Chapter 1 - Intro to Managerial Accounting
Unlike financial accounting, which is for external users, this type of accounting provides information specifically for a company's internal users.
Managerial Accounting
This type of cost remains constant in total regardless of changes in activity level, but decreases per unit as activity increases
Fixed Cost
This is the point where total revenues equal total costs, resulting in zero profit.
Break-Even Point
These two characteristics are required for a cost or revenue to be considered "relevant" to a decision.
Future items and items that differ across alternatives
This is a financial plan for the future that identifies objectives and the specific actions needed to achieve them.
These are the three broad objectives of managerial accounting: to provide information for planning, controlling, and what is the third activity?
Decision Making
This term refers to the range of activity over which a company's assumed cost relationships are valid.
Relevant Range
This is the difference between sales and total variable costs; it represents the amount available to cover fixed costs and then provide for profit.
Contribution Margin
This term describes a cost that cannot be affected by any future action and should be ignored by managers when making relevant decisions.
Sunk Costs
First step in creating a sales budget is to develop this.
Sales Forecast
These specific types of organizational positions have direct responsibility for the basic objectives of an organization, such as a VP of Manufacturing.
Line Positions
This specific type of cost has both a fixed and a variable component—for example, a utility bill with a base charge plus a usage fee
Mixed Cost
This concept describes the units sold or revenue earned above the break-even point.
Margin of Safety
This type of fixed expense is directly traceable to a specific segment and will vanish if that segment is eliminated.
Direct Fixed Expense
This type of budget is a moving 12-month plan that adds a new future month as each current month expires, forcing managers to plan ahead constantly.
Continuous Budget
This term describes the set of activities required to design, develop, produce, market, deliver, and provide services for a product.
While variable costs change in direct proportion to activity, these costs follow a "discontinuous" pattern, remaining constant for a certain range and then jumping to a higher level.
Mixed Cost
This term refers to the relative combination of different products being sold by a company.
Sales Mix
This method of determining cost starts with the price customers are willing to pay and is most effectively used during the design and development stage of a product's life cycle
This details the inflows and outflows of cash and the overall financial position
Cash Budget
This 2002 Act was passed by Congress to limit securities fraud and accounting misconduct following scandals like Enron and WorldCom.
Sarbanes-Oxley Act (SOX)
This specific method of separating mixed costs uses only the highest and lowest points of activity to calculate the cost formula.
High-Low Method
This is the use of fixed costs to create higher percentage changes in profits as sales activity changes.
Operating Leverage
When an organization is faced with a scarce resource or production constraint, managers should choose the product mix that produces the highest amount of this specific metric.
Contribution margin per unit of scarce resource
In the Master Budget, these two main categories of budgets are prepared; the first describes income-generating activities, while the second details cash flows and financial position.
Operating Budgets and Financial Budgets