final chapters Flashcards
what level is information aggregated in financial accounting
global on the company as a whole
organization responsible for regulating financial reporting is the
SEC - securities an exchange commission
organization responsible for developing accounting rules is
FASB - financial accounting standards board
the accounting procedures and practices permitted in published financial statements are severely restricted by
GAAP - generally accepted acctg principles
financial acctg provides info used primarily by
creditors, investors (external)
external users rely on [] data
economic
cash payment for product costs is an [] transaction
asset exchange
to meet the needs of different user groups, []
financial is more aggregated than managerial
the only reporting restriction for managerial acctg is the []-[] principle
value-added
when compared to financial, managerial acctg uses
more estimates and fewer facts
managerial acctg provides info used primarily by
executives and employees (internal)
three costs recognized by GAAP
materials, labor, and overhead
characteristics of financial acctg
objectivity, consistency, reliability
cost per unit also means
average cost per unit
characteristics of managerial acctg info
relevance and timeliness
materials used to make products are usually called [] materials
raw
TF production workers salaries are NOT expensed bc the cash paid to the workers is used to produce inv not rev
true
direct raw materials are [] and [] traced to products
easily and conveniently
direct labor is
easily and conveniently traced to products
recognizing depreciation on manufacturing equip results in
increased inventory, no change to the income statement (cogs)
product costs are added to [] when incurred and expensed when []
inventory, the inv is sold
TF production wages are expensed as incurred and salaries to selling and admin employees are treated as product costs
false, switch
a company recorded a total depreciation, which will be recorded as an expense between manufacturing equip and office equip
office equip
manufacturing overhead includes
indirect labor, indirect materials, factory utilities, depreciation on manufacturing assets
nonproductive expenses are sometimes called [] costs
period
indirect costs cannot be
cost-effectively traces to products and services
cost allocation is the process of dividing
a total cost into parts and assigning the parts to relevant cost objects
as production occurs, materials used, labor and overhead are first accumulated in inv
work in process
to help managers analyze manufacturing costs schedule of [] is prepared
cogs manufactured and sold
which is not an inventory account for manufacturers
cogs
diminishes motivation, sloppy work and inattentive attitudes are all examples of hidden inventory [] costs
holding
goods are transferred to cogs from []
finished goods inventory
inventory holding costs include
obsolesce, financing, warehouse space, and increased production time
just in time inventory reduces inventory holding costs by
making products to order
as activity level decrease, fixed costs []
don’t change
to magnify small changes in rev into dramatic changes in profitability, managers apply [] leverages
operating
when calculating percent change, [] is the staring point
base
the possibility that sacrifices may exceed benefits is called []
risk
the ultimate risk of undertaking a business project is committing to a [] cost
fixed
as activity level decreases, variable costs
decrease
when a company uses a variable cost structure, a 15% change in sales will result in [] inc or dec in profitability
exactly 15%
yr1 gm = 50, yr2 gm = 80, what is percentage change in profitability
(80 - 50)/50 = 60%
sales rev - variable costs =
contribution margin
risk can be avoided by substituting [] in place of []
variable, fixed
magnitude of operating leverage = []/[]
contribution margin/net income
as activity level increases, variable costs per unit
don’t change
shifting the cost structure from fixed to variable cost, [] the level of risk and [] potential for profits
decreases, decreases
fixed costs - contribution margin =
net income
the levels of activity over which a cost is defined as either fixed or variable is called the [] range
relevant
the same cost can behave as either a fixed or a variable cost depending on the
activity base
point where profit = 0
break even
sales price is 20, variable cost is 7.5 per, T fixed costs is 10000, determine break even
10000/(20-7.5)
magnitude of operating leverage is 2, 10% rev inc leads to [] increase in profitability
10% x 2 = 20%
the amount at which actual sales can fall short of expectations before a company begins to incur losses is called the []
margin of safety
the larger the margin of safety, the
more likely the company will report a profit
relevant information must
differ among alternatives and be future oriented
when replacing a car, book value and accumulated depreciation are [] costs
sunk
relevant costs can include [] [] [] costs
opportunity, fixed, variable
most useful information is both [] and []
relevant and precise
the concept of relevant is [] from the concept of cost behavior
independent
relevant rev is sometimes called [] rev
differential
costs that can be eliminated by making specific choices are called [] costs
avoidable
costs incurred each time a company generates one individual item of product are called [] costs
unit-level
costs incurred each time a company generates a set quantity of goods produced at one time are called [] costs
batch-level
costs incurred to support specific services are called [] costs
product level
costs incurred to support an entire company are called [] costs
facility level
engineering design and the costs are obtaining and defending patents are examples of [] level costs
product
A customer has requested a special order of 2,000 Wilson tennis rackets for $40 per unit. The normal selling price is $50. Costs related to the special order are $30 per racket plus batch-level costs of $1,000. Wilson incurred $10,000 of product-level costs to design the racket and has $100,000 of facility-level costs per year. The differential revenue associated with the special order is Blank______.
40 x 2000 units = 80,000
A customer has requested a special order of 2,000 Wilson tennis rackets for $40 per unit. The normal selling price is $50. Costs related to the special order are $30 per racket plus batch-level costs of $1,000. Wilson incurred $10,000 of product-level costs to design the racket and has $100,000 of facility-level costs per year. The differential cost associated with the special order is Blank______.
$30 × 2,000 units + $1,000 batch level-cost = $61,000
in a special order decision, qualitative characteristics may be [] than quantitative ones
more important
outsourcing involves a decision about whether to
buy goods and services from other companies or produce them internally
companies that have control over the full range of activities from acquiring raw materials to distributing goods and services use
vertical integration
managers should bas equipment replacement decisions on [] analysis rather than physical deterioration
profit
what involves making long-term decisions such as defining the scope of the business
strategic planning
capital budgeting focuses on [] range planning
intermediate
short term planning is the focus of
operations budgeting
a continuous 12 mo budget is adjusted at the end of []
each month
TF budgets help with planning, coordination, and performance action but not corrective action
false, it does all
strategic planning involves
identifying the most profitable market niche, determining the scope of the business, and determining products to develop
negative effects of budgets
increasing stress limiting individual freedom
a group of detailed berets and schedules representing the operating and financial plans for the future is called a
master budget
which budget begins the budgeting process
operating
pro forma financial statements are
future oriented
operating budgets do not include a [] budget
captial
where does a company record its current cash sales and collections of accounts receivable
schedule of cash payment
the sales forecast may use [] techniques, [] regarding changes in [], and generally include [] analysis
statistical, data, economic
what would appear on 4th quarter financial statements
total sales for the quarter, dec 31 uncollected credit sales
what is included on the schedule of cash receipts
current cash sales, collections of acts receivable
what, from sales budgets, are on pro forma statements
A/R sales rev
total inv needed =
cost of budgeted sales + desired ending inv
what, from inv purchases budget, are on pro forma
accounts payable, cogs, ending inv
what is included on the selling and admin expn budget
utility, depreciation, and salary expense
if all inv is paid for in the month of purchase, which from a 12 mo inv purchases budget are present on pro forma
desired ending inv and Tcogs
to cover anticipated cash shortages, management can plan [] activities to borrow money and refinance to change the [] plan of [] []
financing, repayment, past borrowing
TF depreciation is a cash expense
false, noncash
what, fro S&A budget are on pro forma
T S&A expenses
management anticipates expected shortage or excess amounts of funds by preparing [] budgets
cash
what appears on a cash budget
expected cash payments, financing activities, expected cash collections
Total cash receipts equal $10,000, total cash payments equal $11,000, beginning cash equals $4,000 and ending cash equals $22,000. The total cash available is Blank______.
$4,000 beginning cash + $10,000 cash receipts = $14,000.
Cash disbursements for inventory is $40,000, for selling and administrative expenses is $30,000, and for a capital expenditure is $20,000. Depreciation expense is $15,000. Total cash disbursements on the cash budget equal Blank______.
$40,000 for inventory + $30,000 for selling and administrative expenses + $20,000 for capital expenditures = $90,000 total cash disbursements.
what items are on the cash budget pro forma
ending cash balance, cash payments, cash for capital expenditure, cash receipts, borrowings
capital expenditures are reported on
both cash budget and cash flow pro forma
cogs is on which statements pro forma
income statement
what os on the pro forma balance sheet
retained earnings and T assets
TF all info for the pro forma statement of cash flows comes from the cash budget
TRUE
what is on the pro forma income statement
interest expense, gross margin, sales rev
pro forma of cash flows includes cash flows from which activities
all three
