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CPA PEP - Core 2 > Management Accounting > Flashcards

Management Accounting Flashcards

1
Q

What is the Contribution Margin calculation?

A

Sales - Variable costs = CM

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2
Q

What’s the Contribution Margin ratio caluculation?

A

CM ratio % = CM/Sales price

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3
Q

How do you calculate break-even in units?

A

Break-even units = fixed cost / CM per unit

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4
Q

How do you calculate break-even in dollars?

A

Break-even dollars = fixed cost / CM ratio

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5
Q

When the Contribution margin increases, how does this affect the break-even point?

A

The break-even point decreases

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6
Q

When the Contribution margin decreases, how does this affect the break-even point?

A

The break-even point increases

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7
Q

When a company is highly automated, does it usually have lower variable costs or higher variable costs?

A

Lower variable costs (direct labour)

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8
Q

What is WACM used to calculate?

A

Break-even with multiple products

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9
Q

How do you calculate WACM per unit?

A

WACM per unit = Total CM / Total units

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10
Q

How do you calculate the WACM ratio?

A

WACM ratio = Total CM / Total sales

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11
Q

How do you calculate UNIT sales necessary to obtain a target profit?

A

Target profit sales (units) = (Fixed cost + Target profit) / CM per unit

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12
Q

How do you calculate DOLLAR sales necessary to obtain a target profit?

A

Target profit sales (dollars) = (Fixed cost + Target profit) / CM ratio

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13
Q

What’s the formula for the Cost Function?

A

TC = (VC × X) + FC

	Where: 
	TC = total cost
	VC = variable cost
	X = activity level 
	FC = fixed cost
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14
Q

How do you make decisions with a constrained resource?

A

Calculate CM per the constrained resource.

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15
Q

What is the COGM formula?

A

COGM = beginning WIP + DM used + DL used + OH applied - ending WIP

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16
Q

What’s the COGS formula?

A

COGS = beginning finished goods + COGM - ending finished goods

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17
Q

what’s the difference between job costing and process costing, in terms of when they’re used?

A

Job costing is when product is unique. Process costing is when products are identical.

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18
Q

What are the 2 methods used for Job Costing?

A

Variable costing and absorption costing

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19
Q

What is the presentation like when using variable costing?

A

CM format

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20
Q

What is the presentation like when using absorption costing?

A

IS format

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21
Q

Which Job Costing method is required under IFRS and ASPE?

A

Absorption costing method

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22
Q

Which costing method requires that spoilage is accounted for?

A

Job costing, not variable costing

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23
Q

What are the 2 methods that could be used under Process costing?

A

Weighted average method and FIFO method. Both use EU’s

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24
Q

What are the differences between using Weighted Ave method for process costing, and FIFo method? (3 differences)

A
  1. Under the weighted-average method, the cost per EU includes beginning inventory. Under the FIFO method, the cost per EU includes only the costs for work performed during the period
  2. for WA, when calculating EU’s, only look at beg WIP and units started. for FIFO, look at beg WIP, units started and finished, and units started but not finished.
  3. In step 5 when assigning total costs to units completed and ending WIP, you have to add the total costs incurred for beg WIP since they weren’t included in the EU per unit.
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25
Q

What are the 5 steps for Process costing?

A
  • 5 step guide to process costing:
    1. Compute units to be accounted for
    2. Compute output in terms of EU
    3. Compute costs to account for
    4. Compute cost per EU
    5. Assign total costs to units complete and to ending WIP
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26
Q

What are the 5 steps for ABC?

A

i. Identify the cost objective (ex. Costs by product line, by customer, etc.)
ii. Identify activities (called cost pools) and cost drivers (ex. If activity is packaging, cost driver could be # of skids)
iii. Calculate total indirect costs, and assign the indirect costs to activity cost pools based on the indirect costs spent on that activity
iv. Calculate activity rates by taking total indirect costs used for the activity, and dividing by the total volume of the cost driver (which is the sum of the cost drivers for all cost objectives)
v. Assign indirect costs to cost objectives (make mini income statements for all cost objectives if the info is given, or just calculate the total OH costs per unit, and then total per unit costs)

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27
Q

What kind of company is ABC most useful for?

A

ABC is most likely to be beneficial in organizations with a high proportion of indirect costs and high variation in resource usage across products, customers, facilities, and so on

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28
Q

What’s the normal balance when OH is incurred?

A

Debit

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29
Q

WHat’s the normal balance when OH is applied?

A

Credit

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30
Q

Wht’s the normal balance when OH is over applied?

A

Credit

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31
Q

What’s the normal balance when OH is under applied?

A

Debit

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32
Q

How do you get rid of an over-application of OH?

A

need to debit Manuf. OH and credit COGS (for % sold) and WIP or FG (for %s in progress or finished but not sold)

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33
Q

How do you get rid of an under application of OH?

A

need to credit Manuf. OH and debit COGS (for % sold) and WIP or FG (for %s in progress or finished but not sold)

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34
Q

What are the 3 methods for join cost allocation?

A

physical output method, sales value at split off point method, and NRV method

35
Q

When can the sales value at split off point not be used?

A

When some products are not sold at the split off point

36
Q

What’s the actg treatment for byproducts or waste that occur before the split-off point?

A

included in joint costs of all products after split off point

37
Q

What’s the actg treatment for byproducts or waste that occur after the split-off point?

A

included in separate costs of the product it’s associated with

38
Q

What are the 3 methods to allocate service dept costs to other depts they serve?

A

Direct allocation, step down method, and reciprocal allocation method

39
Q

What’s the formula to calculate minimum transfer price?

A

Minimum transfer price = Variable costs up to the point of transfer + Opportunity cost to the selling division

40
Q

What’s the minimum transfer price with idle capacity?

A

minimum transfer price is equal to the variable cost

41
Q

WHat’s the minimum transfer price with no idle capacity?

A

market price

42
Q

If one dept sells to another, what is the max price the buying dept is willing to pay?

A

The external selling price

43
Q

what are the 3 transfer pricing methods?

A
  • cost-based transfer pricing
  • market-based transfer pricing
  • negotiated transfer pricing
44
Q

how does the cost based (transfer) pricing method work?

A

takes the full cost + markup, or the variable cost + markup

45
Q

what are the 3 conditions for market-based transfer pricing to result in an optimal decision?

A

A. immediate market must be perfectly competitive and information readily available
B. Interdependencies between the departments must be minimal
C. must be no additional costs or benefits to the organization as a whole in using the external market instead of transacting internally

46
Q

When should an internal transfer definitely never be made?

A

when a company is operating at capacity and can sell its component for more than the internal division would pay to purchase the component externally

47
Q

How does Variable product costing work? When is it applicable?

A

variable costs + markup.
applicable when fixed costs are low and not much competition

48
Q

how does full absorption costing work?

A

full cost + markup

49
Q

what is life cycle costing?

A

trying to maximize profits with the whole product life cycle in mind

50
Q

How does target based costing work?

A

think of a target price to sell the product at, and then a target operating income. THen you do income-selling price to get the target costs. Try to lower costs to match target costs

51
Q

What is predatory pricing?

A

Setting selling price below costs to drive out competition and then raising prices (illegal). ex. Walmart

52
Q

What is penetration pricing?

A

when launching into new mkt to gian economies of scale.
Aim is to set lower price to gain market share, then eventually increasing price once market share is achieved

53
Q

what is price skimming?

A

setting price high to earn back investment or to break even with fewer sales (possibly targetting early adopters). ex. think sea plane, or cell phones.

54
Q

what is price bundling?

A

making it cheaper for customers to buy products together with another one

55
Q

what is peak load pricing / dynamic pricing?

A

charging a higher price for the same product or service when demand approaches physical capacity limits

56
Q

what’s loss leader pricing?

A

selling a less profitable product at a loss to stimulate sales of other more profitable products

57
Q

what is tender or contract pricing?

A

responding to a job/contract that’s available. Price is based on labour and material costs to you and to make a profit

58
Q

what’s value based pricing?

A

pricing based on value perceived by the customer and focuses on differential features

59
Q

what is the only way to truly cut costs?

A

eliminate the activity causing the cost to occur

60
Q

What are the 4 levels of cost accumulation for costs of quality?

A

external failure, internal failure, appraisal/process costs, and prevention/planning costs

61
Q

what’s the largest cost of quality?

A

opportunity of lost sales because of low quality of the service/product delivered to the customer

62
Q

What is the focus of lean mgmt?

A

Eliminating non-value added processes

63
Q

Whats the focus of six sigma?

A

reducing waste in both value added and non value added processes

64
Q

whats the goal of JIT inventory system? (lean mgmt)

A

resuce stock time for inventory, lowering costs

65
Q

what is the goal of activity analysis (lean mgmt)?

A

To divide processes into acitivities and get rid of activities that don;t add value

66
Q

what is the goal of the zero defects approach? (lean mgmt)

A

to get rid of defects before they move onto the next level of production

67
Q

How do you calculate cash conversion cycle?

A

in days
Cycle = inventory holding period + AR collection period - AP payment period

68
Q

How do you calculate operating cycle?

A

in days
Cycle = inventory holding period + AR collection period

69
Q

Whats the most overaraching variance you could calculate to compare budget with actual?

A

static budget variance

70
Q

what’s the static budget variance formula?

A

AQAP - SQSP

71
Q

which variance depicts variance due to sales price difference between budget and actual?

A

flexible budget variance

72
Q

whats the flexible budget variance formula?

A

(AP-SP)*AQ

73
Q

which variance depicts variance due to sales volume ?

A

sales volume variance

74
Q

whats the sales volume variance formula?

A

(AQ-SQ)*SP

75
Q

which variance compares the rates of inputs into production?

A

rate variance

76
Q

what’s the rate variance formula?

A

(AP-SP)*AQ

77
Q

which 2 variances can the flexible budget be broken into?

A

rate and efficiency variances

78
Q

whats the point of the efficiency variance?

A

To compare usage of inputs

79
Q

whats the efficiency variance formula?

A

(AQ-SQ)*SP

80
Q

what are the 4 perspectives in balanced scorecard?

A
  1. Financial
    2. Customer
    3. Internal business process
    4. Learning and growth
81
Q

What are the steps in using balanced scorecard?

A
  1. choose perspctives
  2. choose 3-4 goals per persepctive
  3. choose a measurement method
  4. decide who is responsible
  5. set a target
82
Q

whats the difference between strategy mapping and balanced scorecard?

A

Strategy mapping is primarily used to set and communicate strategy, while the BSC is used to measure progress toward strategy

83
Q

what are 2 types of controls? what are they?

A

general and application.
General - Includes general control env’t and IT controls around physical security, logical access, and distributed computing
Application - built into software to ensure that data is maintained and processed accurately

84
Q

what are the causes of data integrity being low?

A

○ Unintentional errors
○ Manipulation of data
○ Access of data by parties who do not have the right to view the information

CPA PEP - Core 2 (2 decks)

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