BEC CPA 5 Flashcards
Total cost in Ending Inventory using the Weighted-Average method
Units in end. inv. x % completed x Unit cost (end. inv. units completed + completed in month / (beg. costs + costs incurred during month)
Same equation for materials and conversion costs (DL + OH), add together
High-low method of cost estimation
(highest cost - lowest cost) / (highest units - lowest units)
To maximize profit at full capacity, a company should manufacture the product with…
greater contribution margin per hour of manufacturing capacity
In joint-product costing, which cost is relevant when deciding the point at which a product should be sold to maximize profit?
Separable costs after the split-off point
Additional fixed assets needed to maximize capacity equation
Expected sales
times: fixed asset capacity is use (fixed assets x % capacity)
Div.: current sales
Less: total current fixed assets
Commercial paper general does not have:
an Active secondary market
Amount of joint cost allocated to a product after split-off
Product A units x price per unit + product B units x price per unit = total sales value
Product A sales value / total = equal % x joint costs
Characteristics of a monopolistic competition
- Numerous firms with differentiated products
- Ease of entry - few barriers
- Firms exact same influence over price and market
- Non-price competition is frequent and critical
Overhead variance
budgeted / hours = $ per hour x actual hours - actual OH
Why would a firm choose to finance temporary assets with short-term debt?
matching the maturities of assets and liabilities reduces risk
Fixed OH costs equation
Depreciation (machine & building
plus: Insurance
Plus: manager’s salaries (not DL)
Incremental revenue at split-off
end sale price - split-off sale price
- Incremental revenue at split off - incremental costs with producing = process future or sell
A successful responsibility accounting reporting system is dependent upon?
the proper delegation of responsibility and authority
What do you use to compare actual results with budgeted based in achieving volume
Flexible budget
Finding the selling price with a gross margin %
cost per unit / (1 - gross margin)
Total Variance vs.
Volume Variance vs.
Flexible budget variance
Total = actual operating income - master budget
Volume = flexible budget - master budget
Flexible = actual - flexible
Direct material & Direct labor price/rate variance
Actual quantity or hours x (actual price or rate - standard price or rate)
Direct material & Direct labor usage/ efficiency variance
Standard price/rate x (actual quantity/hours - standard quantity/hours used)
Variable overhead rate (spending) variance
Actual hours x (actual rate - standard rate)
Fixed overhead volume variance
Budgeted fixed overhead - standard fixed overhead cost (hours budgeted x actual production x standard FOH rate)
The elasticity of the demand equation & unit quantity
[(Forecasted quantity demanded - current quantity demanded) / current quantity demanded] / [(future price - current price) / current price]
Units = Current quantity demanded x (1 + quantity increase %) which is [(Forecasted quantity demanded - current quantity demanded) / current quantity demanded]
The elasticity of the Supply/cross/income equation & unit quantity
[(Forecasted quantity supplied - current quantity supplied) / current quantity supplied]/ [(Future price - current price) / current price]
Units = Current quantity demanded x (1 + price increase %) which is [(Future price - current price) / current price]
Perfect competition
- Many firms that sell the exact same thing
- no barriers to enter
- has no control over quantity produced but not price
- perfectly elastic (Sell as much or as little at the given market price)
- negative economic profit
Monopolistic competition
- Many firms with some differentiation
- Low barriers to enter
- Mostly has control over quantity produced but not price
- Highly elastic but downward slope
- Zero economic profit
Oligopoly
- Few firms with various products
- High barriers to entry due to economies of scale
- Control over quantity produced and price
- Inelastic
- Positive economic profit
Monopoly
- One firm sells one product
- No entry is possible
- Control over quantity and price
- Inelastic
- Positive economic profit
Cost Leadership Strategies
Organizations sell their product or service for less than competitors to achieve an overwhelming market share.
- works well in markets where customers have large amounts of bargaining power
Differentiation Strategies
Organizations create the perception that their product or service is better and more unique than competitors and can demand higher prices.
- works well when customers see value in a product. brand loyalty
Best Cost Strategies
Combines cost leadership and differentiation to give customers higher value for a reasonable price (bang for your buck).
- works well when generic products are not acceptable but customers are still price conscious
Focus/Niche Strategies
Organizations focus their strategy on a select, small group of consumers.
- works well when firms have proper resources and few firms in the market can compete with price or address a particular feature (baseball gloves that have special features for each position and are sold to professionals)
