and regulators.

Cost Accounting

Often used interchangeably with management accounting; focuses on cost management, measurement, and control.

Sociological Impact of Accounting

Accounting is a socially constructed discipline that both reflects and shapes society, influencing organizational discourse and decision-making.

Ethics in Management Accounting

Ethical comprehension is a crucial learning objective that ensures respect for industry norms and professional integrity.

Product Costing

Categorization and treatment of costs, including direct vs. indirect, product vs. period, and fixed vs. variable costs.

Direct Materials

Raw materials incorporated into the final product and easily traceable.

Direct Labor

Wages of personnel directly involved in manufacturing products.

Manufacturing Overhead

Indirect costs necessary for production but not directly tied to a specific product.

Conversion Costs

Sum of direct labor and manufacturing overhead; costs incurred in converting raw materials to finished products.

Prime Costs

Direct labor and direct materials, often major costs in production.

Cost Driver

A factor that causes a change in the cost of an activity.

Raw Materials Inventory

Account holding the costs of materials purchased but not yet used in production.

Work In Progress (WIP) Inventory

Account holding the costs of products that are partially completed.

Finished Goods Inventory

Account holding the costs of products that are completed and ready for sale.

Cost of Goods Sold (COGS)

Account reflecting the cost of products that have been sold.

Perpetual Inventory System

Continuously records purchases and sales using technology, requiring constant updating of inventory records.

Periodic Inventory System

No detailed records maintained; physical stock takes necessary at period-end to calculate Cost of Goods Sold.

Freight In

Freight costs to acquire inventory; considered part of inventory cost.

Freight Out

Freight costs to deliver goods to customers; treated as a regular expense.

Variable Costs

Costs that change proportionally with production volume.

Fixed Costs

Costs that remain unchanged within a relevant range of production volume.

Step-Fixed Costs

Costs that remain fixed within a range, then increase at certain activity levels.

Semi-Variable Costs

Costs that contain both fixed and variable components.

Curvilinear Costs

Costs that follow a non-linear relationship with activity levels.

Direct Costs

Costs that are traceable to a specific product.

Indirect Costs

Costs that cannot easily be traced; allocated to products.

Manufacturing Overhead Control

Ledger account used to reconcile actual overhead expenditure incurred and budgeted overhead allocated to products.

Budgeting

Comprehensive plan covering a specified future time period, instrumental for monitoring performance and strategic planning.

Operational Budgets

Focus on short-term performance, typically covering the next year, with the sales budget being crucial.

Financial Budgets

Include the budgeted income statement, balance sheet, cash budget, and capital expenditure budget.

Master Budget

Represents a comprehensive view, interlinking various independent budgets, essential for strategic alignment.

Responsibility Accounting

Establishes accountability within departments, assigning budgetary targets that individuals and teams must meet.

Feedforward Control

Anticipating potential future variances allows for proactive adjustments, minimizing adverse impacts.

Cost Center

Focused on managing costs without direct revenue generation.

Revenue Center

Primarily responsible for generating revenues.

Profit Center

Accounts for both revenues and costs, facilitating profitability analysis.

Investment Center

Manages both revenues and costs but is also responsible for investment decisions.

Participatory Budgeting

Engages lower-level managers in budget preparation, resulting in better coordination.

Budgetary Slack

Practice where managers deliberately underestimate revenues or overestimate costs.

Zero-Based Budgeting (ZBB)

Requires justification for all budgeted activities starting from zero.

SKU (stock keeping unit)

Refers to unique products that can be analyzed individually for profitability.

Variance Analysis

Comparing actual costs against standard costs to identify where expenses diverge from expectations.

Job Costing

Applies costs to products in industries where items are custom-made or produced in small batches.

Process Costing

Averages costs over all units produced, used for mass production and repetitive tasks.

Bill of Materials (BOM)

Specifies the materials needed for production, aiding in accurate requisitioning.

Service Costing

Costing method used for intangible service outputs that are consumed as they are produced, often time-dependent and heterogeneous.

Operation Costing

A hybrid costing system where products vary by materials but pass through the same operations.

Joint Products

Products derived from a single raw material.

Joint Cost

Cost of the original raw material before separation into joint products.

Byproducts

Products of value produced in addition to the main product.

Overhead Costs

Indirect costs that add to the cost of products, including manufacturing and non-manufacturing costs.

Cost Pool

A collection of costs to be allocated, consisting of similar costs with a common allocation base or cost driver.

Cost Allocation Basis

A factor or variable that allows the allocation of costs in a cost pool to cost objects.

Plant Wide Rate

A single overhead rate used for the entire production plant.

Departmental Overhead Rates

Overhead rates that recognize different departments may have different cost drivers.

Activity Based Costing (ABC)

Uses activities as cost pools rather than departments to allocate overhead costs.

Multiple Cost Pools

Using multiple cost pools allows for more accurate cost allocations by managing different support services.

Direct Method (Cost Allocation)

Allocations go directly to production or direct service departments, ignoring services between support divisions.

Step Method (Cost Allocation)

Recognizes that some support departments provide services to other support services.

Reciprocal Method (Cost Allocation)

Considers all interactions between support departments but is more complex.

Relevant Range

Level of activity where cost behavior is stable.

Absorption Costing

Includes all manufacturing overhead costs (variable and fixed) in product costs.

Variable Costing

Only includes variable manufacturing overhead costs in product costs; fixed overhead is treated as a period cost.

Just-in-Time (JIT) Costing

Management philosophy focused on reducing costs and wastage by producing only in response to demand.

Backflush Costing

Simplified costing system used with JIT, where costs are calculated backwards from the Cost of Goods Sold account.

Supply Chain Management (SCM)

Manages key business processes across the supply chain, from initial suppliers to final customers。

Standard Costing

Compares predetermined costs with actual performance to identify variances.

Efficiency (Usage) Variance

Measures how efficiently resources are used.

Price Variance

Relates to the cost per unit of input.

Practical Standards

Attainable under normal operating conditions, encouraging positive attitudes but potentially fostering inefficiencies.

Material Price Variance

Compares the actual and standard price of materials used.

Material Usage Variance

Compares the actual and standard quantity of materials used.

Labor Rate Variance

Compares the actual and standard rate of labor.

Labor Efficiency Variance

Compares the actual and standard hours worked.

Flexible Budgets

Adjust throughout the year, catering to a range of activity levels, offering a relevant benchmark for cost control.

Static Budgets

Set for one specific level of activity.

Activity Based Budgeting (ABB)

Builds budgets from major activities and uses Activity Based Costing (ABC) principles.

Intrinsic Motivation

Derives from interest and enjoyment of the work itself.

Extrinsic Motivation

Comes from external sources like pay.

Hygiene Factors

Relate to job context (working conditions, wage levels, rules, relationships with colleagues, job security). Absence leads to dissatisfaction.

Motivating Factors

Relate to job content (challenging work, recognition, responsibility, achievement).

Expectancy Theory

Motivation is influenced by expected outcomes, with employee motivation depending on expectancy, instrumentality, and valence.

Goal Setting Theory

Assigning specific and difficult goals motivates better performance, but acceptance of the goal and the value of the reward drive motivation.

Social Control

Group norms and culture influencing behavior.

Administrative Control

Hierarchical structures, standard procedures, job descriptions, and performance management.

Budgetary Slack

Padding the budget by underestimating revenue or overestimating costs.

Decentralization

Restructuring an organization into units with specific operations and decision-making responsibilities.

Responsibility Accounting

Measures performance to foster goal and behavioral congruence.

Shared services

Concentrate support services into a separate unit, balancing centralized and decentralized structures.

Real-Time Reporting

Aims to provide up-to-date information for competitive advantage.

Return on Investment (ROI)

Performance metric for investment centers, calculated as profit divided by invested capital.

Residual Income

Performance measure calculated as Profit minus (Investment Capital times Imputed Interest Rate).

Weighted Average Cost of Capital (WACC)

Represents the return a business needs to earn to satisfy its owners and debt providers; also the discount rate used in present value calculations.

Economic Value Added (EVA)

Net Operating Profit After Tax minus (Capital Employed times Weighted Average Cost of Capital).