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Managerial Accounting > FINAL DECK > Flashcards

FINAL DECK Flashcards

1
Q

Managerial Accounting involves gathering accounting data primarily for external users

A

False, Why and How?

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2
Q

Managerial Accounting aids management in planning, controlling and making sound business decisions regarding company operations.

A

True, Why and How?

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3
Q

Managerial Accounting can add substantial value to essentially all business majors - regardless of his or her major

A

True, Why and How?

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4
Q

Managerial Accounting is applicable solely to large corporations.

A

False, Why and How?

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5
Q

Financial Accounting provides financial information primarily to external users, but can be useful for internal users as well.

A

True, Why and How?

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6
Q

Managerial Accounting emphasizes relevance, timeliness,precision, and verifiability.

A

False, Why and How?

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7
Q

Financial Accounting focuses primarily on segment operations.

A

False, Why and How?

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8
Q

Management and Leadership essentially mean the same thing.

A

False, Why and How?

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9
Q

Business Ethics is a subordinate concept that can be lightly understood and should be used in both the US and Worldwide economy only when desired (i.e. Competence, Integrity, Credibility).

A

False, Why and How?

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10
Q

Corporate Social Responsibility focuses only on the needs of customers, employees and, shareholders.

A

False, Why and How?

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11
Q

Business Ethics and Integrity have been very highly regarded in US business operations over the past decade.

A

False, Why and How?

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12
Q

The three primary functions of management are - Planning, Controlling, and Decision Making.

A

True, Why and How?

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13
Q

What are the 3 basic classes of manufacturing costs:

A

Direct Materials, Direct Labor and Manufacturing Overhead

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14
Q

A Manufacturing Company President’s salary is part of direct labor.

A

False, Why and How?

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15
Q

The salary of a janitor working in the manufacturing plant is considered a manufacturing overhead cost

A

True, Why and How?

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16
Q

The cost of glue, nuts, and bolts for a manufacturing company are classified as DM.

A

False, Why and How?

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17
Q

Direct materials are product costs

A

True, Why and How?

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18
Q

The salary of a company sales associate is a product cost.

A

False, Why and How?

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19
Q

Non-manufacturing costs are period costs.

A

True, Why and How?

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20
Q

Manufacturing overhead costs are period costs.

A

False, Why and How?

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21
Q

Periods costs are reflected on the balance sheet.

A

False, Why and How?

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22
Q

Product costs are reflected on both the balance sheet and income statement.

A

True, Why and How?

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23
Q

Prime Costs are Product Costs.

A

True, Why and How?

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24
Q

Conversion Costs are Period Costs.

A

False, Why and How?

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25
Q

MO are Prime costs.

A

False, Why and How?

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26
Q

DL are Prime Costs / Are Conversion Costs / Period Costs. (Provide 3 T/F answers).

A

True, True, False

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27
Q

What are the Classes of Costs based on Cost Behavior?

A

Variable, Mixed, Fixed

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28
Q

Variable Costs per unit increases or decreases as activity increases or decreases.

A

False, Why and How?

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29
Q

Fixed cost per unit remains the same as volume increases or decreases.

A

False, Why and How?

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30
Q

In the Mixed Cost formula Y=a+bx, Y=Total Manufacturing Costs, a = Total Fixed Manufacturing Costs, b= Variable Costs per unit, x = volume

A

True, Why and How?

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31
Q

Indirect Costs as MO costs are period costs.

A

False, Why and How?

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32
Q

Direct Costs includes DM, DL and MO.

A

False, Why and How?

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33
Q

The contribution format income statement is primarily used for internal management decision making.

A

True, Why and How?

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34
Q

The fair market valueof an assetis a sunk cost.

A

False, Why and How?

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35
Q

Costs that impact decision making the same way are differential costs.

A

False, Why and How?

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36
Q

Opportunity costs address the benefit given up as a result of incurring a given cost.

A

True, Why and How?

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37
Q

What are Prime Costs?

A

Direct Labor & Direct Materials

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38
Q

What are Product Costs?

A

Direct Materials, Direct Labor and Manufacturing Overhead

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39
Q

What are non manufacturing costs?

A

Administrative + Selling Expenses

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40
Q

What are manufacturing costs?

A

Direct Materials, Direct Labor and Manufacturing Overhead

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41
Q

What are conversion costs?

A

Direct Labor & Manufacturing Overhead

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42
Q

What are period costs?

A

Administrative + Selling Expenses

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43
Q

Job Order Costing is used in companies that manufacture products to customer specifications.

A

True, Why and How?

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44
Q

Job Order Costing is only used in manufacturing companies

A

False, Why and How?

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45
Q

Job Order Costing captures all costs in bulk for assignment to jobs.

A

False, Why and How?

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46
Q

Direct Materials and Direct Labor are allocated to jobs.

A

False, Why and How?

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47
Q

All pending jobs are reflected in the Work In Process account.

A

True, Why and How?

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48
Q

The omission of manufacturing overhead cost seriously impairs the determination of total product cost

A

True, Why and How?

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49
Q

The job cost sheet is used to capture DM, DL, MO, and total cost per unit for each job.

A

True, Why and How?

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50
Q

Manufacturing Overhead costs are recorded on the job cost sheet based on actual costs.

A

False, Why and How?

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51
Q

Predetermined Overhead Rate is based on actual manufacturing overhead costs and actual allocation base.

A

False, Why and How?

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52
Q

The Allocation Base is the same as the Cost Driver.

A

True, Why and How?

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53
Q

Plantwide POHR provides a more accurate allocation of MO than departmental POHRs.

A

False, Why and How?

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54
Q

The 4-step process to compute the predetermined overhead rate involves the formula: Y = a + bx.

A

True, Why and How?

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55
Q

Total estimated manufacturing costs and total fixed estimated manufacturing costs are the same.

A

False, Why and How?

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56
Q

Assigning manufacturing costs to products reasonably ensures profits.

A

False, Why and How?

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57
Q

Actual and Estimated MO usually equals, and rarely require account adjustments at year end.

A

False, Why and How?

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58
Q

Under-applied MO occurs when actual MO is greater than applied MO.

A

True, Why and How?

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59
Q

Over-applied MO results in an overstatement of COGS and an understatement of Net Profit.

A

True, Why and How?

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60
Q

The correction of an under-applied MO results in an increase in COGS and a decrease in Net Profit.

A

True, Why and How?

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61
Q

What is Overapplied overhead?

A

Overapplied means that we assumed our expenses were higher, than the actual. Which means we understated net income

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62
Q

What is Underapplied overhead?

A

Underapplied means we assumed our expenses were lower, than the actual. Which means we overstated net income

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63
Q

How does one fix a overapplied or under applied adjustment?

A

You can either do a fix by crediting crediting COGS, and Debiting MO , or you can split it by WIP, Finished Goods and Cogs , MO

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64
Q

What is a sunk cost?

A

Cost that has already been incurred and cannot be changed

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65
Q

What is a opportunity cost?

A

Loss of benefit from another alternative if one alternative is chosen

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66
Q

Work in process consists of units of production that are partially complete and will require further work before they are ready for sale to customers.

A

True, Why and How?

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67
Q

Finished goods consist of completed units of product that have been sold to customers.

A

False, Why and How?

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68
Q

Raw materials immediately after purchase goes straight to Work in Process inventory

A

False, Why and How?

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69
Q

Selling and Administrative expenses first go through the manufacturing overhead account and then to work in process.

A

False, Why and How?

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70
Q

Selling and Administrative expenses are reflected on the income statement only.

A

True, Why and How?

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71
Q

While direct materials go to WIP as needed for a particular job, indirect materials for the same job go to manufacturing overhead as incurred.

A

True, Why and How?

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72
Q

When raw materials are purchased on credit, the company’s raw materials account is debited and their accounts payable account is credited.

A

True, Why and How?

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73
Q

As direct labor is incurred , the work in process account is debited and wages payable account is credited.

A

True, Why and How?

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74
Q

As indirect labor is incurred, the work in process account is also debited and wages payable account is credited.

A

False, Why and How?

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75
Q

As other manufacturing overhead costs are incurred (i.e. insurance premiums, rents), the manufacturing overhead account is debited and the work in process account is credited

A

False, Why and How?

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76
Q

When MO is applied, the MO account is credited and WIP is debited.

A

True, Why and How?

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77
Q

When good are completed, WIP is credited and the Finished Goods Account is debited.

A

True, Why and How?

78
Q

When goods are sold, two journal entries are required - one for recording the sale, and the other for recording the cost of goods sold.

A

True, Why and How?

79
Q

When recording the cost of goods sold, the company will debit the Finished Goods account and credit the Cost of Goods Sold account.

A

False, Why and How?

80
Q

Estimated MO will almost never equal Actual MO.

A

True, Why and How?

81
Q

When actual MO is greater than estimated MO, the company has overapplied MO.

A

False, Why and How?

82
Q

An underapplied MO situation results in an overstatement of net income.

A

True, Why and How?

83
Q

The correction of an overapplied MO situation results a decrease to cost of goods sold and a decrease to net income.

A

False, Why and How?

84
Q

Overapplied or Underapplied overhead can be closed out directly to cost of goods sold or proportionately to Work In Process, Finished Goods and Cost of Goods Sold.

A

True, Why and How?

85
Q

What is POHR?

A

Predetermined OverHead Rate

86
Q

Process Costing is used by companies that make customized products.

A

False, Why and How?

87
Q

Process Costing has some similarities with Job Order Costing.

A

True, Why and How?

88
Q

Both Process and Job Order Costing seek to determine the proper product unit cost.

A

True, Why and How?

89
Q

Process Costing accumulates costs based on jobs completed.

A

False, Why and How?

90
Q

MO is an important cost element of Process Costing.

A

True, Why and How?

91
Q

What is EUP?

A

Equivalent Units of Production

92
Q

EU is a vitally important concept in determining units produced and unit costs in Process Costing.

A

True, Why and How?

93
Q

EUP computed under the Weghted-Average Method requires the use of beginning inventory and units added to production for the period.

A

TRUE, Why and How?

94
Q

EU computed under the Weighted-Average Method focuses on units completed and transferred, and beginning inventory.

A

False, Why and How?

95
Q

Total EUs require the determination of units completed and transferred + the percentage of DM and Conversion in ending inventory.

A

True, Why and How?

96
Q

What is a Mixed Cost?

A

A cost behavior. Can have both variable and fixed elements. to determine mixed cost you would use the Y = a + bX formula

97
Q

What is a variable Cost?

A

Total variable costs varies when there are changes to activity , however if its by unit, its constant. They are cost behaviors

98
Q

What is a Fixed Cost?

A

Another cost behavior. In total, it remains the same, and per unit, it changes based off of level of activity

99
Q

What is GAAP

A

Generally Accepted Accounting Principles

100
Q

What is IFRS

A

International Financial Reporting Standards

101
Q

What are differential costs

A

future costs between two alternative choices

102
Q

What is the meaning of each of these letters in the formula Y = A + BX

A

Y = Total mixed Cost, A = Total fixed cost, B = Variable cost per UNIT of activity, and X = level of activity

103
Q

The Traditional Format Income Statement is vital in performing a Cost-Volume-Profit (CVP) Analysis.

A

FALSE, Why, How would you switch this statement for it to be true

104
Q

Sales less Variable Costs equals Gross Margin or Gross Profit.

A

FALSE, Why, How would you switch this statement for it to be true

105
Q

The Contribution Margin is a critical concept in understanding CVP analysis.

A

TRUE, Why, How would you switch this statement for it to be false

106
Q

Breakeven is achieved when Sales less Variable Costs equals zero.

A

FALSE, Why, How would you switch this statement for it to be true

107
Q

Fixed Costs are used to determine contribution margin.

A

FALSE, Why, How would you switch this statement for it to be true

108
Q

Contribution margin can be determined using total sales and total variable expense amounts as well as sales per unit and variable costs per unit amounts.

A

TRUE, Why, How would you switch this statement for it to be false

109
Q

Net Operating Income increases or decreases at the rate of contribution margin.

A

TRUE, Why, How would you switch this statement for it to be false

110
Q

The higher the contribution margin, the faster net operating income grows.

A

TRUE, Why, How would you switch this statement for it to be false

111
Q

Changes in fixed costs impact contribution margin.

A

FALSE, Why, How would you switch this statement for it to be true

112
Q

The contribution margin ratio can be determined by dividing Sales per unit by CM per unit.

A

FALSE, Why, How would you switch this statement for it to be true

113
Q

Net Operating Income is usually achieved after CM is greater than zero.

A

FALSE, Why, How would you switch this statement for it to be true

114
Q

CM per unit is equal to Sales per unit less Variable Expenses per unit.

A

TRUE, Why, How would you switch this statement for it to be false

115
Q

When a company has fixed costs, the company’s net operating income is zero when CM is zero.

A

FALSE, Why, How would you switch this statement for it to be true

116
Q

The CM ratio can be computed by dividing the contribution margin per unit by the sales price per unit.

A

TRUE, Why, How would you switch this statement for it to be false

117
Q

The CM ratio can be computed by dividing the total contribution margin by total sales.

A

TRUE, Why, How would you switch this statement for it to be false

118
Q

The CM ratio can be computed by dividing sales per unit less variable expenses per unit by sales per unit.

A

TRUE, Why, How would you switch this statement for it to be false

119
Q

Given a constant Sales level, a decrease in Variable Expenses will result in an increase in CM.

A

TRUE, Why, How would you switch this statement for it to be false

120
Q

An increase in fixed costs typically results in an decrease in net operating income.

A

TRUE, Why, How would you switch this statement for it to be false

121
Q

In considering the CVP graph, a decrease in the sales price would result in a lower breakeven point.

A

FALSE, Why, How would you switch this statement for it to be true

122
Q

In considering the CVP graph, a decrease in variable costs would result in a lower breakeven point.

A

TRUE, Why, How would you switch this statement for it to be false

123
Q

When determining target profit in terms of units, the CM per unit is used for both the equation and formula methods.

A

TRUE, Why, How would you switch this statement for it to be false

124
Q

When determining breakeven in sales dollars, the CM per unit is used for both the equation and formula method.

A

FALSE, Why, How would you switch this statement for it to be true

125
Q

When determining target profit in terms of sales dollars, you can used the equation method to solve for “Q”.

A

FALSE, Why, How would you switch this statement for it to be true

126
Q

The margin of safety is the excess of budgeted or actual sales over the breakeven point.

A

TRUE, Why, How would you switch this statement for it to be false

127
Q

Operating leverage is the impact on net operating income given a percentage change in sales.

A

TRUE, Why, How would you switch this statement for it to be false

128
Q

Variable Manufacturing Overhead Costs is the key difference between Absorption Costing and Variable Costing.

A

FALSE, Why, How would you switch this statement for it to be true

129
Q

Variable Costing treats all Manufacturing Costs as product costs.

A

FALSE, Why, How would you switch this statement for it to be true

130
Q

Absorption Costing uses the traditional income statement format.

A

TRUE, Why, How would you switch this statement for it to be false

131
Q

Unit Product Costs under the Variable Costing approach include fixed manufacturing costs.

A

FALSE, Why, How would you switch this statement for it to be true

132
Q

Selling and administrative expenses are period costs under both the Absorption and Variable Costing approaches.-

A

TRUE, Why, How would you switch this statement for it to be false

133
Q

When units produced are greater than those sold in a given year, the company’s cost of goods sold will be less under the Absorption Costing approach.

A

TRUE, Why, How would you switch this statement for it to be false

134
Q

When units produced are less than those sold in a given year, the Variable Costing Approach will show a lower net operating income than the Absorption Costing Approach.

A

FALSE, Why, How would you switch this statement for it to be true

135
Q

Segment Margin equals sales minus variable expenses.

A

FALSE, Why, How would you switch this statement for it to be true

136
Q

Common costs are allocated among segments before determining segment profitability in the long run.

A

FALSE, Why, How would you switch this statement for it to be true

137
Q

Traceable costs are costs that are identifiable by a segment.

A

TRUE, Why, How would you switch this statement for it to be false

138
Q

Segment Breakeven determination involves the use of allocated common costs.

A

FALSE, Why, How would you switch this statement for it to be true

139
Q

Break Even Point

A

Level of sales at which profit is 0

140
Q

Cost Volume Profit Graph

A

graph representation of the relationships between organizations revenue, costs, and profits on one side, and its sales volume on other side

141
Q

Incremental Analysis

A

analytical approach that focuses only on those costs and revenues that change as a result of a decision

142
Q

Margin of safety

A

excess of budgeted or actual dollar sales over the break even dollar sales

143
Q

Operating leverage

A

Percent increase in sales x degree of operating leverage which gets you the percentage of how much net operating income increases

144
Q

Sales Mix

A

Relative proportions in which a company’s products are sold. Sales mix is computed by expressing the sales of each product as a percentage of total sales.

145
Q

Target Profit Analysis

A

estimating the level of sales needed to achieve a desired target profit.

146
Q

Absorption Costing

A

method that includes all manufacturing costs such as direct materials, direct labor and fixed manufacturing costs as unit product costs. Also uses the traditional income statement

147
Q

Common fixed cost

A

costs that support one business segment but not traceable in whole or in part to any one of the business segments

148
Q

Segment

A

part or activity of an organization about which managers seeks cost, revenue and profit data (department)

149
Q

Segment Margin

A

Sales - Variable expenses - traceable fixed costs

150
Q

Traceable fixed cost

A

cost that can be incurred because of the existence of a particular business segment and would dissapear if segment was eleminated

151
Q

Variable costing

A

costing method that includes variable dm, dl, and mo as product costs, and fixed mo as period cost

152
Q

If units produced equal units sold

A

No change in inventory and absoption NOI would equal variable NOI

153
Q

If units produced are greater than units sold

A

inventory increases, absorption NOI would be higher than variable

154
Q

If units produced are less than units sold

A

inventory decreases, absorption NOI would be lower than variable NOI

155
Q

What costing is better used for CVP analysis?

A

Variable costing, since it categorizes variable and fixed

156
Q

What is variable costing only affected by

A

change in unit sales

157
Q

What is absorption costing affected by

A

changes in unit sales and units of production

158
Q

Companywide break-even point

A

company’s traceable fixed expense + common fixed expense divded by company’s overall CM ratio.

159
Q

Segment break even point

A

traceable fixed expense divided by CM ratio (for that segment)

160
Q

What makes up a value chain

A

R&D, Product Design, Manufacturing, Marketing, Distribution, Customer Service

161
Q

What are the 3 tools for segmented income analysis ?

A
  1. Review the Segment Margin. 2. Compute the CM ratio for each segment. 3. Determine the degree of operating leverage
162
Q

A budget is a plan expressed in quantative terms showing how a cmopany’s financial and other pertinent resources are to be used to achieve a certain financial outcome for a specified period.

A

TRUE, Why, How would you switch this statement for it to be false

163
Q

Budgets help to ensure alignment of financial and other resources to achieve a targeted outcome.

A

TRUE, Why, How would you switch this statement for it to be false

164
Q

Top down prepared budgets are more effective than bottom-up budgets

A

FALSE, Why, How would you switch this statement for it to be true

165
Q

Planning and Controlling functions are the same thing

A

FALSE, Why, How would you switch this statement for it to be true

166
Q

Budgetary slack aids profit maximization

A

FALSE, Why, How would you switch this statement for it to be true

167
Q

Self-Imposed budgets create opportunities for employees to assert that company objectives are unrealistic

A

FALSE, Why, How would you switch this statement for it to be true

168
Q

Top Management’s attitude towards budgets can substantially affect employee performance.

A

TRUE, Why, How would you switch this statement for it to be false

169
Q

Budgets can be used to promote employee effectiveness and can be used to demoralize employees

A

TRUE, Why, How would you switch this statement for it to be false

170
Q

The master budget is a comprehensive layout of a company’s acquisition and use of financial and related resources

A

TRUE, Why, How would you switch this statement for it to be false

171
Q

All sub-budgets within a master budget are interrelated

A

TRUE, Why, How would you switch this statement for it to be false

172
Q

The sales budget and schedule of cash collections are the same

A

FALSE, Why, How would you switch this statement for it to be true

173
Q

The timing of cash collections is not important if all the cash at the end of a given period (i.e quarter, half-year, year) is correct.

A

FALSE, Why, How would you switch this statement for it to be true

174
Q

A company’s production needs for a given period is determined by adding the budgeted sales in units to the beginning period’s units and then subtracting the ending period’s units

A

FALSE, Why, How would you switch this statement for it to be true

175
Q

The final cash disbursement total for the Selling and Administative Expense Budget includes all variable and all fixed selling and administrative expenses

A

TRUE, Why, How would you switch this statement for it to be false

176
Q

In the cash budget, all cash proceeds (inflows) are included in the first section of the budget - including beginning cash.

A

FALSE, Why, How would you switch this statement for it to be true

177
Q

All cash outflows must be included in the cash disbursement section of the cash budget - including loan repayments

A

FALSE, Why, How would you switch this statement for it to be true

178
Q

The primary purpose of the cash budget is to determine the cash balance at the end of each period

A

FALSE, Why, How would you switch this statement for it to be true

179
Q

Depreciation Expense must be included in the Cash Budget

A

FALSE, Why, How would you switch this statement for it to be true

180
Q

Relevant costs are unavoidable costs

A

FALSE, Why, How would you switch this statement for it to be true

181
Q

Sunk Costs are never relevant costs

A

TRUE, Why, How would you switch this statement for it to be false

182
Q

Irrelevant Costs impact successful decision making

A

FALSE, Why, How would you switch this statement for it to be true

183
Q

Once a relevant cost - always a relevant cost

A

FALSE, Why, How would you switch this statement for it to be true

184
Q

In a decision to drop a segment or product line, contribution margin should be greater than all related avoidable costs.

A

FALSE, Why, How would you switch this statement for it to be true

185
Q

Avoidable costs can be fixed of variable costs

A

TRUE, Why, How would you switch this statement for it to be false

186
Q

Common Costs are irrelevant costs

A

TRUE, Why, How would you switch this statement for it to be false

187
Q

Common costs are included in the decision to make v buy a product

A

FALSE, Why, How would you switch this statement for it to be true

188
Q

When the cost to buy a product is less than the TOTAL UNIT COST of the same product to make, the decision should always be to buy the product

A

FALSE, Why, How would you switch this statement for it to be true

189
Q

When the considering profit maximization for a company producing products, constrains should be considered and evaluated when determining the priority of products to make

A

TRUE, Why, How would you switch this statement for it to be false

190
Q

The sale of additional units beyond the break even point produces profit at the rate of the contribution margin per unit

A

TRUE, Why, How would you switch this statement for it to be false

191
Q

Variable Costing treats all variable costs as product costs

A

FALSE, Why, How would you switch this statement for it to be true

192
Q

The costing method that treats all fixed costs as period costs is

A

Variable Costing

Managerial Accounting (3 decks)

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