Managerial Accounting - Cost-Volume-Profit and Job-Order Costing

200 vocabulary flashcards derived from lecture notes on Managerial Accounting, covering key concepts like Cost-Volume-Profit Analysis, Job-Order Costing, and Activity-Based Costing.

Cost-Volume-Profit Analysis (CVP)

A financial analysis tool that helps managers understand the interrelationship among costs, volume of production, and profits.

Contribution Margin (CM)

The amount remaining from sales revenue after variable expenses have been deducted.

Break-even Point

The level of sales at which total revenues equal total costs, resulting in zero profit.

Contribution Margin Ratio (CM Ratio)

A ratio that indicates the percentage of each sales dollar that contributes to fixed costs and profits.

Margin of Safety

The difference between actual sales and break-even sales, indicating how much sales can drop before a business incurs a loss.

Operating Leverage

A measure of how sensitive net operating income is to percentage changes in sales.

Multi-product break-even analysis

Analysis to compute break-even points for companies that sell multiple products, considering sales mix.

Variable Cost

Costs that change in direct proportion to the level of production or sales.

Fixed Cost

Costs that remain constant regardless of production levels.

Cost-Volume-Profit Graph

A visual representation of the relationships between costs, sales volume, and profit.

Target Profit Analysis

Determining the required sales volume to achieve a specified profit level.

Operating Income

The profit earned from business operations, calculated as total revenues minus total operating expenses.

Cost Structure

The relative proportion of fixed and variable costs in an organization.

Degree of Operating Leverage

A ratio that measures the percentage change in operating income for a given percentage change in sales.

Sales Mix

The proportion of different products sold by a company.

Equation Method

A technique used to calculate the break-even point using the sales, variable expenses, fixed expenses, and profit equation.

Formula Method

A technique to determine break-even sales using contribution margin per unit.

Contribution Income Statement

An income statement organized to highlight the contribution margin.

Cost of Goods Sold (COGS)

The direct costs attributed to the production of the goods sold by a company.

Job Order Costing

A costing system that allocates costs to specific jobs or orders.

Process Costing

A costing method that is used when identical units are produced in mass quantities.

Journal Entries

Records that are used to capture the flow of costs in a company's accounting system.

Predetermined Overhead Rate (POHR)

An estimated rate used to apply manufacturing overhead to production.

Direct Materials

Raw materials that can be directly traced to the finished product.

Direct Labour

Costs incurred for the labour directly involved in manufacturing a product.

Manufacturing Overhead

Indirect costs associated with manufacturing that cannot be directly traced to specific products.

Finished Goods

Completed products that are ready for sale.

Work In Process (WIP)

Products that are partially completed but not yet finished goods.

Underapplied Overhead

The situation when the overhead applied to jobs is less than the actual overhead incurred.

Overapplied Overhead

The situation when the overhead applied to jobs is more than the actual overhead incurred.

Cost Reconciliation

A report that summarizes the costs that were transferred out and those that remained in work in process.

Equivalent Units of Production (EUP)

A concept used in process costing to express partially completed units in terms of fully completed units.

Activity-Based Costing (ABC)

A method that assigns costs to products based on the activities required to produce them.

Cost Pool

A grouping of individual costs, typically by department or activity.

Cost Driver

A factor that causes overhead costs to increase or decrease.

First-stage Allocation

The process of assigning overhead costs to activity cost pools.

Second-stage Allocation

The process of assigning costs from cost pools to cost objects.

Sales Revenue

The income received from selling goods or services.

Total Fixed Costs

The total cost that does not change with the volume of production.

Total Variable Costs

Costs that vary with the level of production, calculated as variable cost per unit times the number of units produced.

Ordered Costing Systems

Systems that assign costs to individual jobs or products based on specific requirements.

Batch-Level Activities

Activities that occur for a batch of products rather than for each individual unit.

Customer-Level Activities

Activities undertaken to support individual customers, which cannot be linked directly to product manufacturing.

Unit-Level Activities

Activities that are performed for each individual unit produced.

Organization-Sustaining Activities

Activities that support the organization as a whole and are not tied to specific products.

Budgeted Activity Levels

Projected levels of activities that help determine cost allocation.

Transferring Costs

The process of moving costs from one account to another within the accounting system.

Cost Accounting

The process of tracking, recording, and analyzing costs associated with processes, products, and operations.

Direct Charges

Expenses that can be directly attributed to a specific department or job.

Period Expenses

Costs that are incurred over a period of time and are not tied to inventory.

Variance Analysis

The process of analyzing the difference between planned financial outcomes and actual financial outcomes.

Standard Costs

The expected costs of manufacturing a product based on budget estimates.

Freight Costs

Transport costs incurred while shipping products.

Shipping Charges

Fees associated with the delivery of goods.

Administrative Costs

Expenses related to the general management and administration of the company.

Selling Expenses

Costs incurred to sell a product, including marketing and sales force costs.

Material Requisition Forms

Documents used to authorize the purchase of materials.

Time Tickets

Records of hours worked by employees on specific jobs.

Production Orders

Documents that initiate the production process by specifying the details of production.

Cost of Goods Manufactured (COGM)

The total cost incurred to manufacture goods that were completed during a specific period.

Sales Function

The activities involved in selling products or services to customers.

Change Overhead

The adjustment of overhead costs based on new estimates or actual figures.

Leverage Ratio

A measure of a company's debt level, often compared to its equity.

Gross Margin

The difference between sales and the cost of goods sold, expressing the basic profitability of a product.

Farmout Cost Negotiation

The process of negotiating costs related to subcontractor services in manufacturing.

Customized Production

Tailoring products based on specific customer requirements or orders.

Conversion Cost

The cost incurred to convert raw materials into finished products, consisting of labor and overhead.

Forecasting Costs

Estimating future costs based on historical data and market conditions.

Quality Control Costs

Expenses incurred to ensure the quality of products or services.

Separate Cost Pools

Distinct accounts set up to allocate costs to specific activities.

Production Scheduling

The process of planning and organizing production activities to meet demand.

Inventory Valuation

The method used to value inventory based on cost or market value.

Total Cost

The complete cost incurred to produce a good or service, including fixed and variable costs.

Cost Efficiency

The effectiveness of a company in minimizing costs while maximizing output.

Expense Recognition

The principle that expenses should be recognized in the period in which they are incurred.

Cost Behavior

The way in which a cost will react or change as the level of business activity changes.

Production Variance

The difference between the expected cost of production and the actual cost of production.

Volume Variance

The difference in profit resulting from the actual sales volume compared to budgeted sales volume.

Utilization Rate

A measure of productivity that indicates how efficiently resources are being used.

Cost-Effectiveness Analysis

A technique used to assess the economic outcomes of various operations or decisions.

Product Costing

The process of determining the cost of manufacturing a product.

Job Cost Sheet

A document used to accumulate and track the costs associated with a specific job.

Cost Allocation

The process of distributing costs among different departments, products, or services.

Fixed vs. Variable Costs

The classification of costs based on their behavior in relation to production levels.

Cost Categorization

Dividing costs into categories for better accounting and control.

Total Variable Cost

The total costs that vary with production level, such as materials and labor.

Cost Management

The practice of ensuring that a company's expenses are controlled and efficient.

Productivity Metrics

Measurements used to evaluate the efficiency of production and operations.

Cost Reduction Strategies

Methods employed by businesses to decrease their expenses.

Continuous Improvement

An ongoing effort to enhance products, services, or processes over time.

Performance Indicators

Metrics used to evaluate the success of an organization in achieving its objectives.

External Reporting

The disclosure of financial information to parties outside the organization, such as investors and regulators.

Internal Controls

Processes designed to ensure the integrity of financial and accounting information.

Accrual Accounting

An accounting method that recognizes revenue and expenses when they are incurred, regardless of cash flow.

Cost Control Measures

Strategies implemented to monitor and regulate expenses.

Management Accounting

The practice of analyzing financial information for managers to aid in decision-making.

Financial Statements

Formal records of the financial activities of a business, including balance sheets and income statements.

Pro Forma Financial Statements

Projected or estimated financial statements used for planning purposes.

Operating Expenses

The costs required for the day-to-day functioning of a business.

Opportunity Cost

The cost of foregoing the next best alternative when making a decision.