Accounting Chap 2

  1. What three activities do managers carry out?
    Planning, Directing & Selling, and Controlling.
  2. Define Planning
    establishing a basic strategy, selecting a course of action, and specifying how the action will be implemented.
  3. Define Directing and Motivating
    mobilizing people to carry out plans and routine operations
  4. Define Controlling
    ensuring that the plan is carried out and modified as circumstances change
  5. Managerial Accounting
    concerned with providing information to managers
  6. Financial Accounting
    concerned with providing information to stockholders, creditors, and others who are outside the organization.
  7. Raw Materials
    any materials that are used in a final product
  8. Direct Materials
    those materials that become an integral part of the finished product and whose costs can be convenientl traced to the finished product
  9. Indirect Materials
    Materials such as solder and glue and are included as part of manufacturing overhead
  10. Direct Labor
    consists of labor costs that can easily be traced to individual units of product. Ex. assembly-line workers at Toyota
  11. Indirect Labor
    Labor costs that cannot be physically traced to particular products
  12. Manufacturing overhead
    Includes all manufacturing costs except direct materials and direct labor. Includes indirect materials, labor, maintenance and repairs. Also heat and light, property taxes, depreciation, and insurance on manufacturing facilities.
  13. What are the 2 categories of nonmanufacturing costs?
    Selling Costs and Administrative costs
  14. Selling Costs
    all costs that are incurred to secure customer orders and get the product to the consumer
  15. Administrative costs
    all costs associated with general management of an oganization rather than with manufacturing or selling. Ex. executive compensation, general accounting, secretarial, public relations, and similar costs.
  16. Product Costs
    all costs included with acquiring or making a product. Ex. direct materials, direct labor, and manufacturing overhead. Generally assigned to an inventory account. Also known as inventoriable goods.
  17. Period Costs
    All costs that are not product costs. The sales commissions and rental costs of administrative offices are period costs. They are not included as part of the cost of either purchased or manufactured goods. All selling and admin costs are period costs
  18. Prime Cost
    sum of direct materials cost and direct labor cost
  19. Conversion Cost
    used to describe direct labor and manufacturing overhead because these costs are incurred to convert materials into the finished product.
  20. Raw Materials
    materials that are used to make a product
  21. Work in Process
    consits of units of product that are only partially complete and will require further work before they are ready for sale to a customer.
  22. Finished Goods
    consist of completed units of product that have not been sold to customers
  23. Basic equation for inventory accounts
    beginning balance + additions to inventory - Withdrawals from inventory = Ending Balance
  24. Cost of goods sold equation
    COGS = Beginning finished goods inventory + cost of goods manufactured - ending finished goods inventory
  25. Variable Cost
    a cost that varies in direct proportion to changes in the level of activity
  26. Fixed Cost
    cost that remains constant, in total, regardless of changes in the level of activity.
  27. Relevant Range
    range of activity within the assumptions about variable and fixed costs are valed.
  28. Direct Cost
    can be easily and conveniently traced to a specific cost object.
  29. Indirect Cost
    a cost that cannot easily and conveniently be traced to a specific cost object.
Card Set
Accounting Chap 2
Terms and Equations for chapter 2