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Managerial Accounting > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

Define Managerial Accounting

A

The phase of accounting that is concered with providing info to management for use within the org.

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2
Q

What are the 4 functions of managerial accounting?

A
  1. Predict future costs
  2. Compare actual costs to budgeted costs
  3. to assign costs
  4. properly contrast costs associated with alternatives
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3
Q

Define Cost Object

A

(Direct or Indirect) Anything that has a cost measurement.

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4
Q

How do we know when a cost is traceable

A

When the cost is caused by the cost object

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5
Q

Define Common Cost

A

Type of Indirect Cost; cost incurred to support a number of cost objects but cannot be traced to one specific cost object.

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6
Q

T or F
A cost may be direct or indirect, depending on the cost object

A

T
A soup factory managers salary is indirect if the cost object is chicken noodle soup.
but their salary is direct if the cost object is the manufacturing department.

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7
Q

Define Prime Costs

A

The sum of direct labor and direct materials

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8
Q

Define manufacturing overhead

A

Indirect Cost
All other manufacturing costs that are not direct materials or direct labor

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9
Q

Define Indirect Materials

A

Materials used that cannot be traced to a single cost object. ex)glue uses to put different chairs together, nails used to build a house

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10
Q

Define Indirect Labor

A

All other factory workers that cannot be traced to products. (Janitors, supervisors, material handlers, etc).

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11
Q

What is included in manufacturing overhead

A

(only related to the manufacturing facility)
Indirect labor and materials
depreciation
utilities
taxes
insurance

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12
Q

Define Conversion Cost

A

The cost incurred to convert direct materials into finished products

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13
Q

What are the two types of nonmanufacturing costs

A

Selling costs
Administration Costs

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14
Q

Define Selling Cost

A

All costs incurred to secure customer orders and get the finished product to the customer
ex) advertising, sales, shipping, finished goods warehouses, commissions, sales salaries

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15
Q

Example of selling cost that is direct

A

An advertisement for chicken noodle soup

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16
Q

Example of selling cost that is indirect

A

A sales managers salary who oversees the whole sales department

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17
Q

Define Admin Cost

A

All general management excluding manufacturing and selling

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18
Q

Example of direct admin cost

A

salary of an accountant that only works within the east region

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19
Q

Example of indirect admin cost

A

CFO salary

20
Q

Define the matching principle

A

You only recognize expenses in the same period as the revenues they help to generate are generated

21
Q

When defining costs; they are either…
(3) categories

A

Direct or indirect,
product or period
manufacturing, selling, or admin

22
Q

Define Product cost (3)

A

Direct materials, direct labor, manufacturing overhead

23
Q

Product costs are expensed on the income statement when

A

The product is sold

24
Q

Define Period Costs

A

Selling and Admin costs

25
Q

Period costs are expensed on the income statement when

A

in the period they are incurred

26
Q

T or F
Variable cost per unit changes based on activity.

A

F
(Doesn’t matter if you’re serving 20,000 or 2,000 people dinner, the cost for each individuals dinner is $30 a plate.)

27
Q

T or F
Fixed cost per unit remains the same regardless of activity level.

A

F
If I am paying $4,000 in rent, the average rent cost per unit I make will get smaller if I make more units.
Ex) $4,000/month/250 units=$16 per unit.
$4,0000/mo./1,000 units=$4per unit.

28
Q

Define Differential Cost and Revenue

A

(The difference in cost or revenue when comparing current operations to an alternative operation.)
ex) we are making 100 units now, how much would it cost and how much more revenue would we make if we produced 200 units?

The difference in cost or revenue

29
Q

Define Opportunity Cost

A

The potential benefit that is given up when one alternative is selected over another

30
Q

What is included in a contribution income statement

A

Sales
- Variable expenses (COGS, selling expenses, admin expenses)
= Contribution margin

  • fixed expenses(selling,admin)
    = net operating income
31
Q

COGS Formula

A

Beginning inventory+purchaes-ending inventory=COGS

32
Q

Define Contribution Margin

A

The remaining revenue after variable expenses have been deducted. The amount available to cover fixed expenses and then profits

33
Q

Define CM Ratio

A

It is the contribution margin as percentage of sales

34
Q

CM Ratio Formula

A

Contribution Margin/Sales

35
Q

What is the purpose of CM Ratio

A

To show how the CM will be affected by a change in sales volume.

A CM ratio of 40% means that for every $1 increase in sales, CM will increase by .40.

36
Q

Define breakeven point

A

The level of sales at which profit is zero
Sales=Total expenses

37
Q

What are the two break-even formuals

A

Per Unit=fixed expenses/CM per unit
(company needs to make x units to breakeven)

Dollar Sales=fixed expenses/CM ratio
(company needs to make x $$$ to breakeven)

38
Q

Define Target Profit Analysis

A

A way to estimate how much you need (units produced or dollar sales) to earn a specific profit

39
Q

What are the two target profit analysis formulas

A

Unit sales needed
(fixed costs+target profit)
/ CM per unit

We need to sell x amount of units to earn $100,000 in profit

Dollar sales needed
(fixed costs+target profit)
/CM Ratio

We need to have $x in sales to earn $1000,000 in profit)

40
Q

If you want to increase CM; you need to do 1 of 2 things…

A

Increase the price or decrease the variable costs

41
Q

If you want to decrease breakeven; you need to do 1 of 2 things…

A

Decrease Fixed Costs or increase CM

42
Q

Define Margin of Safety

A

The amount by which sales can drop before losses are incurred

43
Q

Margin of safety in sales formula and in units formula

A

Total sales - breakeven sales

Margin of safety in dollars/ selling price per unit

44
Q

T or F
The higher the CM Ratio; the higher the profitability

A

T

45
Q

How do you calculate the sales mix

A

You divide the unit sales by the overall sales

Lets say you make bikes and cars. If bikes produces 20,000 in sales and your over all sales is 100,000, then bikes would be 20% in sales and cars would be 80% because they would produce 80,000 in sales.

46
Q

What are the 4 steps for finding the breakeven point in $$$ for a company that sells multiple products

A
  1. Calculate the sales mix for each product. (% of sales)
  2. Calculate the CM Ratio for each product and the CM ratio overall
  3. Calculate overall breakeven in dollar sales
  4. Use sales mix % to allocate breakeven in $$$ to each product

Managerial Accounting (1 decks)

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