ACCOUNTG 331 Lecture Notes - Lecture 1: Cost Driver, Management Accounting, Financial Statement
13 Sep 2016
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Document Summary
Accounting is the science of measuring, reporting, and incentivizing performance. Financial accounting: external reporting (e. g. investors, creditors, sec, defined by gaap, only focus is on financial performance. Management accounting: internal reporting (e. g. compensation, production decisions, pricing, forecasting, defined by management, financial and non-financial performance. Rolls into external financial reporting (for most firms, cogd is the single largest expense?) Cost object: something to which costs are being assigned/ something that accumulates costs. Variable cost: a cost that increases when you make one additional item: total variable costs increase when production increases, examples: materials, electricity, hourly wages. Fixed cost: a cost that does not increase when you make one additional item: total fixed costs remain the same when production increases, examples: rent, salaries. How you treat fixed costs has a huge impact on decision-making. Cost driver: a variable, such as the level of activity or volume, that causes costs to change: number of hours worked causes wages to change.
