BAR_1A Current Period/Historical Analysis

Question 1

Formula for WIP

Answer 1

WIP = BI + DM used + DL used + Factory OH applied - Transferred to FG

Question 2

Overhead rate calculation

Answer 2

OH rate = estimated annual OH / estimated annual DL

Overhead is applied at a % of DL cost

or

OH = DL hrs used / Estimated total DL hrs x Total budgets OH

Question 3

Calculate residual income

Answer 3

Capital turnover = sales / invested capital

Residual income = Operating income - imputed interest on invested capital (imputed interest rate x invested capital)

Question 4

Flexible budget

Answer 4

Includes both variable and fixed costs.

In normal flexible budget when production decreases total costs will also decrease

Question 5

ROI can be increased if?

Answer 5

NI increases by the same dollar amount that total assets are increased

ROI = Profit margin x Asset Turnover

ROI = Net income / sales x sales / total assets

Question 6

Know how fixed overhead affects variable and absorption costing

Answer 6

Under absorption costing FOH is a product cost at the time of sale and under variable costing is a period cost at time of production

Absorption = inventoriable
Variable = period

Question 7

What are the benefits of ABC?

Answer 7

1. Allows management to focus on the nature of activities performed
2. Provides understanding of complex product costs and product profitability
3. Provides appropriate means to charge OH costs to products
4. Allows mgmt to examine nonvalue-added actitivies

Question 8

COGS

Answer 8

COGS = Total MFG costs - change in WIP

Total MFG = DM used + DL used + Cost of OH (Factory related costs + Indirect Labor used + indirect materials used)

Change in WIP = Beg WIP - End WIP

Question 9

ROE

Answer 9

ROE = Profit margin x asset turnover x leverage

Question 10

Balanced scorecard

Answer 10

1. Customer satisfaction
2. Learning and growth (innovation)
3. Internal business process improvements
4. Financial measures related to operations

Question 11

Margin of safety

Answer 11

Calc indicates how much sales can drop before a loss will occur (excess sales over breakeven sales point)

Question 12

What is sustainable equity growth?

Answer 12

The ability of a company to continue growing through reinvestment of earnings.

Formula is
(NI - Dividends) / NI x (NI / Average equity)

Question 13

What is process costing

Answer 13

Costs are assigned to units of FGs indistinguishable from each other and produced in a continuous process

During this process - RM costs, DL costs, and applied OH increase the WIP inventory acct

Question 14

Residual income (RI)

Answer 14

Measures performance of investment centers - the amount a division adds to shareholder value of the parent company

Amount of NI in excess of minimum desired rate of return on invested capital

Question 15

What is defensive-interval ratio?

Answer 15

Measures the time a company can survive using its most liquid assets (cash, marketable securities, and net accounts receivable)

Formula
Quick assets / average daily cash expenditures

Question 16

Financial leverage

Answer 16

Percent change in earnings avaialable to common shareholders related to the change in EBIT

If EBIT goes up, EPS will go up

Question 17

Dividend yield

Answer 17

Dividends per share / market price per share

Question 18

Manufacturing Cycle Efficiency

Answer 18

Manufacturing or process time / time from start of manufacturing to delivery

Question 19

Residual income

Answer 19

RI = Operating income - (Imputed interest rate x invested capital)

Question 20

Dividends per share

Answer 20

Dividends paid out / total shares

Question 21

Earnings per share is

Answer 21

Net income / common shares outstanding

Question 22

Price to earnings ratio

Answer 22

market price per share / EPS