COMM 112 Study Guide - Midterm Guide: 2011 Nfl Season, Fixed Cost, Earnings Before Interest And Taxes

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10 Feb 2013
Department
Course
Professor
Accounting Midterm Exam Review
Shannon Bailey
Chapter 1
Managerial accounting the provision of accounting information for a company’s
internal users. It is the firm’s internal accounting system and is designed to support the
information needs of managers
Information for planning the detailed formation of action to achieve a
particular end
Information for controlling monitoring a plan’s implementation and taking
corrective action as needed
Information for decision making the process of choosing among alternatives
Value chain the set of business functions that add value to an organization’s products
or services
Value Chain Primary Activities
Inbound logistics
Operations
Outbound logistics
Marketing and sales
Service
Value Chain Support Activities
Procurement
Technology Development
Human Resources Management
Developing Infrastructure
Continuous improvement the continual search for ways to increase the overall
efficiency and productivity of activities by reducing waste, increasing quality, and
managing costs
Total Quality Management (TQM) manufacturers strive to create an environment
that will enable workers to manufacture perfect (zero-defect) products
Lean accounting organizes costs according to the value chain and collects both
financial and nonfinancial information
Line positions positions that have direct responsibility for the basic objectives of an
organization
Staff positions - positions that are supportive in nature and have only indirect
responsibility for an organization’s basic objectives
Ethical Behaviour involves choosing actions that are right, proper and just. 10 core
values:
1. Honesty
2. Integrity
3. Promise-keeping
4. Fidelity
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5. Fairness
6. Caring for others
7. Respect for others
8. Responsible citizenship
9. Pursuit of excellence
10. Accountability
Chapter 2
Cost the amount of cash or cash equivalent sacrificed for goods/services that are
expected to bring a current or future benefit to the organization
Expenses expired costs
Price revenue per unit
Accumulating costs the way that costs are easured and recorded
Assigning costs the way that a cost is linked to some cost object
Cost object any item such as a product, customer, department, project, geographic
region, plant etc for which costs are measured and assigned
Direct costs those costs that can be easily and accurately traced to a cost object
Indirect costs costs that cannot easily and accurately be traced to a cost object
Allocation means that an indirect cost is assigned to a cost object by using a
reasonable and convenient method
Variable costs costs that increase as total output increase and decrease as total
output decreases i.e. denim used in making jeans
Fixed costs costs that do not increase in total as output increases and do not decrease
in total as output decreases i.e. the cost of property taxes on the factory building
Opportunity cost the benefit given up or sacrificed when one alternative is chosen
over another
Products goods produced by converting raw materials through the use of labour and
indirect manufacturing resources
Services tasks or activities performed for a customer or an activity performed by a
customer using an organization’s products or facilities i.e. car rental, dental care
Manufacturing organizations produce products while service organizations provide
services
Product (manufacturing) costs those costs, both direct and indirect, of producing a
product in a manufacturing firm or of acquiring a product in a merchandising firm and
preparing it for sale
Direct materials those materials that are a part of the final product and can be traced
to the goods being produced
Direct labour the labour that can be directly traced to the goods being produced
Manufacturing overhead all product costs other than direct materials and direct
labour (costs that cannot be traced to the cost object of interest) i.e.
maintenance/janitorial labour
Prime cost the sum of direct materials cost and direct labour cost
Conversion cost the sum of direct labour cost and manufacturing overhead. Can be
interpreted as the cost of converting raw materials into a final product
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Prime cost = Direct Materials + Direct Labour
Conversion cost = Direct Labour + Manufacturing Overhead
Total Product Cost = DM + DL + MO
Period costs all costs that are not product costs i.e. cost of office supplies, CEOs salary
Selling costs the costs necessary to market, distribute, and service a product or service
i.e. advertising, warehousing, shipping, customer service
Administrative costs all costs associated with research, development, and general
administration of the organization that cannot be reasonably assigned to either selling
or production
Materials inventory consists of the costs of the direct and indirect materials hat have
not entered the manufacturing process
Work in process (WIP) inventory consists of the direct materials, direct labour, and
factory overhead costs for products that have entered the manufacturing process but
are not yet completed, regardless of the level of completion
Finished goods inventory consists of completed (or finished) products that have no
yet been sold
Cost of goods manufactured the total cost of making products that are available for
sale during the period
To prepare a statement of cost of goods manufactured:
1. Determine the cost of direct materials used
Materials inventory, Jan 1, 2012 $65 000
Plus materials purchased 100 000
Cost of materials available for use 165 000
Less materials inventory, Dec 31, 2012 (45 000)
Cost of direct materials used 120 000
2. Determine the total manufacturing costs incurred
Cost of direct materials used (step 1) $120 000
All direct labour 210 000
All factory overhead 70 000
Total manufacturing costs incurred 400 000
3. Determine the cost of goods manufactured
Total manufacturing costs incurred (step 2) $400 000
WIP inventory, Jan 1, 2012 50 000
Total manufacturing costs 450 000
Less WIP inventory, Dec 31, 2012 (80 000)
Cost of goods manufactured 380 000
Statement of Costs of Goods Manufactured
For the year ended Dec 31, 2012
Materials inventory, Jan 1, 2012 $65 000
Plus materials purchased 100 000
Cost of materials available for use 165 000
Less materials inventory, Dec 31, 2012 (45 000)
Cost of direct materials used 120 000
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