BAR 3.0 Flashcards
What are the types of relevant costs for special order and make or buy marginal analyses
- Special Order - with excess capacity:
- only variable costs
- Special Order - without excess capacity:
- variable costs + opportunity cost of next best alternative
- Make or Buy - SAME AS ABOVE
What is the nature of sell or process further marginal analysis
Its a calculation used to determine whether to sell the product at joint connection or process further based on the assessment of the following:
Things to consider are whether incremental revenue is greater or less than incremental costs; if i. revenues > i. costs, process further, if i. revenues < i. costs, sell at joint point
What is the nature of keep or drop marginal analysis
This analysis classifies fixed costs as either avoidable (relevant) or unavoidable (irrelevant).
If contribution margin is > avoidable fixed costs, keep line
If contribution margin is < avoidable fixed costs, drop line
NOTE - ALWAYS PERFORM THIS ASSESSMENT BY TAKING TOTAL CM AND OPERATING INCOME OF ALL THE SEGMENTS THE COMPANY HAS
What are the formulas for Target Profit in units and dollars?
Units = FC + Pretax profit/CM per unit
Dollars = VC + FC + Pretax profit OR
FC + Pretax profit/CM Ratio
What is the formula for breakeven point in units and dollars
Units = Total FC/Contribution Margin per unit
Dollars = Total FC/Contribution Margin ratio
What is the formula to apply overheard?
Step 1 - Calculate OH Rate:
OH Rate= All Bdgtd OH Costs/Single Esmtd costs driver
Step 2 - Calculate Applied OH Rate: Actual Cost Driver x Step 1
What is the mnemonic used to determine whether a lease classifies as a sales-type lease from the perspective of the lessor?
OWNES PC
Ownership of the asset transfers at the end of the lease term
Written option is reasonably certain to be exercised
Net present value of payments and any guaranteed residual value is equal to or greater than 90% of the asset’s fair value
Economic life of the asset represents at least 75% of the term
Specialized asset that doesn’t have another function
If none are met then the lease defaults to the following criteria:
Present value of the sum of the lease payments is equal to or substantially exceeds the asset’s fair value
Collections of payments are probable
*If all are met, then the lease is a Direct Finance Lease, if one or none, then its an Operating lease
What are the transactions reconciled between the Government-wide financial statements and the Fund financial statements?
Statement of Net Position (Balance Sheet):
CAN I
+ Capital Assets
- Accumulated Depreciation
- Non-current liabilities
+ Internal Service fund net position
Statement of Revenues, Expenditures, and Changes in Fund balance (Income Statement):
CPAS RIDES
+ Capital outlay expenditures
+ Principal payment on debt
- Asset disposal (NBV)
- Sources (other than financing sourced)
+ Revenue
- Interest Expense
- Depreciation Expense
+ Internal service fund net revenue
What is the criteria a fund must meet to be considered a major fund and therefore reported on the Government-wide Financial statements?
1) 10% or larger of its corresponding fund and
2) 5% or larger of the total of corresponding fund and enterprise funds (or governmental depending on the call of the question)
*General funds are considered major regardless of whether it meets the test
What is the formula for NPV
Step 1: Calculate after-tax cash flow= Annual Net CF x (1- tax rate)
Step 2: Add depreciate benefit= Depreciation x Tax rate
Step 3: Multiply result by appropriate PV of annuity
Step 4: Subtract initial CF
*remember there might be a disposal but that CF is only factored in the last year of the asset
What are the Program Revenue and Expense category types in relation to the Government-wide financial statements?
Program Revenue - COC
Chargers for Services
Operating Grants and Contributions
Capital Grants and Contributions
Expense - reported by program
What are the components of the Statement of Net Position?
Statement of Net Position - RUN
Restricted
Unrestricted
Net Investment in Capital Assets
What is the criteria to determine whether a component unit should be presented using the Blended approach
1) is the BOD of the primary government the same of the component unit?
2) Does the component unit serve the government exclusively?
3) Does the organization not qualify as a legal entity?
*Only one has to apply to use the blended approach
What’s the criteria to be considered a Primary Government
Primary government reports by itSELF
Separately
Elected Governing Body
Legally Separate
Fiscally Independent
*Must meet all 3 otherwise it is considered a component unit
What are the components of the ACFR?
1) Introductory Section (Unaudited)
2) Basic Financial Statements*
3) Statistical Section (Unaudited)
*Composed of:
Management Discussion and Analysis, Government-wide and Fund Financial Statements, and Required Supplementary Information
What are the types of Fiduciary funds and their purpose?
CIPPOE
Custodial funds: to collect cash to be held temporarily for an authorized recipient to whom it will be later disbursed (catch all fund of all Fiduciary activity funds)
Investment Trust Funds: to keep record of external investment pools
Private purpose trust funds: designated fund for reporting all other trust arrangements under which principal and income are for specific individuals, private organizations, other governments
Pension and Other Employee Benefit Trust Funds: account for government sponsored defined benefit and defined contributions plans and other employee benefits
What are the types of Proprietary funds and their purpose?
IE
Internal Service Fund: established to finance and account for services and supplies provided exclusively to other departments within a government unit.
Enterprise Fund: established to account for operations that are financed and operated in a manner similar to private businesses.
What are the types of Governmental funds and their purpose?
GSD CP
General Fund: its a catch all for administrative activities, provides interfund transfers to other Governmental funds
Special Revenue Fund: Revenues and expenditures that are legally restricted or committed for specific purposes
Debt Service Fund: accounts or resources accumulated to pay LT Debt (principal and interest) only for governmental funds - required when legally mandated
Capital Projects Funds: established for the construction, purchase, or leasing of significant fixed assets.
Permanent Funds: should be used to report resources that are legally restricted to the extent that only earnings, and not principal, may be used to support government programs (similar treatment to endowment funds but instead of funding a not for profit’s operations, they fund government programs)
What are the JEs to set up the encumbrance and budgetary control, once an invoice is received, and to record actual expenditures?
JE to set up Encumbrance and Budgetary control:
Dr. Encumbrance
Cr. Budgetary Control
JE when an invoice is received:
Cr. Budgetary Control
Dr. Encumbrance
JE to record actual expense:
Dr. Expenditure
Cr. Vouchers Payable (cash)
What are the Budgetary Accounting JEs for the beginning and ending of the year?
Beginning:
Dr. Estimated Revenue Control
Dr. Budgetary Control (if deficit)
Cr. Appropriations Control
Cr. Budgetary Control (if surplus)
Ending:
Dr. Appropriations Control
Dr. Budgetary Control (if surplus)
Cr. Estimated Revenue Control
Cr. Budgetary Control (if deficit)
Note: the entries are a zero sum game
What are the entries to record Compensation Expense, Exercised Options, Expiration of Options under Compensatory method
Compensation Expense:
Compensation Expense
APIC - Stock Option
Exercised Option:
Cash
APIC - Stock Option
Common Stock
APIC - Excess of Par
Expired Option:
APIC - Stock Options
APIC - Expired Stock Options
Non-compensatory and Compensatory stock options
Noncompensatory Compensation:
Expense is recognized when option is exercised
Compensatory** -
Compensation Expense is allocated over the service/vesting period
Remember that they are valued at Fair Value as of the Grant Date
What are the formulas for DM marginal analysis?
DM Price Variance= Actual Q. Purchased x (Actual price - stdrd price)
DM Q. Usage Variance= Standard price x (Actual q. used - stdrd q. used)
What are the components of Enterprise Risk Management?
GO PRO
G - Governance and Culture
O - Objective and Strategy-Setting
P - Performance
R - Review and Revision
O - Ongoing information, communication, and reporting
What are the principles that make up Governance and Culture?
DEEAD
D - Defines Desired Culture
E - Exercises board oversight
E - Establishes operating structure
A - Attracts, develops, and retains competent employees
D - Demonstrates commitment to core values
What are the principles that make up Objective and Strategy-setting Culture?
F - Formulates business objectives
A - Analyzes business context
D - Defines risk appetite
E - Evaluates alternative strategies
