introduction chapters
chapter 17
Introduction to
Managerial Accounting
goals discussion
goals
achievement
fill
in the blanks
multiple
choice
problems
check list and key terms
Following is a "checklist" of selected key concepts that are likely to be included on an exam. Review and check-off each noted item to be certain that important concepts have not been overlooked in your study.
Distinguish between financial and managerial accounting, and note the importance of specific rules to each.
Be familiar with the Certified Management Accountant and Certified Financial Manager designations issued by the Institute of Management Accountants.
Know how business value relates to management decision making.
Describe and differentiate between planning, control, and decision-making functions.
Be able to explain how strategy, positioning, and budgets are important parts of the planning process.
Understand the need for defining the core values of an organization.
Know the basic nature of operating, capital, and financing budgets.
Be able to briefly compare and contrast job order, processing, and activity-based costing methods.
Distinguish between absorption and direct costing techniques.
Be able to describe recent innovations in production management and information systems: ERP, B2B, RFID, M2M.
Be familiar with inventory management concepts like JIT and EOQ.
Know the basic job duties of a controller and a CFO.
What legislation has contributed to the need for controls within a business organization.
What is the purpose of setting standards and monitoring deviations from those standards?
What is a balanced scorecard?
Discuss the concepts of total quality management and the theory of constraints.
What three costs are incurred by a manufacturing concern?
Distinguish between direct and indirect materials.
Distinguish between direct and indirect labor.
Identify costs that are typically regarded as part of manufacturing overhead.
What comprises prime and conversion costs?
What is the difference between a product (inventoriable) cost and a period cost, and why is this important to the accountant?
Be able to prepare the financial statements of a manufacturer, noting specifically the special inventory categories on the balance sheet and the expanded nature of the income statement.
Be able to demonstrate the calculation of cost of goods manufactured.
Be able to diagram the cost flows within a manufacturing company.
KEY TERMS AND DEFINITIONS (with links to discussion in text)
| activity-based costing | (ABC) A costing system for situations where overhead is high and/or a variety of products are produced; costs are traced to activities and then activities are allocated to production |
| B2B | (Business to Business) A system that enables data interchange between companies; sometimes sufficiently robust to permit automatic inventory replenishment, etc. |
| budget | A planning tool that outlines the financial plans for an organization; there are various types of budgets -- operating, capital, and financial |
| CFM | Certified Financial Manager; a professional designation of competency in the field of financial management that is issued by the Institute of Management Accountants |
| CMA | Certified Management Accountant; a professional designation of competency in the field of management accounting that is issued by the Institute of Management Accountants |
| controller | The primary person responsible for the cost and managerial accounting functions |
| conversion cost | Cost components need to change raw materials to finished goods, specifically direct labor and manufacturing overhead |
| cost accounting | The process by which an organization's cost is collected, assigned, and interpreted |
| cost of goods manufactured | The amount of cost attributable to goods reaching the end of production; beginning work in process (wip) + (direct materials, direct labor, manufacturing overhead) - ending wip |
| direct labor | Gross wages paid to those who physically and directly work on the goods being produced |
| direct material | The costs of all materials that are an integral part of a finished product and that have a physical presence that is readily traced to that finished product |
| ERP | (Enterprise Resource Package) Comprehensive database software that tracks an almost endless array of business and accounting data |
| finished goods | Finished goods represent the cost of completed products awaiting sale to a customer |
| IMA | Institute of Management Accountants; a professional association for management accountants that sponsors the CMA and CFM designations |
| inventoriable cost | product costs that attach to inventory |
| job costing method | A costing approach whereby actual labor and material is tracked for each job or product |
| M2M | (Machine to Machine) enables connected devices to communicate with each other |
| manufacturing overhead | all costs of manufacturing other than direct materials and direct labor (also called factory overhead) |
| period cost | A cost not attributable to the acquisition or manufacture of inventory; expensed as incurred |
| prime cost | Product costs that are direct in nature; direct materials and direct labor |
| process costing methods | A product costing method particularly well suited to situations where production occurs in a continuous process; costs are pooled and assigned to aggregate output |
| product cost | Costs that attach to a product; the summation of direct materials, direct labor, and factory overhead |
| raw materials | the components that will be used in manufacturing units that are not yet started -- also known as direct materials |
| RFID | (radio frequency identification) Micro processes embedded in inventory that emit radio frequency signals that enable a computer to automatically track inventory |
| scorecards (balanced) | A system for evaluating elements that are important to the organization and under the control of an employee holding that position |
| SG&A | Selling, general, and administrative costs; the period costs of the business |
| standards | Benchmarks against which actual productive activity is compared |
| theory of constraints | (TOC) Efficiency is improved by seeking out and eliminating constraints within the organization |
| total quality management | (TQM) A process for continuous improvement by focusing on customer service and systematic problem solving via teams made up of front-line employees |
| variances | Deviations from the norm that may provide warning signs of situations requiring corrective action by managers |
| work in process | Goods that are in production but not yet complete; an accumulation of monies spent on direct material, direct labor, and applied manufacturing overhead |