Chapter 1 -Cost Accounting

What is financial accounting?

An accounting system that provides information to external users such as investors, creditors, and regulators.

Who are the users of financial accounting information?

External users including investors, creditors, and regulators

What is cost management accounting?

An internal system that identifies, collects, measures, classifies, and reports information for costing, planning, controlling, and decision making.

Who uses cost management accounting information?

Internal users such as manager

What does the financial accounting information system produce?

Outputs such as financial statements for external users.

What rules govern financial accounting?

: Rules set by the SEC and FASB.

What are the objectives of the cost management information system?

Costing products/services, planning and control, and decision making.

How does cost accounting relate to financial and management accounting?

: It satisfies costing objectives for both systems.

What is management accounting concerned with?

How cost and financial information is used for planning, controlling, and decision making.

What is global competition

: Increased competition due to improved transportation and communication.

Why is the service industry important to cost management?

It comprises about three-fourths of the U.S. economy and employment.

What is the theory of constraints?

A method used to continuously improve manufacturing and nonmanufacturing activities.

What is just-in-time (JIT) management?

: A demand-pull system that produces only when needed and in required quantities.

What is lean manufacturing?

An approach that eliminates non-value-added activities to reduce costs and lead time.

Why is new product development important in cost management?

Most production costs are incurred during design and development.

What is total quality management (TQM)?

A philosophy focused on continuous improvement and elimination of waste.