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ACCT 201 > Module 1 > Flashcards

Module 1 Flashcards

1
Q

Plan

A

set goals and objectives; determine specific roadmap for achieving those goals using budgets

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2
Q

Control

A

monitoring the company’s day-to-day operations using various managerial accounting reports

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3
Q

Evaluate

A

compare actual results of operations against the plan using variance analysis and other performance evaluation tools

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4
Q

Make Decisions

A

managers must choose between available alternatives in every step using cost-benefit analysis

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5
Q

Primary users (Managerial and Financial)

A

M: Internal management
F: External users, primarily stockholders and creditors

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6
Q

Purpose (Managerial and Financial)

A

M: plan, control, evaluate operations
F: help make investing and lending decisions

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7
Q

Accounting Product (Managerial and Financial)

A

M: on demand reports
F: annual or quarterly GAAP financial statements

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8
Q

Basis of info (Managerial and Financial)

A

M: relevant data with future focus
F: reliable data based on historical transactions

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9
Q

Business unit (Managerial and Financial)

A

M: segments
F: consolidated

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10
Q

Audited by (Managerial and Financial)

A

M: internal auditors
F: independent, external CPAs

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11
Q

Requirements by (Managerial and Financial)

A

M: N/A
F: Securities and exchange commission (SEC)

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12
Q

Affects employee behavior (Managerial and Financial)

A

M: carefully consider when designing incentives
F: not a concern

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13
Q

Board of directors

A

Elected by shareholders to oversee the company

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14
Q

Chief Executive Officer (CEO)

A

hired by BOD to manage the company on daily basis

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15
Q

VP of Various Operations

A

research and development, sales, marketing, purchasing, production, etc

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16
Q

Treasurer

A

raise capital, invest and manage $

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17
Q

Controller

A

general financial and managerial accountant

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18
Q

Audit committee

A

oversee annual external audit

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19
Q

internal audit

A

internal controls and risk management

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20
Q

Where do management accountants fit in?

A

Everywhere. Serve on cross-financialteams reporting to various VPs providing data and financial perspective

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21
Q

Contribution Income Statement

A 
Sales Revenue 
(Variable Expenses)
Contribution Margin
(Fixed Expenses)
Operating Income 
**Based on cost behavior (Used to see how different volumes will impact business)
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22
Q

Variable cost

A

-total costs change in direct proportion to changes in activity level

TC = VC * x

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23
Q

For variable cost: as activity level rises, unit costs ….

A

don’t change; VC/unit is constant

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24
Q

For variable cost: as activity level rises, total costs ….

A

rises

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25
Q

Fixed cost

A

total costs do not change despite changes in activity level (volume)

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26
Q

For fixed cost: as activity level rises, unit costs ….

A

FC/unit decreases

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27
Q

For fixed cost: as activity level rises, total costs ….

A

no change to TC; TC is constant

28
Q

Mixed cost

A

costs that contain both a variable and a fixed component

29
Q

For mixed cost: as activity level rises, unit costs ….

A

Unit costs decrease because of fixed component

30
Q

For mixed cost: as activity level rises, total costs ….

A

TC rises because of variable component

31
Q

Relevant range

A

normal operations. If we move outside of relevant range, total FC and VC/unit could change

32
Q

Step costs

A

fixed for a small range of volume then jumps to a new level with a moderate change in volume; ex. baristas: 20 cups/hr cap, if you make more you need more baristas

33
Q

Curvilinear Costs

A

does not follow a neat pattern; Approximate linear line

34
Q

A traditions income statement is based on

A

cost function

35
Q

Costs of goods sold expenses are …

A

costs that can be directly traced to the product or service sold

36
Q

Operating expenses are

A

everything else we spend to run the business

37
Q

A contribution income statement is based on

A

cost behavior

38
Q

Account analysis

A

classify every account on the trial balance as variable, fixed, or mixed

39
Q

Scattergraphs

A

used to help managers visualize the relationship between cost and volume

40
Q

Cost equation

A

TC= (VC * x) + FC

41
Q

High-Low Method Steps

A
  1. identify the data points with the highest and lowest volume of activity
  2. Find the slope of the line. This will be our variable cost per unit
  3. Find the vertical intercept of the line. This will be our fixed cost. Use the cost equation and 1 data point.
42
Q

Regression Analysis

A

Use all data points to estimate the cost equation

TC = (X Variable 1 * Volume) + Intercept

43
Q

Intercept coefficient

A

Fixed costs

44
Q

X Variable 1

A

variable cost/unit (VC) or slope of the line

45
Q

R square

A

goodness of fit; how well does the line/cost equation fit the data points

> .8 = strong relationship
.5 - .8 = use with caution
< .5 = weak relationship

46
Q

Which method is most accurate for cost equation?

A

Regression analysis

47
Q

Which income statement format do managers use to predict costs?

A

Contribution Margin Income Statement

48
Q

Profit Equation

A

P = (SP * x) - (VC * x) - FC

49
Q

Break even point

A

How much do we need to sell just to cover all of our costs?

50
Q

Steps to Break-even (for one product)

A
  1. Set the profit equation equal to zero
  2. Calculate the contribution margin per unit
  3. At the break-even point, total contribution margin = total cost
  4. Solve for x to find the break-even point in units
51
Q

Contribution margin meaning

A

sales revenue left, after covering variable costs, to cover fixed costs plus desired operating profit

52
Q

Contribution margin ratio meaning

A

% of every sales dollar that goes towards fixed costs + operating profits

53
Q

How to calculate CM%

A

(Unit CM $) / (Unit Sales Price)
or
(SP - VC) / (SP)

54
Q

How to use the profit equation to calculate targeted profit or income?

A

change P from 0 to desired profit (set equation = desired profit instead of 0)

55
Q

How to use CM $ or CM % to calculate targeted profit or income?

A

add desired profit to the numerator (Fixed Cost)

$ amount to cover) / (Unit CM $

56
Q

Margin of Safety

A

excess of actual sales over breakeven sales; Cushion or drop in sales the company can sustain before losing money; Used to evaluate risk

57
Q

Margin of Safety in Units =

A

Expected or Actual Units Sold - Break-even Units

58
Q

Margin of Safety as a percent calculation

A

(Margin of safety in units) / (expected or actual units sold)

59
Q

Steps to calculate multi product breakeven point and activity required to meet a target income

A
  1. Calculate CM per unit
    (CM = SP * x - VC * x)
  2. Determine the sales mix
    (Sales mix = Sales of 1 product / total sales)
  3. Calculate the WACM
    (WACM = sum of product’s unit CM$ * that product’s sales mix)
  4. Use the WACM to determine the breakeven point in units (ROUND UP)
    (BE point = $ amount to cover / WACM)
  5. Use the sales mix to determine exactly which products we need to produce (round normally)
    (Individual BE point = BE point * that product’s sales mix)
60
Q

What factors influence the price a customer is willing to pay for a product or service?

A

Quality, utility, supply, price, convenience, organic

61
Q

What factors influence the price a company wants to charge for a product or service?

A

input costs, profit, other operating expenses

62
Q

Cost-Plus pricing

A

starts with the cost of the product or service and adds a markup to cover the company’s operating costs and contribute to its profit

63
Q

Calculate Markup %

A

(SP - Cost) / (Cost)

64
Q

Target Costing

A

Starts with the price customers are willing to pay and calculates the maximum cost the company can incur to deliver the product or service and earn the desired markup

65
Q

Calculate Gross Margin %

A

(sales price - cost) / sales price

ACCT 201 (4 decks)

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