Textbook Notes (368,588)
Canada (161,988)
Commerce (596)
COMM 112 (20)


13 Pages
Unlock Document

COMM 112
Teri Shearer

Chapter 1  Managerial accounting: the provision of accounting information for a company’s internal users  Planning: the detailed formulation of action to achieve a particular end  Controlling: managerial activity of monitoring a plan’s implementation and taking corrective action as needed  Decision making: the process of choosing among competing alternatives  Financial accounting: primarily concerned with producing information for external users  Value chain: inbound logistics, outbound logistics, marketing and sales, service, 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: philosophy in which manufacturers strive to create an environment that will enable workers to manufacture perfect products  Lean accounting: organized 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  Controller: chief accounting officer, supervises all accounting functions and reports directly to the general manager and chief operating officer  Treasurer: is responsibility for the finance function  Sarbanes-Oxley Act (SOX): established stronger government control and regulation of public companies in the U.S.  Publicly traded companies: issue shares traded on the U.S. stock exchange  Ethical behaviour: involves choosing actions that are right, proper, and just  Certified Management Accountants (CMA) and Certified General Accountants (CGA): have established ethical standards for accountants  Chartered Accountant (CA): education program that focuses on external financial reports and, in particular, auditing functions Chapter 2  Cost: the amount of cash or cash equivalents sacrificed for goods and/or services that are expected to bring a current or future benefit to the organization  Expenses: expired costs  Price: revenue per unit  Accumulating cost: the way that costs are measured and recorded  Assigning cost: 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, and so on, for which costs are measured and assigned  Committed fixed costs: can be avoided  Discretionary fixed costs: can be modified  Direct costs: those costs that can be easily and accurately traced to a cost object  Indirect costs: costs that cannot be easily and accurately traced to a cost object  Allocation: an indirect cost is assigned to a cost object using a reasonable and convenient method Indirect Direct costs costs Direct Allocation Tracing cost cost object object  Variable cost: on that increases in total as output increases and decreases in total as output decreases  Fixed cost: a cost that does not increase in total as output increases and decrease in total in input decrease  Opportunity cost: the benefit given up or sacrificed when on alternative is chosen over anther  Products: goods produced by converting raw materials through the use of labour and indirect manufacturing resources, such as manufacturing plant, land, and machinery  Services: tasks or activities performed for a customer or and activity performed by a customer using an organization’s products of facilities  Manufacturing organizations: organizations that produce products  Service organization: organizations that 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 o Direct materials: those materials that are part of the final product and can be directly traced to the foods being produced o Direct labour: the labour that can be directly traced to the foods being produced o Manufacturing overhead: all product costs other that direct materials and direct labour  Prime cost: the sum of direct material cost and direct labour cost  Conversion cost: the sum of direct labour cost and manufacturing overhead cost  Period costs: all costs that are not product costs costs period product capitalize inventory asset asset depreciation period COGS expense expense  Selling costs: those costs necessary to market, distribute, and service a product of service  Administrative costs: all costs associated with research, development, and general administration of the organization that cannot reasonably be assigned to either selling or production  Manufacturing costs: total of: o Direct material cost: the cost of any material that is an integral part of the finished product o Direct labour cost: the wages of employees who are integral to the finished product o Factory overhead costs: costs other than direct materials cost and direct labour cost that are incurred in the manufacturing process  Materials inventory: consist of the costs of the direct and indirect materials that have not entered the manufacturing process  Work in process inventory (WIP): consists of the direct materials, direct labour, and factory overhead costs for products that have entered the manufacturing process but are not yet completed  Finished goods inventory: consists of completed products that have not been sold  Cost of goods manufactured: the total cost of making products that are available for sale during the period  Cost of goods sold: determined by subtracting the ending finished foods inventory from the cost of finished foods available for sale Beginning inventory + Purchases - Direct materials = Ending inventory value of materials used in production of materials  Gross margin: the difference between sales revenue and cost of goods sold  Gross margin %: gross margin / sales revenue  Operating income %: operating income / sales revenue Chapter 3  Cost behaviour: the general term for describing whether a cost changes when the level of output changes  Cost driver: a casual measurement that causes costs to change  Relevant range: the range or output over which the assumed cost relationship is valid for the normal operations of a firm  Fixed costs: costs that in total are constant within the relevant range as the level of output increases or decreases  Discretionary fixed costs: fixed costs that can be changed or avoided relatively easily at management discretion  Committed fixed costs: fixed costs that cannot be easily changed  Variable costs: costs that in total vary in direct proportion to changes in output within the relevant range Total Variable costs = Variable rate X Amount of output Total costs Is fixed throughout the Variable Cost Varies in direct proportion to relevan range Fixed Cost changes in activity Varies inversely with changes Remains fixed through the in activity throughout the relevan range relevant range  Mixed costs: costs that have both a fixed and a variable component Total cost = Total fixed cost + Total variable cost  Step cost: displays a constant level of cost for a range of output and then jumps to a higher level of cost at some point, where it remains for a similar range or output Total cost = Fixed costs + (Variable rate X Output)  Dependent variable: a variable whose value depends on the value of another variable  Independent variable: a variable that measures output and that explains changes in the cost or other dependent variable  Intercept: corresponds to fixed cost (point at which the cost line intercepts the cost (vertical) axis)  Slope: corresponds to the variable rate (the variable cost per unit of output);it is the slope of the cost line Variable rate = Fixed costs = Total cost a high (low) point – (Variable rate X Output at high (low) point)  Scattergraph method: a way to see the cost relationship by plotting the data points on a graph Variable rate =  Method of least squares (regression): a statistical way to find the best-fitting line through a set of data points Chapter 4  Break-even point: the point where total revenue equals total cost  Contribution margin income statement: income statement format that is based on the separation of costs into fixed and variable components  Contribution margin: the excess of sales over variable costs Contribution margin = sales – variable costs  Contribution margin ratio: the percentage of each sales dollar available to cover fixed costs and to provide the percentage of each sales dollar available to cover fixed costs and to provide income from operations Contribution margin ratio = contribution margin / sales Change in income = Change in sales x Contribution margin from operations dollars ratio  Unit contribution margin: for analysing the profit potential of proposed decisions Unit contribution margin = sales price per unit – Variable cost per unit Change in income = Change in sales x Unit contribution from operations units margin Operating income = Total variable expenses – Total fixed expenses Operating income = (Price x Number of units sold) – (Variable cost per unit x number of units sold) – total Fixed cost Break-even units = total fixed cost / (Price – Variable cost per unit)  Variable cost ratio: the proportion of each sales dollar that must be used to cover variable costs Operating income = Sales – Total variable expenses – Total fixed expenses Break-even sales = total fixed expenses / contribution margin ratio BE: (P x Q) = Q X VCU + FC + O P = selling price per unit P x Q – Q x VCU = FC Q = quantity Q (P – VCU) = FC P(Q) = total revenue QCM = FC VCU = variable cost per unit Q = FC / CM VC(Q) = total variable cost FC = total fixed costs Operating income = (Price x Units sold) – (unit variable cost x units sold) – Fixed cost # of units to earn target income = (fixed costs + target income) / (price – variable cost per unit) Sales dollars to earn target income = (Fixed cost + Target income) / (Contribution margin ratio) Target sales – variable expenses – fixed expenses = (target income after tax)/(1-tax rate) BE = (FC + NI/(1-T)/CM  Profit-volume graph: visually portrays the relationship between profits and units sold  Cost-volume-profit graph: depicts the relationship among cost, volume, and profits by plotting the total revenue line and the total cost line on a graph Revenue = Price x Units Total cost = (units variable cost x units) + fixed cost  Direct fixed expenses: those fixed costs that can be traced to each segment and would be avoided if the segment did not exist  Common fixed expenses: fixed costs that are not traceable to the segments and would remain even if one of the segments was eliminated Mulching mower break- even units = fixed cost / (price - unit variable cost) Riding mower break-even units = fixed cost / (price – unit variable cost)  Sale mix: the relative combination of products being sold by a firm Margin of safety units: Actual sales in units – Break-even sales in units Margin of safety in dollars: Actual sales in $ - Break-even sales in $ Margin of safety % : Margin of safety in units / Actual unit sales MS = (sales – sales at BEP) / Sales  Operating leverage: the use of fixed costs to extract higher percentage changes in profits as sales activity changes Margin in safety units x Price = Margin of safety in sales revenue  Degree of operation leverage (DOL): can be measured for a given level of sales by taking the ratio of contribution margin to operating income Degree of operating leverage = Contribution margin / operating income Percentage change in operating income = DOL x percent change in sales  Indifference point: quantity at which two systems produce the same operating income equation of the two systems equal and solving for the number of unit Chapter 5  Process-costing system: unit costs are computed by dividing the process costs for the given period by the output of the period Process Costing Job-order
More Less

Related notes for COMM 112

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.