Study Notes Acc 503

Managerial Accounting: Week 1

Key Phrases / Concepts:

1. Managerial accounting: the process of obtaining, creating, and analyzing relevant information to achieve organizational goals.

2. Costs: usage of resources.

3. Cost objects: the item at the center of a decision for which cost is calculated. A cost object can be any level of specification, including a particular manufactured unit or hour of service provided, an entire product line, a department, division, or business unit, or a facility within an organization.

4. Direct costs: Costs that are traceable to a cost object. In a manufacturing setting, direct costs include materials that are specific to a given unit and labor that is directly attributable to a given unit. In a service setting, direct costs include labor that is performed for a specific client or engagement. Differentiated from indirect costs, which are impossible or cost-prohibitive to trace to a specific cost object.

5. Indirect costs: Costs that are impossible or cost-prohibitive to trace to a cost object.

6. Cost behavior: Describes the relation of costs to some activity of interest. Variable costs fluctuate with the changes in the level of activity, whereas fixed costs do not fluctuate with the changes in the level of activity. Cost behavior is particular to a given relevant range.

7. Variable costs: Costs that vary with production (or some other activity) volume. Total variable costs increase as volume increases.

8. Fixed costs: Costs that do not vary with production (or some other activity) volume, in a short-term horizon.

Guiding Questions:

1. What is managerial accounting, and why is it important?

Managerial accounting focuses on internal users such as executives, product managers, sales managers, to make important decisions. It is important because it contains additional information on financial and non-financial metrics that aide decision making and facilitation.

2....