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Managerial Accounting Concepts > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

Cost of Goods Sold =

A

product cost x units sold/units made

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2
Q

Ending Inventory =

A

units made - units sold

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3
Q

relevant range

A

total fixed costs don’t change for a range of activity, aqnd then jumps to a new higher cost for the next higher range of activity

range of activity over which the definitions of fixed costs and variable costs are valid

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4
Q

Supplies used in the plant managers’ office would be categorized as

GSA or product, asset or expense

A

product

asset

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5
Q

cost allocation

A

process of dividing a total cost into parts and assigning the parts to relevant objects

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6
Q

Wages of administrative building security guards would be categorized as

GSA or product, asset or expense

A

GSA

expense

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7
Q

Contribution Margin Ratio =

A

Contribution Margin/Revenue

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8
Q

We use the contribution margin ratio to

A

calculate money needed to break even or get profit

See the percentage of sales that goes to fixed costs

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9
Q

Raw Material Equation =

A

Beginning Inventory + Materials Purchased - Materials Used = Ending Inventory

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10
Q

Depreciation on vehicles used by salespeople would be categorized as

GSA or product, asset or expense

A

GSA, expense

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11
Q

cost-volume-profit graph

A

horizontal axis-activity
vertical axis-$

fixed cost line- constant at total fixed cost
total cost line - slants upwards as costs increase

sales line - revenue

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12
Q

Operating leverage =

A

Contribution margin/Net income

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13
Q

Cost volume profit limitations

A

1) selling price is constant
2) costs are linear: VC per unit is constant, FC don’t change, efficiency is consistent
3) sales mix constant
4) inventory levels constant
5) All CVP variables are within the relevant range

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14
Q

product costing

A

classifying and accumulating costs (materials, labor, overhead) to determine the cost of making a product or providing a service

managers need to know the costs of their products and servicesWhat is

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15
Q

Operating leverage means

A

how a % change in sales will affect profits

how much of an organization’s costs are fixed

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16
Q

Margin of Safety =

A

(units expected - break-even units)/units expected

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17
Q

When product cost is expensed, what is it expensed under? What financial statement?

A

Cost of Goods sold in the income statement

Asset/Inventory/Materials in the balance sheet

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18
Q

Work in Process Equation =

A

BI + Material used + Labor + Overhead - Cost of Goods Manufactured = EI

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19
Q

Definitions of fixed and variable costs depend on

A

context

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20
Q

Cost of merchandise shipped to customers is categorized as

GSA or product, asset or expense

A

Product, expense

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21
Q

Variable costs ___ when activity increases or decreases

A

increase or decrease proportionally

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22
Q

The variable cost assumption (constant unit variable cost) applies within the ______

A

relevant range

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23
Q

Mixed costs have both ____ and ____ components.

A

fixed, variable

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24
Q

Lubricant used to maintain factory equipment would be categorized under

GSA/product, asset/expense

A

Product, Asset

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25
Q

Increasing variable costs ____ operating leverage

A

decreases

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26
Q

The Cost of a delivery truck would be categorized under

GSA or product, asset or expense

A

GSA, asset

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27
Q

The break-even point is where

A

cost = profit
zero net income
CM = fixed costs (you’ve covered all your fixed costs)

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28
Q

Cost of goods sold =

A

product cost - COGM

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29
Q

Gross margin income statement

A 
Revenue
(COGS)
Gross Margin
(SGA)
Operating Profit/Loss
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30
Q

Fixed cost per unit ___ when activity increases and ___ when activity decreases

A

decreases, increases

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31
Q

When is a product cost expensed

A

At the point of sale

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32
Q

Partially complete products or materials to which some labor and or overhead have been added are called

A

work in process inventory

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33
Q

manufacturing process

A

financial assets -> manufacturing process -> physical assets

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34
Q

Completed products awaiting sale are

A

Finished Goods

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35
Q

BI + cost added = ____ + EI

What equation is this

A

cost transferred

Inventory

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36
Q

A lower contribution margin means ____ break-even volume in units

A

greater

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37
Q

EQN method

A

selling price per unit (u)= variable cost per unit (u) + fixed cost + desired profit

“u”-number of units

38
Q

____ costs better if volume is increasing but ___ costs are better if business is declining

A

fixed, variable

39
Q

Fixed costs ____ when activity increases/decreases

A

remains constant

40
Q

Variable cost per unit ____ when activity decreases/ increases

A

remains constant

41
Q

Total units need to break-even with multiple products =

A

Total fixed cost/ weighted average contribution margin

42
Q

Mixed product CM income statement

A

Sales of A
Sales of B
Total Sales

(VC A)
(VC B)

Contribution Margin

(FC)

Net income/loss

43
Q

Contribution Margin Per Unit Method to get the break-even point in units

A

Fixed cost/Contribution Margin per unit

44
Q

CM Ratio method to get break-even point in dollars

A

FC/CM ratio

FC/(CM/Sales) = FC x Sales / CM

45
Q

Manufacturing costs consist of

A

Direct material, direct labor, and overhead

46
Q

Depreciation on computers used in a factory would be categorized as

GSA or product, asset or expense

A

Product, asset

47
Q

Depreciation on factory assets is considered

48
Q

Calculating the # units to reach a profit =

A

(Fixed cost + desired profit)/Contribution margin per unit

49
Q

commodity

A

there is no difference between products, making price a deciding factor

50
Q

Service/period costs are expensed when?

A

immediately, in the period in which the economic sacrifice is incurred

51
Q

Period cost is also know as

A

GSA

General, Selling, and Administrative

52
Q

Unless otherwise stated, cost per unit means

A

average cost per unit

53
Q

Average cost per unit =

A

total cost/# units

54
Q

Cost-plus pricing

A

Selling price = cost + markup (equal to a percentage of the cost)

a common business practice

55
Q

Raw materials used to make a product would be categorized as

GSA or product, asset or expense

A

Product, asset

56
Q

CVP Graph

A

See physical index card

57
Q

Computers for the accounting department would be categorized as

A

GSA, Assets

58
Q

Companies with highly fixed cost structures will have ____ break-even points than those with lower

59
Q

raw materials

A

materials waiting to be processed

60
Q

If the Contribution Margin is $0.25 and there are 7000 additional units, for every additional unit past the break-even unit you pay a certain amount

A

(7000) (0.25-0.05)
(7000) (0.2)
1400

61
Q

upstream cost

A

costs incurred before manufacturing begins

62
Q

downstream cost

A

costs incurred after manufacturing is complete

63
Q

How much product cost should be expensed?

A

Units sold/units made = x/product cost

64
Q

Gross profit margin =

A

revenue - COGS

65
Q

Value-added principle

A

only report info that adds value by helping make better decisions

66
Q

If the operating leverage is 6, a 10% increase in sales will increase profit by how much?

67
Q

Multiple product

A

1) Sales mix
2) WACM
3) Total units needed to break-even
4) how much of each product
5) verify with income statement

68
Q

Overhead

A

unrelated to manufacture but still a cost, like utilities

69
Q

Increased fixed cost, __ leverage, ___ risks, ___ profit

A

increase, increase, increase if volume increasing

70
Q

Weighted average contribution margin

A

sales mix 1 x contribution margin 1 + sales mix 2 x contribution margin 2

71
Q

Period costs are related to manufacturing of a product, T/F

72
Q

Break-even volume in units

A

fixed cost/contribution margin per unit

73
Q

Break-even volume in sales dollars

A

fixed cost/contribution margin per unit x selling price per unit

74
Q

Break-even ratio in units

A

Fixed cost/CMPU

75
Q

Break-even ratio in dollars

A

Fixed cost/CM ratio

76
Q

Sales revenue - variable cost

A

Contribution margin

77
Q

Cash dividend to stockholders would be categorized as

A

neither product nor GSA, asset nor expense

78
Q

Earning volatility is

A

what happens to the bottom line if the unit number fluctuates

79
Q

Increased fixed costs, increases leverage, which ___ volatility

80
Q

Increased variable costs, ___ volatility

81
Q

Depreciation is added/subtracted to SGA/period costs

82
Q

managerial vs. financial

A

managerial: internal, value-added, estimates, relevant, continuous
financial: external, SEC IFRS GAAP FASB government and investors, facts, quarterly/annually, reliable, consistent

83
Q

Which costs increase income (when volume is increasing) from most to least?

A

Fixed mixed variable

84
Q

When fixed costs are covered, net income will increase by

A

the contribution margin

85
Q

What is the total contribution margin at the break-even point?

A

Fixed costs

86
Q

Contribution margin =

A

Revenue-variable costs

87
Q

CM Income Statement

A 
Revenue
(VC)
CM
(FC)
NI
88
Q

BI + COGM - ____ = EI is which EQN

A

COGS, Finished Goods Inventory

89
Q

Gross margin

A

Sales - COGS

90
Q

When fixed costs are covered, NI will increase by

Managerial Accounting Concepts (3 decks)

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