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Managerial Accounting > Final Exam > Flashcards

Final Exam Flashcards

1
Q

Net Present Value (NPV)

A

tells you if rate is higher or lower than cost of capital (next best method)

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2
Q

Internal Rate of Return (IRR)

A

tells you what your return is (best method)

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3
Q

Payback

A

how quickly you’ll get money back

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4
Q

Static

A

is long-term strategic planning

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5
Q

Flexible

A

shows expected revenue and expenses at a variety of volume levels

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6
Q

3 Reasons why cash is work more today than cash to be received in the future

A
  • inflation
  • interest
  • risk
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7
Q

What are 3 approaches to establishing transfer prices

A
  • price based on market forces
  • price based on negotiation
  • price based on cost
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8
Q

Capital Investment

A

using an asset to generate a return

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9
Q

Operating Leverage

A

magnifies and increase we have in sales

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10
Q

Advantages of Budgeting

A
  • coordination
  • planning
  • performance measurement
  • corrective action
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11
Q

Responsibility Center

A

an organizational unit that controls identifiable revenue or expense items

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12
Q

Residual Income

A

operating income - (operating asset + desired ROI)

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13
Q

Break Even Point

A

where profit/revenue equals total cost

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14
Q

Liquidity

A
  • short term
  • how quickly we use up an asset OR how fast cash turns to an asset
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15
Q

Solvency

A
  • long term
  • ability to pay all of money that is owed
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16
Q

Period Costs

A

selling general administrative (expensed when incurred)

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17
Q

3 ways a manager can increase ROI

A
  • increasing sales
  • reducing expenses
  • reducing the investments (assets) base
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18
Q

Vertical Analysis (common size)

A

study of items on financial statements in terms of another item

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19
Q

Horizontal Analysis (% change)

A

compares items over periods of times

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20
Q

Relevant Range

A

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

21
Q

Contribution Margin

A

amount of sales revenue that remains for a product or service after its variable costs are deducted

22
Q

Value Chain

A

obtaining raw materials to ultimate disposition of finished products. Sequence of steps we use to convert to finish product

23
Q

High/Low methods:

A
  1. equation method
    sales - vc - fc = 0
  2. cm per unit method
    fc (profit) / cm (per unit)
  3. cm ratio method
    fc (profit) / cm ratio
24
Q

Contribution Ratio

A

CM / Sales

25
Q

Relevant Information

A
  • differs among alternatives
  • is future oriented
26
Q

Unit Level Cost

A

cost incurred each time a company generates one unit of product (ex: cost of direct materials, direct labor, inspections, packaging, shipping, handling)

27
Q

Batch Level Cost

A

products are generated in batches rather than individuals (ex: apartment air conditioners)

28
Q

Product Level Cost

A

costs incurred to support specific products or services (ex: quality inspection costs, engineering design costs)

29
Q

Facility Level Costs

A

incurred to support the entire company. Not related to any specific product, batch or unit of product (ex: building rent, depreciation, personnel administration and training)

30
Q

Direct Costs

A

can easily be traced

31
Q

Indirect Costs

A

can not easily be traced

32
Q

3 Primary Volume Cost Drivers Used in Traditional Costing Systems

A
  1. # of units produced
  2. # of labor hours
  3. amount of direct materials
33
Q

ABC

A

use many more activity centers than the number of departments in traditional system

34
Q

Time Value Money Theory

A

present value of a dollar received in the future is less than a dollar

35
Q

Opportunity Cost

A

sacrifice incurred in order to obtain an alternative opportunity

36
Q

Overhead Costs

A

also known as indirect costs

37
Q

Activity Based Drivers

A

used to improve accuracy or indirect cost allocations

38
Q

3 levels of planning for a business

A
  1. strategic planning
  2. capital budgeting
  3. operating budgeting
39
Q

Strategic Planning

A

involves making long term decisions such as: defining scope of business, determining which products to develop/discontinue, identifying most profitable market price

40
Q

Capital Budgeting

A

intermediate range planning. Involves decisions on whether to buy or lease equipment etc.

41
Q

Operations Budgeting

A

short term plans. Key component is master budget. Sales targets, production goals, financing plans

42
Q

Master Budget

A

group of detailed budgets and schedules representing the company’s operating and financial plans for a future accounting period

43
Q

Key Factors to Help Develop Budget Standards:

A
  • combined experience
  • judgement
  • forecasting ability for all personnel who have resposability for a price and usage decisions
44
Q

Favorable Costs

A

occur when actual costs are less than expected costs

45
Q

3 categories of responsibility center

A
  1. cost
  2. profit
  3. investment
46
Q

Inventory Accounts are used in manufactoring costs:

A
  • raw materials (lumber, metals, paint)
  • work in process (partially completed products)
  • finished goods (completed products ready for sale)
47
Q

Job Order

A

accumulate costs by individual products

48
Q

Process Costing

A

allocate costs evenly to homogeneous products

Managerial Accounting (2 decks)

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