301. If you possess these six traits, then you’ll have the potential to become a leader who inspires others to readily and energetically channel their efforts toward achieving organizational goals.302. In this example, the company is using a type of extrinsic incentive known as a bonus to highlight a particular goal and to presumably motivate employees to achieve it.303. The bonus system did motivate employees to attain the time reduction goal; however, it also had the unintended consequences of causing employees to neglect product quality, thereby increasing repair costs, product returns, and customer defections.304. In other words, what may have seemed like a well-intended extrinsic incentive actually produced dysfunctional results for the company.305. Accounting is the language of business and you’ll need to speak it to communicate effectively with and influence fellow managers.306. Conversely, managerial accounting is concerned with providing information to managers within an organization so that they can formulate plans, control operations, and make decisions.307. The notion of different cost classifications for different purposes is the most important unifying theme of this chapter and one of the key foundational concepts of the entire textbook.308. Direct materials refers to raw materials that become an integral part of the finished product and whose costs can be conveniently traced to the finished product.309. Indirect labor refers to employees, such as janitors, supervisors, materials handlers, maintenance workers, and night security guards, that play an essential role in running a manufacturing facility.310. Manufacturing overhead also includes other indirect costs that cannot be readily traced to finished products such as depreciation of manufacturing equipment and the utility costs, property taxes, and insurance premiums incurred to operate a manufacturing facility.311. The term conversion cost is used to describe direct labor and manufacturing overhead because these costs are incurred to convert direct materials into finished products.312. The matching principle is based on the accrual concept that costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized.313. Work in process consists of units of product that are only partially complete and will require further work before they are ready for sale to the customer.314. Rather, as explained above, they are recorded as expenses in the period in which the related products are sold.315. Notice that product costs flow through three inventory accounts on the balance sheet prior to being recognized as part of cost of goods sold in the income statement.316. While there are many activity bases within organizations, throughout this textbook, unless stated otherwise, you should assume that the activity base under consideration is the total volume of goods and services provided by the organization.317. Manufacturing overhead usually includes various fixed costs such as depreciation, insurance, property taxes, rent, and supervisory salaries.318. Consequently, as the activity level rises and falls, total fixed costs remain constant unless influenced by some outside force, such as a landlord increasing your monthly rent.319. Differential cost is a broader term, encompassing both cost increases (incremental costs) and cost decreases (decremental costs) between alternatives.320. In speaking of changes in cost and revenue, the economist uses the terms marginal cost and marginal revenue.
