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29 Cards in this Set

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Managerial Accounting (purposes)
Internal and External transactions for future, planning directing and deciding, rules set by management and IMA, not required, reported only as needed, cost-benefits
Financial Accounting (purposes)
Externally reported to investors/stakeholders/SEC, based on historical info, rules set by GAAP and SEC, required by SEC, annually and quarterly reported, determines worth of investment
Managerial Ethics (4 Necessary parts and info)
Managers must follow IMA, must avoid and report fraud to directors, avoid and stop any padding in the budget
COMPETENCE
CONFIDENTIALITY
INTEGRITY
CREDIBILITY
Cost-Benefit Analysis
HELPS MAKE A DECISION! PV of FV benefits to determine compare costs, outcomes can be different. QUANTITATIVE and QUALITATIVE.
Quantitative Benefits
$$$$ and more inventory sold
Qualitative
Customer service increased and loyalty gained
Cost Object
the object being measured ie) materials, hours, units, etc.
Cost Driver
(Price)/(cost rate)
Direct Costs
Measurable and traceable to a cost object
Indirect Costs
untraceable to a cost object, but have an affect on VC or mixed costs
Relevant Costs
future oriented and can be changed
Irrelevant Costs
focuses on past costs that were paid off and will not recur
Period Costs
not related to the manufacturing of a cost object, but rather is considered overhead
Product Costs
related directly to the manufacturing of a product. factory costs, direct material costs, direct labor, electricity in factory, depreciation of the building, factory janitor. NOT: corporate building, corporate salaries, sales commissions, etc.
Cost of Goods Sold (Calculation steps)
Beginning inventory
+purchases
=Cost of goods available
-ending inventory
=COGS
The importance of Overhead Allocation
decision-making advice
efficiency w/ resources

identify indirect costs and measure them in order to eliminate waste and reduce use of resources; allows managers to allocate funds not only to the direct, traceable costs BUT ALSO to the indirect costs that have been incurred historically and will be incurred again
Plantwide Overhead
(total estimated cost of managerial overhead)/(allocation base)
Departmental Overhead
(est dept cost)/(allocation base)
ABC Costing
1. Identify Activities and MOH of each
2. Select allocation bases for activities and estimate a total for the activity
3. (Estimated total indirect cost of activity)/(Estimated total quantity of cost allocation base)
Contribution Margin Income Statement
Sales Revenue
-total Variable Costs
=CONTRIBUTION MARGIN
-total Fixed Costs
=Operating Income
Contribution Margin in $
Sales Revenues - Total VC
Unit Contribution Margin
Sales Price per unit - cost per unit
OR (sales revenue)/(Total Units sold) - (Total VC)/(UNITS PRODUCED)
Contribution Margin (purpose)
to show how much revenue is remaining to pay off fixed costs; (for ratio) to determine what percent of revenue contributes towards paying for variable costs
Contribution Margin Ratio
(CM in $)/(Revenues)

shows how much $ is remaining to pay off Fixed Costs
Break-Even Point (purpose)
the number of units necessary to break-even

revenues and costs are EQUAL
profits are 0
Break-Even Point (units)
Fixed Expenses=(Sales Price per unit - Cost per Unit)

(Fixed Expenses)/(CM)
Break-Even Point ($)
(Total Fixed Expenses in $)/(CM Ratio)
Margin of Safety (calculation and purpose)
(expected sales) - (break-even point)

tells managers how much sales can drop before reaching the break-even point
Operating Leverage (calculation and purpose)
(CM)/(Operating Income)

tells how much more revenue is available in relation to operating income, shows how much revenue as a % is being spent on fixed costs