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Accounting 122
Exam 4: Chapter 14, 15, 16
| Term | Definition |
|---|---|
| managerial accounting | area of accounting aimed mainly at serving the decision-making needs of internal users; also called management accounting |
| planning | process of setting goals and preparing to achieve them |
| enterprise risk management (ERM) | systems and processes used to reduce risk to an organization |
| control | process of monitoring planning decisions and evaluating the organization’s activities and employees |
| internal control system | all policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies |
| ethics | codes of conduct by which actions are judged as right or wrong, fair or unfair, honest or dishonest |
| Institute of Management Accountants (IMA) | a professional association of management accountants |
| Sarbanes-Oxley Act | Legislation that created the Public Company Accounting Oversight Board, regulates analyst conflicts, imposes corporate governance requirements, enhances accounting and |
| Sarbanes-Oxley Act | control disclosures, impacts insider transactions and executive loans, establishes new types of criminal conduct, and expands penalties for violations of federal securities laws |
| fixed costs | cost that does not change in total with changes in the volume of activity |
| variable costs | cost that changes in total in proportion to changes in the activity output volume |
| cost object | product, process, department, or customer to which costs are assigned |
| direct costs | costs incurred for the benefit of one specific cost object |
| indirect costs | costs incurred for the benefit of more than one cost object |
| product costs | costs that are capitalized as inventory because they produce benefits expected to have future value; include direct materials, direct labor, and overhead |
| period costs | expenditures identified more with a time period than with finished product costs; include selling and general administrative expenses |
| direct materials | raw material that physically becomes part of the product and is clearly identified with specific products or batches of product |
| direct materials costs | expenditures for direct materials that are separately and readily traced through the production process to finished goods |
| direct labor | work of employees who physically convert materials to finished product |
| direct labor costs | wages and salaries for direct labor that are separately traced through the production process to finished goods |
| factory overhead | factory activities supporting the production process that are not direct materials or direct labor; also called overhead and manufacturing overhead |
| factory overhead costs | expenditures for factory overhead that cannot be separately or readily traced to finished goods; also called overhead costs |
| indirect materials | materials used to support the production process but not clearly identified with products or batches of product |
| indirect labor | work of production employees who do not work specifically on converting direct materials into finished products and who are not clearly identified with specific units or batches of product |
| indirect labor costs | labor costs that cannot be physically traced to production of a product or service; included as part of overhead |
| prime costs | expenditures directly identified with the production of finished goods; include direct materials costs and direct labor costs |
| conversion costs | expenditures incurred in converting raw materials to finished goods; includes direct labor costs and overhead costs |
| raw materials inventory | goods a company acquires to use in making products |
| work in process inventory | account in which costs are accumulated for products that are in the process of being produced but are not yet complete; also called Goods in Process Inventory |
| finished goods inventory | account that controls the finished goods files, which acts as a subsidiary ledger (of the Inventory account) in which the costs of finished goods that are ready for sale are recorded |
| cost of goods manufactured | total manufacturing costs (direct materials, direct labor, and factory overhead) for the period plus beginning work in process less ending work in process; also called net cost of goods manufactured or cost of goods completed |
| schedule of cost of goods manufactured | report that summarizes the types and amounts of costs incurred in a company’s production process for a period; also called manufacturing statement or cost of goods manufactured statement |
| customer orientation | company position that its managers and employees be in tune with the changing wants and needs of consumers |
| lean business model | practice of eliminating waste while meeting customer needs and yielding positive company returns |
| continuous improvement | concept requiring every manager and employee continually to look to improve operations |
| total quality management | concept calling for all managers and employees at all stages of operations to strive toward higher standards and reduce the number of defects |
| ISO 9000 standards | international standards for quality management and quality assurance |
| just-in-time manufacturing | process of acquiring or producing inventory only when needed |
| value chain | sequential activities that add value to an entity’s products or services; includes design, production, marketing, distribution, and service |
| corporate social responsibility (CSR) | explicit consideration of the demands of stakeholders other than just shareholders and creditors in company decisions |
| triple bottom line | a framework for reporting an organization’s performance on social (“people”), environmental (“planet”), and financial factors (“profits”) |
| sustainability accounting standards board (SASB) | a nonprofit entity engaged in creating and disseminating sustainability accounting standards for use by companies. |
| raw materials inventory turnover | measure of how many times a company turns over (uses in production) its raw materials inventory during a period; defined as Raw materials used divided by Average raw materials inventory |
| days’ sales in raw materials inventory | measure of how much raw materials inventory is available in terms of the number of days’ sales; defined as ending raw materials inventory divided by raw materials used and that quotient multiplied by 365 days |
| cost accounting system | accounting system for manufacturing activities based on the perpetual inventory system |
| job order production | production of special-order products; also called customized production |
| job | production of a customized product or service |
| job lot | production of more than one unit of a customized product or service |
| process operations | processing of products in a continuous (sequential) flow of steps; also called process manufacturing or process production |
| target cost | maximum allowable cost for a product or service; defined as expected selling price less the desired profit |
| work in process inventory | account in which costs are accumulated for products that are in the process of being produced but are not yet complete; also called Goods in Process Inventory |
| finished goods inventory | account that controls the finished goods files, which acts as a subsidiary ledger (of the Inventory account) in which the costs of finished goods that are ready for sale are recorded. |
| job order costing system | cost accounting system to determine the cost of producing each job or job lot |
| job cost sheet | separate record maintained for each job |
| receiving report | form used to report that ordered goods were received and to describe their quantity and condition |
| materials ledger cards | perpetual record updated each time materials are purchased or issued for production use |
| materials requisition | source document production managers use to request materials for production; used to assign materials costs to specific jobs or overhead |
| time tickets | source document used to report the time an employee spent working on a job or on overhead activities and then to determine the amount of direct labor to charge to the job or the amount of indirect labor to charge to overhead |
| predetermined overhead rate | rate established prior to the beginning of a period that divides estimated overhead cost by an estimated activity base, such as estimated direct labor; used to apply overhead cost to production. |
| cost-plus pricing | pricing method where target price equals cost plus a markup |
| underapplied overhead | amount by which actual overhead cost incurred in a period exceeds the overhead applied to that period’s production using the predetermined overhead rate |
| overapplied overhead | amount by which the overhead applied to production in a period using the predetermined overhead rate exceeds the actual overhead cost incurred in a period. |
| services in process inventory | account that records the cost of partially completed services |
| services overhead | account that records the overhead costs of providing services |
| process operations | processing of products in a continuous (sequential) flow of steps; also called process manufacturing or process production |
| process costing system | system of assigning direct materials, direct labor, and overhead to specific processes; total costs associated with each process are then divided by the number of units passing through that process to determine the cost per equivalent unit |
| equivalent units of production (EUP) | number of units that would be completed if all effort during a period had been applied to units that were started and finished |
| conversion cost per equivalent unit | the combined costs of direct labor and factory overhead per equivalent unit |
| FIFO | method to assign cost to inventory that assumes items are sold in the order acquired; earliest items purchased are the first sold |
| process cost summary | report of costs charged to a department, its equivalent units of production achieved, and the costs assigned to its output |
| materials consumption report | document that summarizes the materials a department uses during a reporting period; replaces materials requisitions when materials move continuously through a process. |
| hybrid costing system | a costing system that contains features of both process and job order costing systems; also called operation costing system |
| operation costing system | a costing system that contains features of both process and job order costing systems; also called hybrid costing system |
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ryanriggs18
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