Shared Flashcard Set

Details

Chapter 7 and 8
managerial accounting chapter 7 & 8
32
Accounting
Undergraduate 2
04/08/2013

Additional Accounting Flashcards

 


 

Cards

Term
Activity-based costing
Definition
A costing technique that assigns costs to cost objects, such as products or customers, based on the activities those cost objects require
Term
Activity
Definition
an event that consumes resources; any repetitive event that serves as a measure of output or usage, such as sales, production, phone calls made, or miles driven.
Term
Activity-based budgeting
Definition
The practice of using activity-based costing information and knowledge about activities and resource consumption to prepare an organization's budget.
Term
Activity-based management
Definition
the process of using ABC info to manage a business's activities
Term
activity cos pool
Definition
a group of costs combined based on their activity cost drivers and the resources to be consumed
Term
activity rate
Definition
rate calculated by dividing the total activity cost by the total activity driver volume
Term
Batch-level activity
Definition
an activity performed all at once on groups, or batches, of products
Term
customer-level activity
Definition
an activity relating to specific customers (not to specific products)
Term
first-stage allocation
Definition
an abc process in which costs are assigned first to activity cost pools before being assigned to cost objectives
Term
non-value added activity
Definition
an activity that consumes resources but does not contribute to the value of the final product or service.
Term
organizational-level activity
Definition
an activity required to provide productive capacity and to keep the business in operation
Term
process improvement
Definition
the examination of business processes to identify incremental changes that may reduce operating costs
Term
product-level activity
Definition
an activity that supports the product lines or services a company provides.
Term
unit-level activity
Definition
an activity that benefits individual units of prduction
Term
value-added activity
Definition
an activity that helps create the product the customer wants to buy
Term
unavoidable cost
Definition
a cost incurred under all alternatives under consideration
Term
throughput contribution
Definition
sales revenue minus direct materials cost
Term
theory of constraints
Definition
theory developed to maximize the performance of a value chain by focusing on constraints that limit an organization's output.
Term
Five Steps to implement ABC
Definition
1. Identify activities
2. Develop activity cost pools
3. Calculate activity cost pool rates
4. Allocate costs to products or services
5. Calculate unit product costs
Term
under traditional-costing systems
Definition
-small volume jobs are typically under-costed
-large volume jobs are typically over-costed
Term
ABC
Definition
batch-related and product-level costs are allocated using appropriate batch and product cost dirvers
Term
The key is activity management
Definition
look at activities that use labor resources....
-Inefficient production processes
-Poor facilities layout
-Non-value added activities
-Untrained workforce
Term
avoidable cost
Definition
cost associated with a particular alternative that will be eliminated if alternative is eliminated
Term
unavoidable cost
Definition
cost that will continue regardless of the alt selected
Term
Relevant cost decision model
Definition
*identify the decision
*identify the alternatives
*identify the relevant revenues and costs
*identify the qualitative issues to consider
*identify the alternative with the greatest benefit or least cost
Term
why accept special order pricing
Definition
-for products made to consumer specs
-for unusual order (q,p,d)
-for one-time job
-to utilize idle production facilities
Term
qualitative issues to consider
Definition
-what precedent does this special order set for future jobs
-how will customers react
-is there enough capacity to produce the order w/o reducing normal production
Term
what costs are relevant
Definition
-price we have to pay to buy the component
-all avoidable costs we would incur to make the component
-watch out for fixed oh per unit;it may or may not be avoidable
Term
opportunity costs
Definition
-opportunity costs of using our facilities may be relevant
-what alternative uses of the capacity exist?
-can we generate additional income by using the freed up facilities in some way
Term
qualitative factors to consider
Definition
-relative net advantage given uncertainty of estimates (costs, risks, etc.)
-reliability and # of sources of supply
-ability to assure quality
-future bargaining position with suppliers
-perceptions regarding possible future price changes
Term
constrained resource allocation decision
Definition
-Decision: How should we allocate a scarce resource across all products
-Factors: scarce resource, CM per unit of scarce resource, demand for products
-Qualitative factors: customer preferences for products, customer service issues
-watch put: CM per unit of product
-decision rule: make the product with the highest contribution margin per unit of scarce resource
Term
keeping/eliminating operations...
what is relevant
Definition
-all direct costs associated with the segment
*variable costs
*direct avoidable fixed costs
-calculate the segment margin
*revenues -VC- Avoidable FC
-watch out for allocated common FC
Supporting users have an ad free experience!