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41 Cards in this Set
- Front
- Back
Balanced Scorecard
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• Includes financial and nonfinancial performance measures (Standard costs, income measures, ROI, and residual income are financial) (Defect rates, cycle time, on-time deliveries)
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Controllability Concept
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• Crucial to responsibility accounting system. Managers should be evaluated based on revenues or costs they control
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Cost-based transfer price
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• Least desirable, removes profit motives. Some companies base the transfer price on variable costs, others use full cost (variable + allocation rate of FC)
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Cost Center
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• an organization unit that incurs expenses but does not generate revenue
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Decentralization
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• delegating authority and responsibility
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Investment Center
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• Managers are responsible for revenues, expenses, and the investment of capital
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Management by Exception
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• Concentrating funds to areas that are lacking
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Margin
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• A measure of management’s ability to control operating expenses relative to the level of sales
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Market-based transfer prices
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• Are preferable because they promote efficiency and fairness (motivate managers to use their resources efficiently)
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Negotiated transfer price
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• Can be more beneficial, preserves the notion of fairness, should be the first alternative to market transfer pricing
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Profit Center
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• Incurs both costs but also generates revenue
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Residual Income (RI)
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• Measures a manger’s ability to maximize earnings above some targeted level
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Responsibility Accounting
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• Focuses on evaluating the performance of individual managers
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Responsibility Center
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• An organization unit that controls identifiable revenue or expense items
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Responsibility Report
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• Is prepared for each manger who controls a responsibility center. The report compares the expectations for the manager’s responsibility center with the center’s actual performance
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Return on Investment (ROI)
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• The ratio of wealth generated (operating income) to the amount invested (operating assets) to generate wealth
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Suboptimization
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• Managers that choose to benefit themselves at the expense of their corporations
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Transfer Price
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• Will increase the selling division’s earnings and decrease the purchasing division’s earnings
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Turnover
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• A measure of the amount of operating assets employed to support the achieved level of sales
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Absorption (Full) Costing
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• Require that all product costs, both variable and fixed , be reported as inventory until the products are sold, when the product costs are expensed as COGS.
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Applied Overhead
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• Require that all product costs, both variable and fixed , be reported as inventory until the product s are sold, when the product costs are expensed as COGS.
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Finished Good Inventory
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• Includes completed products that are ready for sale
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Manufacturing Overhead Account
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• Temporary asset account
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Overapplied Overhead
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• If more overhead has been applied than was actually incurred
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Predetermined Overhead Rate
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• Overhead allocation that is before the actual overhead costs are known
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Raw Materials Inventory
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• Lumber, Metals, Paints, and Chemical that will be used to make the companies product
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Schedule of Cost of Goods Manufactured and Sold
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• Shows the overall cost of goods manufactured and sold, the final total on the schedule (COGS) is disclosed
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Underapplied Overhead
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• Less overhead was applied than was incurred
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Variable Costing
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• Inventory includes only variable product costs, the income statement is presented using the contribution margin approach, with variable product costs subtracted from sales revenue to determine the contribution margin
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Work in Process Inventory
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• Includes partially completed products
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Cost Per Equivalent Unit
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• Used to allocate the total cost incurred
• CPEU = Total Cost / Number of Equivalent Whole Units |
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Equivalent Whole Units
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• A rational allocation requires converting partially finished into equivalent “whole” products
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First-In, First-Out (FIFO) Method
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• Accounts for the degree of completion of both beginning and ending inventory, but it is more complex to apply
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Hybrid Costing System
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• Combine features of both process and job-order costing systems
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Job Cost Sheet
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• Product costs for each individual job are accumulated on this. AS each job moves through production, detailed cost information for materials, labor, and overhead is recorded on the job cost sheet
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Job-Order Costing System
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• Accumulate costs by individual products
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Material Requisition Form
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• Before starting a job, the job supervisor fills this out, which lists materials needed to begin work, authorization of raw materials to be release form storage to production
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Process Costing System
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• Allocate costs evenly to homogenous products
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Transferred-In Costs
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• Costs that are transferred to one department to another. They are combined with the additional materials, labor, and overhead costs
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Weighted Average Method
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• Does not account for the state of completion of units in beginning inventory, equivalent units are computed for ending inventory only
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Work Ticket
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• “Time Card” provides space for a job number, employee id, and work description. Records the amount of time spent on each project
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