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Managerial Accounting MGMT 302 - Tamara Ebl - 2019 > Midterm Review > Flashcards

Midterm Review Flashcards

1
Q

What is the main characteristic of Just-In-Time approach?

A

Purchases and products built only to meet the customer demand

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2
Q

What are the two characteristics of Total Quality Management (TQM)?

A

1) Focus on serving customers

2) Systematic problem solving using front-line employees

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3
Q

Outline the Plan-Do-Check-Act (PDCA/Deming Wheel) process

A

1) Study, collect data, plan, plan measures
2) Test the plan on a small scale
3) Evaluate the test and see if it worked
4) Adjust plan and try again, or implement the change (depending on the result from the test)

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4
Q

What is process re-engineering?

A

Analyzing and implementing changes in a process to focus on simplification and elimination of wasted effort

Eliminate non-value adding activities

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5
Q

What is the theory of constraints? Three parts of the TOC chain?

A

That managing constraints is the path to success

1) ID the constraint
2) Limit the strain on the constraint
3) Focus on strengthening the weakest link

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6
Q

What was the main purpose of Sarbanes-Oxley Act?

A

Improve the reliability and accuracy of corporate financial reports and disclosures

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7
Q

What is the cost behaviour of variable costs with respect to level of activity?

A

They are constant per unit but increase as a total with an increase in level of activity

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8
Q

What is the cost behaviour of fixed costs with respect to level of activity?

A

They change per unit but stay constant as a total with an increase in level of activity (within the relevant range)

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9
Q

What is the difference between a direct and an indirect cost? An example of each?

A

Direct cost can be easily and economically traced to a cost object.
Direct: amount of fuel for a plane
Indirect: Salaries of baggage handlers

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10
Q

What is a differential (relevant) cost?

A

A cost that differs between two alternatives and occurs in the future

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11
Q

What is manufacturing overhead/factory overhead/factory burden/indirect manufacturing cost?

A

The costs that go into production that are indirect (indirect materials/labour, factory maintenance, utilities, property taxes, depreciation on factory equipment and factory buildings)

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12
Q

What is conversion cost?

A

Manufacturing overhead and direct labour

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13
Q

What is prime cost?

A

Direct labour and direct materials

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14
Q

What is the difference between product/inventoriable costs and period costs?

A

Product: Costs associated with acquiring or producing a product
Period: All non-manufacturing costs

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15
Q

What is the basic inventory flow equation?

A

Beginning balance + Additions to inventory - Withdrawals from inventory = Ending balance

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16
Q

What are the differences between the financial statements of a merchandising firm and a manufacturing firm?

A

Income statement: Purchases vs. Cost of Goods Manufactured, Merchandise inventory vs. Finished Goods inventory

Balance Sheet: Raw materials/Work in process/finished goods vs. merchandise inventory

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17
Q

How is the schedule of cost of goods manufactured assembled?

A

Direct materials + Direct labour + Manufacturing overhead = COGM (total man + beginning WIP - ending WIP = COGM)

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18
Q

What is a step-variable cost? Example?

A

Changes in response to more than a unit of activity change. Example: Wait staff at a restaurant

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19
Q

What is the difference between a committed fixed cost and a discretionary fixed cost?

A

Committed: Long-term, can’t be eliminated without huge changes in ability to achieve goals
Discretionary: Short-term, can be eliminated without huge changes in ability to achieve goals

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20
Q

What is a mixed cost? How does it behave as activity level increases?

A

Mix of fixed and variable costs (think two-part tariff pricing)

Decreases on a per unit basis as activity increases. Increases in total as activity increases.

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21
Q

How are mixed costs analyzed through the high-low method?

A

Change in cost / Change in activity = Variable Cost
FC = Total Cost - VC

Y = FC + VCx

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22
Q

Difference between contribution/variable costing and traditional/gross margin/absorption costing income statements

A

Contribution used the CM and distinguishes between variable and fixed costs whereas the trad format uses COGS and Gross Margin

23
Q

What is the income statement format for variable costing?

A

Sales - VC = CM - FC = NI

24
Q

Define break-even point and what will happen when sales increase over the BEP

A

Where net income = 0

After the BEP NI will increase by the amount of the contribution margin x the # of units

25
Q

What is the CM ratio?

A

CM / Sales

26
Q

What are the four CVP analysis assumptions?

A

1) Selling price constant
2) Costs are linear and can be separated into VC and FC
3) Sales mix is constant
4) Inventory doesn’t change

27
Q

Define the two methods of BE analysis

A

1) Equation method
Profits = Sales - (VC + FC)
2) CM Method
FC / Unit CM or FC / CM Ratio

28
Q

How does the target profit equation relate to the BE analysis equations?

A

Add profits to fixed expenses in the same equations

29
Q

What is the margin of safety?

A

Margin of safety dollars / Total (budgeted) sales

30
Q

What is operating leverage?

A

CM / NI

31
Q

What are the 4 steps in CVP analysis?

A

1) Determine how the behaviour of the costs being changed (fixed, variable, mixed)
2) Determine change in sales that will occur
3) Determine change in VC and include on new fin statements
4) Determine NI

32
Q

What is the difference between a forecast, projection, and budget?

A

Forecast: Assumptions based on facts
Projection: Different scenarios, what is hoped to happen
Budget: What is required, not expected

33
Q

Incremental vs zero-based budgeting

A

Incremental: Based on the previous period
Zero: Everything needs to be justified again

34
Q

Periodic vs continuous budgeting

A

Periodic: usually once a year
Continuous: Rebudgeting for 12 months out every month

35
Q

Participative (self-imposed) budgeting

A

Managers prepare their own budgets rather than being dictated from above

36
Q

Responsibility accounting

A

Managers held responsible for only the items that they can control

37
Q

Master budget layout

A 
Sales -> S&A, Production, Cash
Production -> DM Budget, DL budget, MOH budget
S&A -> Cash 
DM Budget -> Cash
DL -> Cash
MOH -> Cash
Ending FG inventory Budget -> Production
38
Q

Production budget format

A 
Budgeted sales
Add: Desired ending
Total needs
Deduct: Desired beginning
Required production
39
Q

DM Budget format

A 
Raw materials needed
Add: Desired ending
Total needs
Deduct: desired beginning 
Total purchases needed
40
Q

DL Budget format

A 
Required production
Hours per case
Hours needed
Cost per hour
Total direct labour cost
41
Q

MOH Budget format

A 
Budgeted hours
Variable overhead rate
Variable MOH
Fixed MOH
Total MOH
Less: Depreciation
Cash disburse for MOH

Total MOH
Budgeted DL hours
Overhead rate for the year

42
Q

FG budget format

A

Unit product cost (DL, DM, MOH)

Ending inventory in units
Unit product cost (from above)
Ending FG in dollars

43
Q

S&A Budget format

A 
Budgeted sales
Variable S&A per unit
Total Variable S&A
Budgeted fixed S&A
Total S&A
Less: Depreciation
Cash for S&A
44
Q

Cash budget format

A 
Cash balance beginning
Add: receipts
Cash available before financing
Deduct: Disbursements
Excess of cash over disbursements

Financing (borrowing, repayments, interest)
Total financing
Cash balance, ending

45
Q

Budgeted Income format

A 
Sales
Less: COGS
Gross Margin
Less: S&A
NOI
Less: interest
NI
46
Q

Budgeted balance format

A

Current assets
PPE
Total Assets

Liabilities
SH Equity
Total Liab & Equity

47
Q

What is the target costing formula?

A

Estimated price - Target profit margin = Target cost

48
Q

What’s the difference between COGM and COGS

A

COGM: Relates to units PRODUCED
COGS: Relates to units SOLD

Rarely the same

49
Q

What are the 4 steps to profitably using a constrained resource?

A

1) Calc CM per unit
2) Calc how much of each constrained resource in each unit
3) CM / Unit of constrained resource
4) Rank the alternatives

50
Q

What are the 3 steps for sell-or-process decision?

A

1) Calc sales value if processed further - sales value at split-off point
2) Cost of processing further
3) Step 1 - Step 2 = positive then process further; if negative don’t process further

51
Q

What are the 6 benefits of budgeting

A

1) Systematic thinking
2) Potential impediment uncovering
3) Communicate plans
4) Coordinate plans
5) Resources used effectively
6) Create benchmarks for future performance

52
Q

What are the two axes on the CVP graph?

A

X - Unit volume

Y - $

53
Q

Sales Budget Format

A

Budgeted sales in units
Selling price per unit
Total Sales

Schedule of cash collections

Managerial Accounting MGMT 302 - Tamara Ebl - 2019 (2 decks)

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