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COST ACCOUNTING by Raiborn and Kinney

CHAPTER 1: Introduction to Cost Accounting


Chapter Summary
1. Accounting
provides
information
to
external
parties
(stockholders, creditors, and
various regulatory bodies) for
investment
and
credit
decisions.
helps estimate the cost of
products
produced
and
services provided by the
organization.
provides information useful
to the internal managers who
are responsible for planning,
controlling, decision making,
and evaluating performance.
2. The
purpose
of
financial,
management, and cost accounting
are that
financial
accounting
is
designed to meet external
information needs and to
comply
with
generally
accepted
accounting
principles.
management
accounting
attempts to satisfy internal
users information needs.
cost accounting creates an
overlap between financial
accounting and management
accounting
by
providing
product costing information
for financial statements and
quantitative, disaggregated,
cost-based information that
managers need to perform
their responsibilities.
3. The organizational mission and
strategy are important to cost
accountants because they help

establish
appropriate
measures
of
accomplishment.
develop,
implement,
and
monitor
the
necessary
information systems.
4. The common corporate strategies
are
cost leadership, which refers
to maintaining a competitive
edge
by
undercutting
competitor prices.
product differentiation, which
refers to offering (generally
at a premium price) superior
quality products or more
unique
services
than
competitors
5. The value chain is a set of valueadding functions or processes that
converts inputs into products and
services for company customers,
and
organizations
add
value
through the value chain functions
of
research and development
product design
supply
production
marketing
distribution
customer service
6. A balanced scorecard
is a four perspective measure
of critical goals and targets
needed
to
operationalize
strategy.
looks at the success factors
for learning and growth,
internal business, customer
satisfaction, and stockholder
value.

COST ACCOUNTING by Raiborn and Kinney

CHAPTER 1: Introduction to Cost Accounting

includes
financial
and
nonfinancial, internal and
external,
long-term
and
short-term, and lead and lag
indicators.

7. The organizational structure


is composed of people,
resources other than people,
and commitments that are
acquired
and
arranged
relative to authority and
responsibility
to
achieve
organizational
mission,
strategy, and goals.
is used by cost accountants
to
understand
how
information is communicated
between
managers
and
departments as well as the
authority and responsibility
of each manager.
has line personnel who seek
to achieve the organizational
mission and strategy through
balanced scorecard targets.
has staff personnel, such as
cost accountants, who seek
to advise and assist line
personnel.
8. Some sources for professional
ethics include the
IMAs Code of Ethics that
refers
to
issues
of

competence, confidentiality,
integrity, and objectivity.
Sarbanes-Oxley
Act
that
requires corporate CEOs and
CFOs to sign off on the
accuracy of financial reports.
False
Claims
Act
that
provides for whistle-blowing
protection.
Foreign Corrupt Practices Act
that
prohibits
U.S.
corporations from offering or
giving bribes to foreign
officials to influence those
individuals to help, obtain, or
retain business.

9. Generally accepted cost accounting


standards
do not exist for companies
that are not engaged in
contracts with the federal
government; however, the
statements on management
accounting and management
accounting guidelines are
well-researched suggestions
related
to
management
accounting practices.
are prepared by the Cost
Accounting Standards Board
for companies engaged in
federal
government
cost/bidding contracts.