ACC FINAL (P1)

Strategic Planning

The process of developing the organization's long-term objectives

Measurement

The process where managers develop and agree upon performance metrics that will help them determined how well the company is achieving its objectives

Evaluation

The process by which managers monitor operations and compare actual and expected results

Financial Accounting

Prepared in accordance with GAAP

Managerial Accounting

Prepared according to management needs

What is the primary goal of Managerial Accounting?

Provide information to managers

Direct Labor Cost

Cost of wages paid to employees directly involved in the manufacturing process

Prime Costs (formula)

Direct Materials + Direct Labor

Conversion Costs (formula)

Direct Labor + Manufacturing Overhead

Conversion Costs

Costs omitted from Conversion: Direct Materials

Manufacturing Costs compromising the total cost of Work in Process

Direct Materials; Direct Labor; Manufacturing Overhead

Product Costs

Direct Materials, Direct Labor, Manufacturing Overhead

Electricity used to operate factory machinery would be classified as a

Product Cost-manufacturing overhead

Period Costs

Sales Salaries Expense, CEO salary expense, Administrative Expense (Rent on office facilities)

Work in Process Inventory

Products that are in the process of being manufactured

Balance Sheet Inventory Accounts (Reported as Current Assets)

Materials, Work in Process, Finished Goods

Income Statement Accounts

Cost of Goods Sold (COGS)

Correct Flow of Manufacturing Overhead

Raw Materials > Work in Process > Finished Goods > Cost of Goods Sold

Main Types of Costing Systems for Manufacturing Overhead

Process Costing and Job Order Costing

Job Order Costing for a Type of Industry

Companies that make custom products

Process Costing for a Type of Industry

Industries that manufacture a large number of identical units of commodities

Job Order Costing for Recordkeeping

Provide a separate record of the cost of each particular quantity of product that passes through the factory

Process Costing for Recordkeeping

Used by companies whose products are indistinguishable from each other

Materials Requisition

Document authorizing the issuance of materials

Receiving Report

In Job Order Costing, when goods that have been ordered are received, counted, and inspected

Time Record

The amount of time spent by an employee on an individual job

Equivalent Units

The portion of whole units that were completed with respect to either materials or conversion costs within a given accounting period

Cost of Product Report

Periodically prepared by a processing department summarizing the units it is accountable for and the total product costs incurred during the period

Process Costing Fact

Equivalent production units are generally determined for direct materials and conversion costs

Cost Allocation

Process by which Factory Overhead is assigned to a cost object

Overapplied Factory Overhead

When applied Factory Overhead is GREATER THAN actual Factory Overhead

Underapplied Factory Overhead

When applied Factory Overhead is LESS THAN actual Factory Overhead

Factory Overhead Allocation Methods

Single Plantwide Factory Overhead Rate, Multiple Production Department Rates, Activity-Based Costing (ABC)

Multiple Production Department Rates

Using multiple department factory overhead rates instead of a single plantwide rate results in more accurate product costs

Activity-Based Costing (ABC)

Activity Rate = Cost Budgeting for Each Activity Pool / Estimated Activity Base for That Pool