Cost Accounting Chapter 1

is to provide the detailed cost data essential to management in controlling current operations and planning for the future. Cost accounting systems show what costs were incurred and how they were used.

A) The cost procedures must be designed to permit the determination of unit costs as well as total product costs. B) Unit costs are also useful in making a variety of marketing decisions, such as determining the selling price of a product, deciding how to meet competition, arriving at a contract bid price, and analyzing profitability.

is the process of establishing goals and objectives and determining the means by which they will be met.

aids planning by providing historical costs that can be used to estimate future costs and operating results and to decide whether to acquire additional facilities, change marketing strategies and obtain capital.

is the process of monitoring the company’s operations and determining whether the objectives identified in the planning process are being accomplished.

Periodically measuring actual operating results and comparing them to the plan; and taking necessary corrective action when the operating results deviate from the plan.

assigning responsibility for costs or production results to individuals who have the authority to influence them

compare planned or budgeted amounts to actual operating results and identify the difference, or variance, as favorable or unfavorable.

is the largest organization of accountants in industry in the world. It awards the Certified Management Accountant (CMA) certificate and issued a Statement of Ethical Professional Practice (appearing in the Appendix to Chapter 1 in the text) that must be adhered to by its members. These standards address a member’s responsibility in areas such as maintaining appropriate levels of professional competence, refraining from discussing confidential information, avoiding conflicts of interest and communicating information fairly and objectively. The second part of the document provides guidance for resolving ethical conflicts.

was written to protect shareholders and other stakeholders of companies whose stock is publicly traded by improving corporate governance

The means by which a company is directed and controlled

certification of the financial statements by the chief executive and financial officers
establishment of the Public Company Accounting Oversight Board (PCAOB)
severely limiting non-auditing services that an accounting firm provides to a company it audits,
requiring companies to include a report on the effectiveness of its internal controls in its annual report
making the Audit Committee of the Board of Directors responsible for decisions involving the company’s relationship with its audit firm
severe criminal penalties for alteration of business documents and for retaliation against whistleblowers.

focuses on the gathering of information for use in the preparation of financial statements for external users.

focuses on both historical and estimated data that management needs to conduct ongoing operations and do long-range planning.

includes those parts of both financial and managerial accounting that collect and analyze cost information. It provides the product cost data required for special reports to management (managerial accounting) and for inventory costing in the financial statements (financial accounting).

a company that purchases merchandise for resale, computes cost of goods sold by adding the amount of merchandise it purchased to beginning merchandise inventory, then subtracting the amount of ending inventory.

a company that uses labor and technology to convert raw materials into goods, computes cost of goods sold by adding cost of goods manufactured to beginning finished goods inventory and then subtracting ending finished goods inventory.

The balance sheet for a manufacturer includes the following three inventory accounts: 1) Finished goods 2) Work in process 3) Materials