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Managerial Accounting Final > Test 1 Ch 1-4 > Flashcards

Test 1 Ch 1-4 Flashcards

1
Q

Three steps of the Management Process

A

Planning, Controlling, Decision Making

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2
Q

Management Process- Planning

A

Setting Objectives, Identifying ways to achieve the objectives.

Example: Budgets

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3
Q

Management Process- Controlling

A

Monitoring a plan’s information, Feedback, reacting to feedback.

Example: Performance reports

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4
Q

Management Process- Decision Making

A

Choosing among competing alternatives

Example: deciding the selling price of products.

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5
Q

What is Feedback?

What 3 things can a manager do with Feedback?

A

Feedback- Information used to evaluate or correct implementation of a plan.

  • Continue the implementation as originally planned
  • Take corrective action if needed
  • Modify the plan
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6
Q

Managerial Accounting Information Systems

what is the Target User, Restrictions, Types of information, Time orientation, Aggregation, Breadth

A
  • -Target User- Internal Users, Managers
  • -Restrictions- No mandatory rules for preparing reports.
  • -Type of information- Financial and non financial
  • -Time Orientation- Emphasize the future
  • -Aggregation- Detailed information about product line, departments, etc.
  • -Breadth- Broad and multidisciplinary.
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7
Q

Role of Managerial Accountant

A
  • The role of managerial accountants in an organization is one of support.
  • They assist those individuals who are responsible for carrying out and organizations basic objectives.
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8
Q

Line Positions

A

Positions that have direct responsibility for the basic objectives of an organization.

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9
Q

Staff Positions

A

Positions that are supportive in nature and have only indirect responsibility for and organizations basic objective.

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10
Q

Controller

A

Supervises all accounting functions and reports directly to the General Manager and Chief Operation Officer.

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11
Q

Treasurer

A

Responsible for the finance function.

In large companies, the controller is seperate from the treasury department.

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12
Q

Ethical Behavior

A

Involves choosing actions that are right, proper, and just.

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13
Q

4 areas of Certification in Management Accounting

A

1) economics,finance, and management.
2) financial accounting and reporting.
3) management reporting, analysis, and behavioral issues.
4) decision analysis and information systems

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14
Q

Cost

A

The cash (or cash equivalent) sacrificed for goods or services that are expected to produce current or future benefits.

  • Expenses are expired costs
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15
Q

Cost object

A

Any item such as products, departments, customers, and activities for which costs are measured and assigned.

Examples of each:

  • Product- BMW X5 sports activity vehicle
  • Service- Dealer-support telephone hotline.
  • Project- R&D project on DVD system enhancement.
  • Customer- Herb Chambers Motors, a dealer that purchases a broad range of BMW vehicles.
  • Activity- Setting up production machines
  • Department- Environmental, Health and Safety.
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16
Q

How does a cost system determine the costs of a cost object?

A

-Cost accumulation- A collection of costs data in an organized manner.

  • Cost assignment- A general term that includes gathering accumulated costs to a cost object. This includes:
  • – Tracing accumulated costs with a direct relationship to the cost object
  • – Allocating accumulated costs with an indirect relationship to a cost object.
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17
Q

What are Direct Costs?

Name some examples

A
  • Can be conveniently and economically traced (tracked) to a cost object.
  • Assignment of direct costs to a cost object is called Cost Tracing.

Examples: Parts, assembly line wages

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18
Q

What are Indirect Costs?

Name some examples

A
  • Cannot be conveniently or economically traced (tracked) to a cost object.
  • Assignment of Indirect costs to a cost object is called Cost Allocation.

Examples: Electricity, rent, property taxes, depreciation

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19
Q

What are the 3 factors affecting Direct/Indirect Cost Classification?

A
  • Cost Materiality- the more immaterial the cost, the less likely it is economically feasible to track the cost.
  • Availability of Information-Gathering Technology- The use of computers makes it easier to track costs as direct costs.
  • Operation Design- Facility layout may make it easier to assign direct costs.
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20
Q

Variable Cost (definition and formula)

A
  • Changes in total proportion to changes in the related level of activity or volume.
  • TVC= # produced x cost per unit
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21
Q

Fixed Cost (definition and formula)

A
  • Remain unchanged in total regardless of changes in the related level of activity or volume.
  • FC= TFC / # produced
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22
Q

Cost Driver

A

A variable that causally affects costs over a given time span.

Example:

  • Number of vehicles determines the total steering wheel costs.
  • Setup hours determine setup costs
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23
Q

Opportunity Costs

A

The benefit given up or sacrificed when one alternative is chosen over another.

24
Q

Product Cost

A

Product manufacturing costs.

25
Q

Period cost

A

Have no future value and are expensed in the period incurred.

Examples: Freight out, Marketing design costs, etc.

26
Q

Classification of Product Costs:

Direct Material, Direct Labor, Overhead

A

DM- acquisition osts of all materials that will become part of the cost object.
– Examples: Freight-in, Sales Tax, Custom Duties.

DL- Compensation of all manufacturing labor that can be traced to the cost object.
– Examples: Includes wages and fringe benefits.

OH- Factory costs that are not traceable to the product in an economically feasible way.

    • Examples: Plant cleaning and Maintenance
    • OH is in indirect cost
27
Q

Total Product Cost (definition and formula)

A

Equals the sum of DM, DL, OH

TPC= DM+DL+OH

28
Q

Unit Product Cost (definition and formula)

A

Equals total product cost divided by the number of units produced.

Per-Unit Costs= TPC / # units produced

29
Q

Prime Cost (definition and formula)

A

Refers to all direct manufacturing costs (materials and labor)

PC= DM+DL

30
Q

Conversion Cost (definition and formula)

A

Refers to direct labor and indirect manufacturing costs.

CC= DL+OH

31
Q

Period Costs

A

Period costs typically are expensed in the period in which they are incurred.

32
Q

Selling Costs

A

Costs necessary to market, distribute, and services a product or service.

Examples: Salaries and commissions of sales personnel, advertising, warehousing, shipping, and customer service.

33
Q

DM $400,000
DL $80,000
OH $320,000

Find the Prime Cost, Prime Cost Per Unit, Conversion Cost, Conversion Cost Per Unit

A

PC= $480,000
Per Unit PC= $120
Conversion Cost= $400,000
Per Unit CC= $100

34
Q

Administrative Costs

A

Costs associated with research, development, and general administration of the organiation that cannot reasonably be assigned to either selling or production.

Examples: Legal fees, printing the annual report, general accounting

35
Q

DM Used (formula)

A

DM Used= DM BI + Purchases - DM EI

36
Q

Cost Of Goods Manufactured (formula)

A

COGM=WIP BI + Tot. Product Cost- WIP EI

37
Q

Sales Revenue (formula)

A

Sales Revenue= Price x units Sold

38
Q

Gross Margin (formula)

Gross Margin Percentage (formula)

A

GM=Sales Revenue- COGS

Gross Margin Percentage= GM / Sales Revenue

39
Q

Operating Income (what it shows and formula)

A

Shows how much the owners are actually making.

OI= GM - Selling and Admin Expenses

40
Q

How to calculate # of units sold

A

Units sold= FG BI + Units finished - FG EI

41
Q

Cost Behavior

A

Describes how a cost behaves or changes as the amount of output changes.

42
Q

Variable Cost/Rate (definition and formula)

A

Total dollar amount varies in direct proportion to changes in the activity level.
(Slope)

Variable Rate per Hour= Change in cost / Change in Hours

43
Q

Fixed Cost (definition and Formula)

A

Total dollar amount remains constant as the activity level changes within the relevant range.
(Vertical Intercept)

FC= Variable Rate x Tot Cost

44
Q

Total Cost (formula)

A

Total Cost= Tot. Fixed Cost + Tot. Variable Cost

Total Fixed Cost= TC - TVC

45
Q

Total Variable Cost (formula)

A

Variable Rate x # of hours

46
Q

Mixed Cost Formula

A

Y= a + bX

Y=Total mixed cost
a= Total fixed cost
b= Variable cost per unit of activity (independent variable)
X= level of activity

47
Q

Contribution Margin (CM) (definition and formula)

A

The amount remaining from sales revenue after variable expenses have been deducted.

CM= Revenues - Variable Cost

48
Q

Contribution Margin Ration (formula)

A

Total CM / Total Sales

In terms of units:

  • SP-VC
  • Unit CM / Unit selling price
49
Q

Break Even units (formula)

A

FC / (SP - VC)

FC= Fixed Sell & Admin Expense + Tot. OH
SP= Sell price per unit
VC= DM + DL + OH + VSE
50
Q

Break Even Sales (formula)

A

Tot. FC / CM Ratio

51
Q

of Units to sell to earn operating income (formula)

A

Units= (Tot. FC + Target Income) / CM Per Unit

52
Q

Target Revenue (formula)

A

Target Revenue= (TFC+Target Income) / CM Ratio

53
Q

Variable Cost Ratio (formula)

A

VC per unit / Sales Price

54
Q

VC per unit (formula)

A

DM + DL + OH + VSE

55
Q

Revenues (formula)

A

(FC + Profits) / CM Ratio

56
Q

CM=FC

CM= (SP-VC)

A

know that

Managerial Accounting Final (4 decks)

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