Cost Accounting

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Finance - Personal Finance

michael1tekrzp Created by 10 mon ago

Cards in this deck(44)

Quantitative plans for the future, stated in either physical or financial terms or both

a method for translating the goals and strategies of an organization into operational terms

the process of 1. Setting standard 2. Receiving feedback on actual performance 3. Taking corrective action whenever actual performance deviated significantly from planned performance

Forces managers to plan Provides resource information to improve decision-making It aids in the use of resources and employees by setting a benchmark for evaluation performance Improves communication and coordination

a comprehensive financial plan for the year made up of various individual departmental and activity budgets. Prepared for a one-year period, which corresponds to the company's fiscal year.

concerned with the income-generating activities of a firm (sales, production and finished goods inventories

concerned with inflows and outflows of cash with financial position. Planned cash inflows and outflows are detailed in a cash budget and the expected financial position (at the end of the period) is shown in a budgeted balance sheet.

a moving 12-month budget. Most companies prepare a budget once a year, however some organizations use continuous budgeting

describes how many units must be produced in order to 1. Meet sales needs and 2. Satisfy ending inventory requirements. Units to be produced = budgeted unit sales + desired units in ending inventory - units in beginning inventory

details the raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories

a detailed plan showing the number of units that must be produced during a period in order to satisfy both sales and inventory needs

a 12-month budget that rolls forward one month as the current month is completed

A budget of the estimated direct materials, direct labor, and factory overhead consumed by sold products.

a budget showing the dollar amount of unsold finished goods inventory that will appear on the ending balance sheet

a budget that outlines planned expenditures for selling and distribution activities

a budget that estimates cash inflows and outflows during a particular period like a month or a quarter

collecting and processing payments from customers

the price that should be paid for a specific quantity of input

specify how much of an input should be used to make a product or provide a service

the product of these two standards: Standard price × Standard quantity (SP × SQ).

(AP x AQ) - (SP x SQ)

AQ x (AP - SP)

(AQ - SQ) x SP

occurs whenever actual prices or usage of inputs are lesser than standard prices or usage

occurs whenever actual prices or usage of inputs are greater than standard prices or usage

(SP*AQ)-(SP*SQ) or (AQ-SQ)SP If the actual quantity is greater than the standard quantity the MUV is unfavorable If the actual quantity is less than the standard the MUV is favorable

(AR*AH) - (SR*AH) or (AR-SR)AH

(AH*SR) - (SH*SR) or (AH-SH)SR

a system that measures the results of each responsibility center and compared those results with expected or budgeted outcomes

part of the business where a manager is accountable for specified activities

manager is responsible only for costs Example: a production department within the factory. The supervisor of this department does not set sold prices or make marketing decision but can control manufacturing costs

the manager is accountable for revenues only

The manager is responsible for managing and controlling both revenue streams and costs

a business segment whose manager has control over cost, revenue, and investments in operating assets

decisions are made at the very top level and lower-level managers are charger with implementing those decisions

allows managers at lower level the exposure/authority to make and implement key decisions pertaining to their areas of responsibility

Better access to local information: lower level manager who are in contact with immediate operating conditions have better access to local information Cognitive limitations: not possible to have the expertise and training to process and use all information More timely response: local manager both make and implement decisions Focusing on central management: higher managers can focus on strategic planning and decision making Training and evaluation of segment managers: an organization always needs well trained managers to relapse higher level managers over time Motivation of segment managers: greater responsibility produces more job satisfaction Enhanced competition: allows the company to determine each division's contribution to profit and expose each division to market forces

= operating income/average operating assets = (operating income/sales)*(sales/average operating assets) = operating income margin*operating asset turnover

(beginning assets + ending assets) / 2

earning before interest and income taxes and is typically used for division

all assets acquired to generate income

after-tax operating income m- (weighted average cost of capital*total capital employed). ($ not %)

Net Operating Income - (Average Operating Assets x Minimum Required Rate of Return)

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