Management Accounting Glossary PDF

Management Accounting Glossary 1. Managerial accounting is the process of identifying, measuring, interpreting, and communicating information in pursuit of an organization’s goals. 2. Managerial accountants are specialists in using the tools of managerial accounting. 3. Managerial accounting inf...

Management Accounting Glossary 1. Managerial accounting is the process of identifying, measuring, interpreting, and communicating information in pursuit of an organization’s goals. 2. Managerial accountants are specialists in using the tools of managerial accounting. 3. Managerial accounting information assists management through its attention directing function. 4. Balanced score-card is a model of business performance evaluation that includes several types of financial and nonfinancial performance measures. 5. Financial accounting is the use of accounting information for reporting to parties outside the organization. 6. Cost accounting system accumulates data about the costs of producing the company’s outputs. 7. Managers in line positions are directly involved in the provision of goods or services. 8. Managers in staff positions supervise activities that support overall mission, but they are only indirectly involved in operational activities. 9. The chief financial officer (CFO) is the designation given to the executive responsible for all accounting and finance functions. 10. Internal auditor is the director of an internal audit department, is responsible for reviewing the accounting procedures, records in both the managerial and financial accounting areas of responsibility. 11. The set of linked, value-creating activities, ranging from securing basic raw materials and energy to the ultimate delivery of products and services, is called the value chain. 12. Cost drivers include such characteristics of the value chain as production volume ,sales volume, product mix, number of orders, number of production runs, number of parts, types of service provided, and so forth. 13. A cost relationship refers to the correlation between costs and cost drivers. 14. The process of managing those cost relationships to the firm’s advantage is called strategic cost management. 15. A more useful measure of capacity is practical capacity, which allows for normal occurrences such as equipment (cash register) downtime and worker (cashier) fatigue or illness. 16. The process of making sense of big data and developing true and helpful insights from it is called data analytics. 17. One of the primary challenges of big data relates to making sure that so much data is valid and usable. This is called data governance. 18. The other key challenge of big data is to analyze such a large volume of data and draw insights from it that are useful for decision makers. The process of doing this is called data science. 19. Capacity mean the amount of resources a company applies to its value chain and the upper limit on the amount of goods or services that an organization can produce in a specified period of time using those resources. 20. An expense is defined as the cost incurred when a resource(asset) is used up for the purpose of generating revenue. 21. When the inventory asset is reduced, the product costs that have been recorded are reclassified as an expense called cost of goods sold. 22. Inventoriable cost, is a product cost that stored as the cost of inventory until the goods are sold. 23. Period costs are identified with the period of time in which they are incurred rather than with units of purchased or produced goods. 24. A product cost is a cost assigned to inventory, to goods that are either purchased or manufactured foe sale. 25. Operating expenses are treated as period costs and as such are expensed during the period in which they are incurred. 26. Gross profit (sometimes called gross margin) is the portion of revenues left after deducting just the costs that have been classified as cost of sales, without considering any other costs of operating the company. 27. Operating income (operating profit) goes one step further to report the profit remaining from revenues after deducting both cost of sales and all period costs of operations. 28. Raw-material inventory includes all material before they are placed into production. 29. Work-in-process inventory refers to manufactured products that are only partially completed at the date when the balance sheet is prepared. 30. Finished-goods inventory refers to manufactured goods that are complete and ready for sale. 31. The cost of salaries, wages, and fringe benefits for personnel who work directly on the manufactured products is classified as direct-labor cost. 32. Manufacturing overhead (production overhead) includes three types of costs; indirect material, indirect labor, and other manufacturing costs. 33. The cost of personnel who do not work directly on the product, but whose services are necessary for the manufacturing process, are classified as indirect labor. 34. Service departments (support departments) are those that do not work directly on manufacturing products but are necessary for the manufacturing process to occur, such as equipment-maintenance departments. 35. An overtime premium is the extra compensation paid to an employee who works beyond the time normally scheduled. 36. Idle time is time that is not spent productively by an employee due to such events as equipment breakdowns or new setups of production runs. 37. Total manufacturing cost includes direct material, direct labor, and manufacturing overhead. 38. Direct labor and manufacturing overhead are called conversion costs. 39. Direct material and direct labor are referred to as prime cost. 40. A variable cost changes in total, in direct proportion to a change in the level of activity. 41. A cost driver is a characteristic of an activity or event that causes costs the spending. 42. A fixed cost remains unchanged in total as the level of activity (or cost driver) varies. 43. A cost management system (CMS) is a management planning and control system. 44. Activity accounting is a cost management system on the organization’s activities. 45. Managerial accountants have developed a system for determining the cost of producing goods or services called activity-based costing (ABC) system. 46. The cost management is facilitated by tracing costs to the department or work center in which the cost was incurred and tracing of costs to departments is known as responsibility accounting. 47. An entity, such as a particular product, service or department, to which a cost is assigned is called a cost object. 48. A cost that can be traced to a particular cost object is called a direct cost of that cost object. 49. A cost that is not directly traceable to a particular cost object is called an indirect cost of that cost object. 50. A manager can control or heavily influence the level of a cost, that cost is classified as a controllable cost. 51. An opportunity cost is defined as the benefit that is sacrificed when the choice of one action precludes taking an alternative course of action. 52. Sunk costs are costs that have been incurred in the past. 53. A differential cost is the amount by which the cost differs under two alternative actions. 54. The average cost per unit is the total cost, for whatever quantity is manufactured, divided by the number of units manufactured. 55. product costing is the assignment of production costs to all output of the organization, whether items manufactured, goods merchandised (resold), or services delivered. 56. A product-costing system accumulates the costs incurred in a production process and assigns those costs to the organization’s outputs. 57. Job-order costing is used by companies with job-shop or batch-production manufacturing processes. 58. A process-costing system accumulates all the production costs for a large number of units of output, and then these costs are averaged over all of the units. 59. The subsidiary ledger account assigned to each job is a document called a job-cost record. 60. A material requisition form is used as the basis for transferring the cost of the requisitioned material from the Raw-Material inventory account to the Work-in- Process inventory account, and for entering the direct-material cost on the job-cost record for the production job in process. 61. A document such as the material requisition form, which is used as the basis for an accounting entry, is called a source document. 62. Supply chain refers to the flow of all goods, services, and information into and bill of materials out of the organization. 63. A bill of materials (BOM) is a list all of the materials needed. 64. A time record is a form that records the amount of time an employee spends on each production job. 65. The process of assigning manufacturing-overhead costs to production jobs is called overhead application (overhead absorption). 66. Volume-based cost driver (activity base) assign costs roughly in proportion to the amount (volume) of products produced. 67. Manufacturing overhead is the amount of actually incurred for indirect material, indirect labor, factory rental, equipment depreciation, utilities, property taxes, and insurance are recorded as debits to the account. 68. The amount by which actual overhead exceeds applied overhead is called underapplied overhead. 69. The actual overhead had been less than applied overhead ,the difference would have been called overapplied overhead. 70. Some companies use a more accurate, but more complicated , procedure called proration. 71. The schedule details the costs of direct material, direct labor, and manufacturing overhead applied to work in process is called schedule of cost of goods manufactured. 72. The amount transferred from Work-in-Process inventory to Finished-Goods inventory is called the cost of goods manufactured. 73. Inventory using a predetermined overhead rate, the product costing system is referred to as normal costing. 74. Actual costing is a system in which direct materials and direct labor are added to work –in-process inventory at their actual amounts and actual overhead is allocated to work in process using an actual overhead rate computed at the end of each accounting period. 75. Throughput time (cycle time) is the average amount of time required to convert raw materials into finished goods ready to be shipped to customers. 76. The overhead was applied to products using a single predetermined overhead rate based on machine hours , it is known as a plantwide overhead rate. 77. When a company uses departmental overhead rates, the assignment of manufacturing- overhead costs to production jobs is accomplished in two stages, comprising what is called two-stage cost allocation. 78. All manufacturing-overhead costs are assigned to departmental overhead centers is called cost distribution ( cost allocation). 79. Service departments are departments that do not work directly on the firm’s products but are necessary for production to take place. 80. All service department costs are reassigned to the production departments through a process called service department cost allocation. 81. Process-costing system is used in repetitive production environments, where large numbers of identical or very similar products are manufactured in a continuous flow. 82. The costs assigned to these partially completed products are called transferred-in costs. 83. Equivalent units is used in process costing to refer to the amount of manufacturing activity that has been applied to a batch of physical units. 84. Departmental production report is a typical process – costing system and prepared for each production department at the end of every accounting period. 85. The production processes described above are referred to as batch manufacturing processes. 86. Product costing system is used when conversion activities are very similar across product lines but the direct materials differ significantly. 87. Labor hours are related closely to the volume of activity in the factory these traditional product-costing systems are said to be volume-based (or throughput- based) costing systems. 88. Activity-based costing (ABC) systems, which follow a special two-stage procedure to assign overhead costs to products. 89. The overhead costs assigned to each activity comprise an activity cost pool. 90. The machine-related activity cost pool represents a unit-level activity since every product unit requires machine time. 91. Batch-level activities include the setup, purchasing, material handling, quality assurance, and packing/shipping activity cost pools. 92. Facility-level activities are required in order for the entire production process to occur. 93. The classification of activities into unit-level, batch-level, product-sustaining-level, and facility-level activities is called a cost hierarchy. 94. The consumption ratio is the proportion of an activity consumed by a particular product. 95. A cost driver is a characteristic of an event or activity that results in the incurrence of costs. 96. Story-boarding is a procedure used to develop a detailed process flowchart, which visually represents activities and the relationships among the activities. 97. An activity dictionary is a complete listing of the activities identified and used in the ABC analysis. 98. A bill of activities is another commonly used element in an ABC analysis. 99. Using activity-based costing (ABC) information to support organizational strategy, improve operations, and manage costs is called activity-based management or ABM. 100. Activity analysis is the detailed identification and description of the activities conducted in the enterprise. 101. Non –value added activities are operations that are either (1)unnecessary and dispensable or (2) necessary but inefficient and improvable. 102. A set of linked activities (such as that depicted above ) is called a process. 103. Customer-profitability analysis uses activity-based costing to determine the activities, costs, and profit associated with serving particular customers. 104. A version of ABC that has found wide acceptance i service-industry settings is called time-driven activity-based costing (TDABC). 105. A cost prediction is a forecast of cast at a particular level of activity. 106. A variable cost changes in total in direct proportion to a change in the activity level (or cost driver). 107. The determination of cost behavior, which is often called cost estimation. 108. Some costs are nearly variable, but they increase in small steps instead of continuously Such costs, called step-variable costs, usually include inputs that are purchased and used in relatively small increments. 109. A fixed cost remains unchanged in total as the activity level (or cost driver) varies. 110. Some costs remain fixed over a wide range of activity but jump to a different amount for activity levels outside that range.Such costs are called step-fixed costs. 111. A semivariable (or mixed) cost has both a fixed and a variable component. 112. A curvilinear cost behavior pattern has a curved graph. 113. Relevant range is the range of activity within which management expects the company to operate. 114. A engineered cost bears a definitive physical relationship to the activity measure. 115. A committed cost results from an organization’s ownership or use of facilities and its basic organization structure. 116. A discretionary cost arises as a result of a management decision to spend a particular amount of money for some purpose. 117. The account-classification method of cost estimation, also called account analysis. 118. Account analysis, involves a careful examination of the organization’s ledger accounts. 119. Scatter diagram is the analyst visualize the relationship between cost and the level of activity (or cost driver). 120. An outlier is a data point that falls far away from the other points in the scatter diagram and is not representative of the data. 121. The cost line fit to the data using least-squares regression is called a least- squares regression line (a regression line). 122. Multiple regression is a statistical method that estimates a linear (straight- line) relationship between one dependent variable and two or more independent variables. 123. A completely different method of cost estimation is to study the process that results in cost incurrence this approach is called the engineering method of cost estimation. 124. Big data, means a massive volume of both structured and unstructured data that is so large it is difficult to process using traditional methods. 125. Managerial accounting is the process of identifying, measuring, analyzing, interpreting, and communicating information in pursuit of an organization’s goals. 126. Data analytics is the process of examining data sets in order to draw conclusions about the information they contain, increasingly with the aid of specialized systems and computer software. 127. Data visualization is the presentation of data in a graphical or pictorial format to help people discern patterns, trends, relationships, and other complex scenarios embedded in the data. 128. Tableau is an interactive, data visualization software package used to present data analytic results in a graphical or pictorial format that facilitates drawing insights and conclusions from the data. 129. Cost – volume –profit analysis (or) CVP analysis is the analytical technique used by managerial accountants to address these questions. 130. The break-even point is the volume of activity where the organization’s revenues and expenses are equal. 131. This income statement highlights the distinction between variable and fixed expenses shows the total contribution margin. 132. The unit contribution margin divided by the unit sales price is called the contribution-margin ratio. 133. The relationship between profit and volume of activity, a cost-volume-profit (CVP) graph. 134. The safety margin of an enterprise is the difference between the budgeted sales revenue and the break-even sales revenue. 135. For any organization selling multiple products, the relative proportion of each type of product sold is called the sales mix. 136. Weighted-average unit contribution margin is the average of the several products’ unit contribution margins, weighted by the relative sales proportion of each product. 137. Manager might do the CVP analysis using different estimates for the ticket prices, sales mix for regular and box seats, unit variable expenses, and fixed expenses.This approach is called sensitivity analysis. 138. The gross margin is computed by subtracting cost of goods sold from sales. 139. Contribution income statement is the contribution format highlights the distinction between variable and fixed expenses. 140. The cost structure of an organization is the relative proportion of its fixed and variable costs. 141. The extent to which an organization uses fixed costs in its cost structure is called operating leverage. 142. The both variable and fixed manufacturing overhead in the product costs that flow through the manufacturing accounts. This approach to product costing is called absorption costing (full costing). 143. Production managers have a goal of minimizing inventory levels, and systems designed for this purpose are called just-in-time inventory systems or JIT. 144. A product’s quality of design refers to how well it is conceived or designed for its intended use. 145. The quality of conformance refers to the extent to which a product meets the specifications of its design. 146. Total quality management, or TQM refers to the broad set of management and control processes designed to focus the entire organization and all of its  employees on providing products or services that do the best possible job of satisfying the customer. 147. Sustainable development, means business activity that produces the goods and services needed in the present without limiting the ability of future generations to meet their needs. 148. ESG investing, promotes investment in companies based in part on their performance with regard to the environment, society, and good corporate governance. 149. Environmental costs take many forms, such as installing scrubbers on a smokestack to comply with EPA regulations, improving a production process to reduce or eliminate certain pollutants, or cleaning up a contaminated river. 150. Environmental cost management is the strategic implementation of systems for identifying, measuring, controlling , and reducing the private environmental costs borne by a company or other organization.