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BEC > Coat Accounting > Flashcards

Coat Accounting Flashcards

1
Q

How is residual income calculated?

Sales 50 mil
Avg invested capital (total assets) 20 mil
Net operating profit 3 mil
Cost of capital 8%

A

Operating income -(RRR x operating assets)

20 mil x 8%= 1.6 mil

3 mil - 1.6 mil = 1.4 mil

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2
Q

How do you calculate operating profit?

A

(Sales - COGS - G&A expenses)/ sales

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3
Q

How do you calculate inventory turnover?

A

COGS/avg inventory

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4
Q

How do you calculate book value per share?

A

(Common stock + RE)/outstanding shares

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5
Q

How do you calculate WACC?

Cost of project: 50,000,000

To finance:
-15,000,000 of 20- yr bonds at 101 with a rate of 8%

-35,000,000 of funds generated from earnings

Assume cost of debt is 7% and cost of equity is 12%

A

15mil/50mil= 30% (comes from debt)

35mil/50mil= 70% (comes from equity)

(30% x 7%) + (70% + 12%)= 10.5%

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6
Q

What does the b in the y=a+bx equation stand for?

A

The x is the independent variable.

For example if someone wants to predict setup costs and has y=400+200x, the x is the number of setups.

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7
Q

What is the CAPM formula?

A

RR=RFR+B(ERR-RFR)

RR=rate of return
RFR=risk free rate (usually US bonds rate)
B=beta (sensitivity to market)
ERR= expected rate of return

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8
Q

What is the profitability index?

A

This ranks projects after considering NPV and cost.

PV Project inflows/PV of project cost

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9
Q

What are the after tax cash flows in year 2?

Investment 500,000
Cash flow yrs 1-5: 140,000
Yearly tax depreciation 90,000
Cost of capital 10%
PV of $1 after 5 years .621
PV of annuity for 5 yrs 3.791
Marginal tax rate 30%
A

Figure out what we will pay taxes on:

140,000-90,000= 50,000

Figure out tax expense:

50,000 x 30%=15,000

After tax cash:

140,000-15,000=125,000

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10
Q

What is the effective interest rate?

One year loan of 500,000 at 8%. Company must maintain a compensating balance of of 20%.

A

Cost/net benefit

Cost of loan:
500,000 x 8% =40,000

Available amount to use:

500,000 x 20%= 100,000

500 - 100= 400 (benefit)

Effective interest rate:

40,000/400,000=10%

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11
Q

What is the accounting rate of return?

Equip cost 100,000
Savings if equip acquired 20,000 a year
Eat useful life 10yrs
Straight line w no residual

What is the ARR?

A

ARR=(avg annual incremental revenue-avg annual incremental expenses)/ initial(or avg) investment

Only technique that uses depreciation expense.

Problem:
Revenue or savings - expense or depreciation/ initial investment

20,000-10,000*/100,000=10%

*100,000/ 10 yrs

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12
Q

Using the FIFO method how do you account for the equivalent units of production for conversion costs? And cost per share unit?

Completed production 92k
Ending WIP. 24k
Beg WIP 16k

Beg inventory 60% complete for materials and 20% for conversion costs.

End inventory 90% complete for materials and 40% for conversion costs.

Costs incurred in current month 182,880 (direct labor), 391,160 factory OH.

A

Conversion cost:

92k
+9,600 (24k x .4)
-3,200 (16k x .2)
=98,400 units

Conversion per unit cost:

(182,800 + 391,160)/98,400= 5.83

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12
Q

What is Annualized percentage rate(APR)?

A

(Discount lost/principal)/time fraction of year

2/10 n/30

(.02/.98)/(20*/365)

*30-10

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13
Q

How do you account for the proper charge to the loss from abnormal spoilage?

Normal spoilage is defined as 4%
Units failing inspection 1,500
Good units passing inspection 28,500

Direct labor:
2 DLH @ &16 /DLH
Manufacturing overhead:

2 DLH @ &30 /DLH

A

1,500
-1,140 (28,500 x .04)
=360 abnormal spoilage

Rework cost:
$16 x .25= 4.00
$30 x .25=+7.50
=11.50

11.50 x 360= 4,140

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14
Q

How do you calculate COGS?

Raw material is 55,000 (beg) and 65,000 (end)

WIP is 96,000 beg) and 80,000 (end)

FG is 50,000 beg) and 85,000 (end)

During 2012:
Raw material purchased is 400,000
Direct manufacturing labor is 220,000
Factory overhead is 330,000

A

Beg finished goods. 50,000
Add COGM:
Raw mat used. 390,000*
Dir. many. Labor 220,000
Factory OH. 330,000
End WIP. (80,000) = 956,000
Less end FG. (85,000)
COGS. 921,000

*55,000+400,000-65,000

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16
Q

What are conversion costs?

A

Direct labor and manufacturing overhead costs

17
Q

What is the break even formula?

A

Fixed costs/ (sales per unit-variable cost per unit)= units

Or

Fixed costs/contribution margin

18
Q

How do you calculate the amount of direct materials charged to a job?

WIP Balance
03/01 balance.     12,000
03/31 direct mat. 40,000
03/31 direct lab.   30,000
03/31 manu. OH.  27,000
03/31 FG.               (100,000)

OH is applied at a rate of 90% of direct labor. Only job at end of Mar. has been charged 2,250 in manufacturing OH.

A
  1. Calculate total costs charged:
    12,000+40,000+30,000+27,000-100,000=9,000
  2. Figure out direct labor charged to job:

2,250/90%=2,500

  1. Figure out direct materials charged to job:

9,000-2,250-2,500=4,250

19
Q

What is the economic order quantity?

Sales 1,800

Carrying cost 20% of inventory value
Purchase price is $20 per unit
Cost per order is $25

A

Square root of (2 x demand x ordering cost)/carrying cost

2x1,800x25/(20% x 20 per unit)= 22,500

Sqrt of 22,500 is 150

20
Q

What is the cost volume profit analysis?

A

R-VC-FC=OI

Revenue - VC =contribution margin - fixed costs = operating income

21
Q

How do you calculate ending WIP?

Completed production 92,000
Ending WIP 24,000
Ending inventory was 90% complete for materials and 40% for conversion

A

Ending WIP= material + conversion costs
97,200 (24k x 90%)
55,968 (24k x 40%)
=153,168

22
Q

What are the 3 steps to process costing?

A
  1. Determine equivalent units.
  2. Compute cost per unit
  3. Determine costs transferred out and costs remaining in ending WIP
23
Q

What are the two processing cost methods?

A

Weighted avg (work done to this point)

and FIFO (work done this period)

24
Q

Weighted avg method:
Beg WIP 16,000
Completed work 92,000
Ending WIP 24,000

Beg inventory was 60% complete for materials and 20% for conversion. Ending inventory was 90% complete for materials and 40% for conversion.

Beg inventory cost are: 54,560 materials, 20,320 DL, 15,240 OH.

Current Costs incurred: 468,000 materials, 182,880 DL, 391,160 OH.

What is the total unit cost of end. WIP?

A
  1. Determine equivalent units:
    DM: 92,000 + 21,600 (24,000 x .9) =113,600
    CC: 92,000 + 9,600 (24,000x .4) = 101,600
  2. Compute cost per unit:
    DM: 522,560*/113,600=4.60
    *54,560+468,000

CC: 609,600*/101,600=6.00
*20,320+15,240+182,880+391,160

  1. Determine costs transferred out and costs remaining in ending WIP:

21,600 x 4.60=99,360
9,600 x 6.00=57,600

99,360+57,600=156,960 total cost of units in end WIP

25
Q

FIFO method:
Beg WIP 16,000
Completed work 92,000
Ending WIP 24,000

Beg inventory was 60% complete for materials and 20% for conversion. Ending inventory was 90% complete for materials and 40% for conversion.

Beg inventory cost are: 54,560 materials, 20,320 DL, 15,240 OH.

Current Costs incurred: 468,000 materials, 182,880 DL, 391,160 OH.

What is the total unit cost of end. WIP

A
  1. Determine equivalent units:
    DM: 6,400+ 76,000** + 21,600**=104,000

*60% of beg inventory complete last month so 40% this month. 16,000 x40%

**92,000-16,000. 16k is beg balance meaning completed last month.

***24,000x90%

CC: 12,800+76,000+9,600=98,400

  • 20% of beg inventory complete last month so 80% this month. 16,000 x80%
  • *same as DM
  • **24,000x40%
  1. Compute cost per unit:

468,00*/104,000=4.5

574,400**/98,400=5.83

  • only current month costs
    • only current DL and OH
  1. Determine costs transferred out and costs remaining in ending WIP:
    DM: 21,600 x 4.5= 97,200
    CC: 9,600x5.83=55,968

97,200+55,968=153,168

26
Q

Direct cost Variance analysis:

Co. Budgeted for 8,500 board ft of production and used 9,000 ft in actuality. Budgeted cost was $2/foot. Actual cost was $3/foot. What was the material efficiency variance?

A

AxA. AxS. SxS
Price. 9,000. 9,000. 8,500
Quantity $3. 2. 2
Totals. 27,000. 18,000. 17,000
F/U. 9,000U. 1,000U

27
Q

Selling price variance:

Co. Estimated sales of $6 per bottle of product A and $8 for B. The est. demand was 10k for A and 30k for B. The actual demand was 8k for A and 33k for B. The actual price was 6.2 for A and 7.7 for B. What is the selling price variance

A

A: (6.2-6) x 8,000=1,600 F*

*bc actual price was more

B (7.7-8) x 33,000=9,900U

Total is 1,600F-9,900U=8,300U

BEC (5 decks)

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