ACC 406 Chapter Notes - Chapter 2: Income Statement, Office Supplies, Gross Margin
ACC - Chapter 2 - Basic Managerial Accounting
One of the most important tasks of managerial accounting is to determine the cost of
products, services, customers and other items or interest to managers.
Costs
Cost - the amount of cash or cash equivalent sacrificed for G and S that are expected
to bring a current or future benefit ot the organization (dollar measure)
ď‚·Incurred to produce future benefits
ď‚·Used up in the production of revenues, they are said to expire
ď‚·Expired costs are called expenses
The revenue per unit is called price
ď‚·In accounting revenue and price are the same. Cost is different
Accumulating costs - the way that costs are measured and recorded
Assigning costs - the way that a cost is linked to some cost object
ď‚·A cost object is something for which a company wants to know the cost
ď‚·Assigning costs tells the company why the money was spent
A cost object is 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 be easily and accurately traced to a cost object
ď‚·Allocation - an indirect cost is assigned to a cost object by using a reasonable
and convenient method
Variable cost - one that increases in total as output increases (decreases)
Fixed cost - cost that does not increase in totally as output increases
Opportunity cost - the benefit given up or sacrificed when one alternative is chosen
over another
Products - are goods produced by converting raw materials through the use of
labor and indirect manufacturing resources
Services - are tasks or activities performed for a customer or an activity performed
by a customer using an organization’s products or facilities
ď‚·Are intangible, perishable, and require direct contact between providers and
buyers
Manufacturing organizations - organizations that produce products
Service organizations - organizations that provide services
Product (manufacturing) costs - 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
ď‚·Direct materials - materials that are a part of the final product and can be
directly traced to the goods being produced
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Document Summary
Acc - chapter 2 - basic managerial accounting. One of the most important tasks of managerial accounting is to determine the cost of products, services, customers and other items or interest to managers. Cost - the amount of cash or cash equivalent sacrificed for g and s that are expected to bring a current or future benefit ot the organization (dollar measure) Used up in the production of revenues, they are said to expire. In accounting revenue and price are the same. Accumulating costs - the way that costs are measured and recorded. Assigning costs - the way that a cost is linked to some cost object. A cost object is something for which a company wants to know the cost. Assigning costs tells the company why the money was spent. A cost object is any item such as a product, customer, department, project, geographic region, plant, etc. for which costs are measured and assigned.