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Managerial Accounting Concepts > Exam 3 > Flashcards

Exam 3 Flashcards

1
Q

strategic planning

A

5-7 years, long term decisions like defining the scope of a business, determining which products to develop or discontinue, and identifying most profitable markets

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2
Q

capital budgeting

A

1-5 years, intermediate-range planning, buying or leasing equipment, whether to stimulate sales, increase company’s assets

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3
Q

operations budget

A

1 year, short-term objectives: sales targets, production goals, and financing plans

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4
Q

Advantages of Budgeting:

A

promotes planning and coordination

enhances performance measurement and corrective actions

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5
Q

Evaluation of goals cocreated by ______ to be attainable but ______

A

employees and management

challenging

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6
Q

sales budget shows

A

expected sales for coming periods and expected collection on those sales
critical to success of entire budgeting process because it affects everything else

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7
Q

Sales Budget looks like

A

months —>

Section 1: Projected Month's Sales
Sales
Cash Sales
Cash on Acct
Total Budgeted Sales

Section 2: Schedule of cash receipts
current cash sales
collection of AR
Total budgeted collections

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8
Q

Operating Budgets

A

Sales budget -> Inventory purchases budget -> SGA Expense budget

cash budget

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9
Q

Proforma financial statements _____ come from ____ budget

A

income statement, balance sheet and statement of cash flows

inventory purchases

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10
Q

Cash receipts come from ____ budget

A

sales

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11
Q

Cash payments for inventory come from ___ budget

A

inventory purchases

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12
Q

cash payments for SGA come from ____ budget

A

SGA Expense

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13
Q

Cash payments for SGA go into ____ budget

A

cash

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14
Q

Inventory purchases budget looks like

A

months —->

Section 1: Projected Purchases
Budgeted Cost of Goods Sold
Plus: Desired EI
Total Inventory Needed
Less: Beginning Inventory
Required Purchases (on acct)

Section 2: Schedule of Cash Payments for Inventory purchases
Pay % of current month’s AP
Pay % of prior month’s AP
Total Budgeted Collections

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15
Q

inventory needed per month is calculated by

A

adding desired ending inventory to estimated COGS and subtracting beginning inventory

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16
Q

S&A expense budget looks like

A

months —->

Section 1: Projected S&A Expenses
Salary expense
Sales commision, % of sales
Supplies expense, % of sales
Utilities expense
Depreciation expense
Rent Expense
Misc Expense
Total S&A before Interest
Section 2: Schedule of cash payments
Salary Expense
100% of prior month's sales commission
Supplies expense, 1%
100% prior month's untilities expense
Rent expensea
Misc expense
Total Payments for S&A Expenses
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17
Q

Cash budget looks like

A

months —->

Section 1: Cash receipts
Beginning cash balance
Add: cash receiots
Total cash available

Section 2: Cash Payments
For Inventory Purchases
For S&A Expense
For Interest Expense
For Purchase of Store Fixtures
Total Budgeted Disbursement

Section 3: Financing Activities
Surplus (shortage)
Borrowing (Repayment)
Ending Cash Balance

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18
Q

Pro Forma Income Statement and where to get info

A 
Sales ------ Sales budget
(COGS) ------ inventory purchases budget
Gross Margin
(Operating Expenses) ----- S&A budget
Operating Income
(Interest Expense) ------ cash budget
Net Income
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19
Q

Pro Forma Balance Sheet

A 
Assets
Cash ------ cash budget
AR ----- sales budget
Inventory ----- inventory purchases budget
Store Fixtures --- cash budget
Total Assets
Liabilities
AP ----- Inv purchases
Sales comm payable --- S&A
Utilities payable --- S&A
Line-of-credit borrowing ----- cash budget

Equities
Retained earnings ——- pro forma income statement
Total Liabilities and Equities

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20
Q

Pro forma Statement of cash flow

A

Cash flow from operating activities

Cash receipts from customers —- cash receipts budget
cash payments for inventory — inventory purchases
Cash payments for S&A —- S&A budgets
cash payments for interest —- cash budget

Net Cash flows from operating activities

Cash flows from Investment activities
Payment for Fixtures —- cash budget

Cash flows from Financing activities
inflow from borrowing on line-of-credit —- cash budget
Net Change in Cash —- cash budget

Plus: Beginnning cash balance
Ending cash balance — cash budget

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21
Q

flexible budget

A

compares what we aimed for vs. how much we actually sold

shows expected variance at a variety of volume levels

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22
Q

Flexible Budget looks like

A

units –>

Sales Rev
Variable manufacturing costs
materials, labor, overhead
Variable GSA
CM
Fixed costs
manufacturing, GSA
Net Income
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23
Q

static budget

A

get definition from book

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24
Q

variances

A

=standard cost - actual cost

comparing expectations with reality
standard cost does not equal actual cost

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25
Q

variances favorable if

A

spend/use less or sell more than expected

26
Q

variances unfavorable if

A

spend/use more or sell less than expected

27
Q

sales volume variance

A

difference between static budget sales amount/volume and flexible budget sales amount/volume

28
Q

Who is usually responsible for volume variances?

A

marketing managers

production managers have little control

29
Q

flexible budget variances

A

compare actual results with what should have been achieved at that activity level

30
Q

standard cost system

A

everyone collaborates to encourage efficient future productions, benchmarks against which actual performance can be judged

31
Q

management by exception

A

focuses on material differences b/w actual and expected results

32
Q

When selecting which variances to investigate:

A

1) Materiality
2) how frequently it occurs
3) capacity to control variance
4) characteristics of items behind variance

33
Q

Materials price variance

A

actual Q x Actual P per lb + Actual Q x standard P per lbl

actual cost + variance dividing column

34
Q

Materials usage variance

A

actual Q x standard P + standard Q x Standard P

variance dividing column + standard cost

35
Q

Actual cost (materials)

A

Actual Q x Actual P

36
Q

variance dividing column (materals)

A

Actual Q x standard P

37
Q

Standard cost (materials)

A

Standard Q x Standard P

38
Q

Total materials variance

A

materials price variance + materials usage variance

39
Q

Price variance (materials)

A

(Actual price - standard price) x actual Q

40
Q

Usage Variance (materials)

A

(Actual Q - Standard Q) x Standard P

41
Q

Actual cost (labor)

A

Actual hours x actual price per hour

42
Q

variance dividing (labor)

A

actual hours x standard p

43
Q

standard cost (labor)

A

standard hours x standard p

44
Q

actual cost + variance dividing

A

labor price variance

45
Q

variance dividing + standard cost

A

labor usage variance

46
Q

Price variance

A

actual p - standard p

x actual hours

47
Q

Usage variance

A

Actual hours - standard hours

x standard p

48
Q

production manager controls:

A

skill level assigned to work leels, employee motivation, quality, and training

49
Q

Time allows you the opportunity to and

A

postpone consumption and earn interest

50
Q

Examples of capital investments

A

purchases of long-term operational assets

not as liquid, the company will be committed for an extended period of time

51
Q

PV of $ received in the future is ____ today’s dollar

A

less than

52
Q

When a company invests in capital assets, it is sacrificing ____ for the opportunity to _____

A

present money

receive future money

53
Q

annuity

A

constant payment at the end of each year

  1. equal pymt amounts
  2. equal time intervals b/w payments
  3. constant rate of return
54
Q

Today, 200000 is worth less/more than in the future

A

less

55
Q

Higher interest rates mean a ____ future cash value

A

lower

56
Q

Net Present Value

A

inflows - outflows
PV of future cash inflows - cost of investment

helps you decide whether or not to invest

57
Q

a positive NPV means

A

yields a higher rate of return than required

58
Q

a negative NPV means

A

yields a lower rate of return than required

59
Q

examples of cash inflows

A

salvage value, incremental revenue, cost savings, release of working capital

60
Q

Examples of outflows

A

initial investment, increases in op expenses, increasing working capital requirements

61
Q

PV Index:

A

PV of cash inflows/PV of cash outflows

comparing capital investment alternatives

Managerial Accounting Concepts (3 decks)

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