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Managerial Accounting
Chapter 1, 2, and 3
31
Accounting
Undergraduate 4
09/20/2012
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Term
Managerial accounting
 Definition
The provision of accounting information for a company's internal users.
Term
Managerial accounting's three broad objectives
 Definition
To provide information to aid in:
PLANNING
CONTROLLING
MAKING DECISIONS
Term
Planning
 Definition
Requires setting objectives and identifying methods to achieve those objectives.
Term
Controlling
 Definition
Monitoring a plan's implementation and taking corrective action as needed.
Term
Decision making
 Definition
Choosing among competing alternatives.
Term
Financial accounting
 Definition
Primarily concerned with producing information (financial statements) for EXTERNAL USERS.
Term
Managerial accounting
 Definition
Produces information for INTERNAL users.
Term
Value Chain
 Definition
The set of activities required to design, develop, produce, market, and deliver products and services, as well as provide support services to customers.
Term
Cost
 Definition
The amount of cash or cash equivalent sacrificed for goods and/or services that are expected to bring a current of future benefit to the organization.
Term
Expense
 Definition
An expired cost.
Term
Price
 Definition
Revenue per unit
Term
Accumulating cost
 Definition
The way that costs are measured and recorded.
Term
Assigning costs
 Definition
The way that a cost is linked to some cost object.
Term
Cost object
 Definition
Any item such as a product, customer, department, project, geographic region, plant, and so on, for which costs are measured and assigned.
Term
Direct cost
 Definition
Costs that can be easily and accurately traced to a cost object.
Term
Indirect cost
 Definition
Costs that cannot be easily or accurately traced to a cost object.
Term
Allocation
 Definition
An indirect cost is assigned to a cost object by using a reasonable and convenient method.
Term
Variable cost
 Definition
A cost that increases in total as output increases and decreases in total as output decreases.
Term
Fixed cost
 Definition
A cost that does not increase as total output increases and does not decrease in total as output decreases.
Term
Opportunity cost
 Definition
The benefit given up or sacrificed when one alternative is chosen over another.
Term
Direct materials
 Definition
Those materials that are a part of the final product and can be directly traced back to the goods being produced.
Term
Direct labor
 Definition
The labor that can be directly traced to the goods being produced.
Term
Manufacturing overhead
 Definition
All products other than direct materials and direct labor.
Term
Total product cost formula
 Definition
Direct materials cost + Direct labor cost + Manufacturing overhead cost
Term
Per-unit cost formula
 Definition
Total product cost / Number of units produced
Term
Prime cost
 Definition
The sum of direct materials cost and direct labor costs.
Term
Conversion cost
 Definition
The sum of direct labor cost and manufacturing overhead cost. This may be interpreted as the cost of converting raw materials into a final product.
Term
Period cost
 Definition
All the costs that are not product costs (i.e., all areas of the value chain except for production).
Term
Selling costs
 Definition
Those costs necessary to market, distribute, and service a product or service.
Term
Administrative cost
 Definition
All costs associated with research, development, and general administration of the organization that cannot be reasonably assigned to either selling or production.
Term
Cost of goods manufactured
 Definition
Represents the total product cost of goods COMPLETED during the current period and transferred to finished goods inventory.
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