Notes 2

Question 1

Inventory Conversion Period

Answer 1

Average Inventory /

COGS per day

Question 2

Receivables Collection Period

aka Days Sales Outstanding

Answer 2

Average Receivables /

Credit Sales per day

Question 3

Payables Deferral Period

Answer 3

Average Payables /
Purchases per day

OR

Average Payables /
(COGS / 365)

Question 4

Cash Conversion Cycle

Answer 4

Inventory Conversion Period
+ Receivables Conversion Period
- Payables Deferral Period

Question 5

Difference between
Data Manipulation Language DML
Data Control Language DCL
Data Definition Language DDL

Answer 5

Manipulation = Queries Database (ManQueDa)
Control = Controls Access (CoCoA)
Definition = Controls Tables (DeCoTa)

~ ManQueDa CoCoA DeCoTa ~
~ Imagine an Al Queda Man Servant serving Cocoa to his fellow terrorists hiding out in north Dakota ~

Question 6

Difference between
Absorption Costing
Variable Costing

Answer 6

Fixed Manufacturing Overhead is treated as a product cost and inventoried under Absorption Costing (GAAP)

Whereas Variable Costing books Fixed Manufacturing Overhead as a period cost/expensed (not GAAP)

~ SVAP ~
Sales > Production (& Inventory decreases), then VC > AC
Sales < Production (& Inventory increases), then VC < AC

Question 7

Difference between
Static Budget
Flexible Budget

Answer 7

Static = budgeted costs for budgeted output
Flexible = budgeted costs for actual output

Question 8

Fixed Factory Overhead

Answer 8

Estimated Cost /

Normal Capacity

Question 9

Variable Overhead

Answer 9

Estimated Activity /
Actual Activity

If immaterial, then goes to COGS
if material, then goes to WIP, Finished Goods, COGS

Question 10

Difference between
Freight In
Freight Out

Answer 10

Freight In = Product Cost (Inventory Sost) & is a direct material purchase item

Freight Out = Period Cost (Selling Cost) & is NOT part of inventory

Question 11

Operating Income

Answer 11

Net Sales 
- Product Costs
= Gross margin
- Period Cost
= Operating Income

Question 12

High-Low Method

Answer 12

Change in Cost /

Change in Activity

Question 13

Budgeting Flowchart

Answer 13

1. Sales Forecast/Budget

2a. Production Budget
       = Direct Materials, Direct Labor, Overhead Budgets
2b. R&D/Design Cost Budget
2c. Selling Expense Budget
2d. Administrative Budget

3. Cash Budget
4. Budgeted Income Statement
5. Budgeted Balance Sheet

Question 14

Cash Budget

Answer 14

Beginning Cash Balance
\+ Receipts (aka Collections)
= Cash Available
- Payments (materials, expenses, payroll)
\+/- Financing
= Ending Cash Balance

Question 15

Production Budget

Answer 15

Budgeted Sales
\+ Desired Ending Finished Goods Inventory
= Total Need
- Beginning FG Inventory
= Units to be produced
* Direct Materials per unit
= Production Needs
\+/- Desired DM Ending Inventory
= Total Needs
- Beginning DM Inventory
= DM to be purchased (units)
* Price per unit
= DM purchases in dollars

Question 16

Balanced Scorecard

Answer 16

~FLICk~ the card

Financial
Learning & Growth (Innovation)
Internal Business Process
Customer