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Accounting D1 96 > Unit 6 > Flashcards

Unit 6 Flashcards

1
Q

Source, Purpose, Outcome of Managerial accounting

A

Source - internal best practices to be competitive, no legislation
Purpose - serve competitive needs to serve customer requirements
Outcome - proprietary data, confidential

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2
Q

Types of managerial accounting statements

A

Revenues by Product Line
Product Line Income statements
Product line profitability
Cost Center report

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3
Q

Title of person who usually prepares Managerial accounting information.

A

Cost Accountant/Cost Accounting Manager

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4
Q

3 functions of managerial accounting

A

Planning
Controlling
Evaluating

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5
Q

2 types of planning for managerial accounting info

A

Long run - strategic planning, capital budget

Short run - production/process prioritizing, operational budgeting (profit planning)

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6
Q

capital budgeting

A

planning for long term assets

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7
Q

production prioritizing

A

analyzing product lines and division profitability to find profit improvement opportunities

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8
Q

Operational budgeting, alternate names

A

managerial planning decisions for short term (< 1y) operations, characterized by regularity and frequency
aka profit plans
communicate daily, weekly, monthly goals (standards)

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9
Q

Describe Controlling function in mgr accting

A

tracking actual performance
measure deviation from standards (variances)
manage day to day business processes

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10
Q

Describe Evaluating function in mgr accting

A

analyze results, provide feedback, reward performance, identify problems

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11
Q

three types of businesses

A

Manufacturing - product and period costs
Service - mostly only period costs
Merchandise - product and period costs

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12
Q

product vs period costs

A

product - associated with a product, usually all costs associated with production facility
period - not directly related to a product, service, asset, charged as expense to income statement in period where it occurs.

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13
Q

3 different types of manufacturing costs

A

Direct materials - raw materials
Direct Labor - wages of employees who work directly on products
Manufacturing overhead - all other costs, ie factory supervisor, utilities

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14
Q

inventories in manufacturing process

A

raw materials
work in process
finished goods

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15
Q

cost of goods manufactured statement

A

summary of total costs of goods manufactured and transferred out of the work in process inventory
includes direct materials, direct labor, overhead
supports income statement by providing input to COGS

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16
Q

Cost of goods sold statement

A

Cost of goods manufactured, plus beginning inventory and minus ending inventory of finished goods
internal, confidential

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17
Q

indirect labor and materials

A

labor and materials not directly associated with creating the product, but are still included in GOGM
included Manufacturing Overhead

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18
Q

one important difference between manufacturers and service providers

A

service providers don’t have significant raw material costs

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19
Q

direct labor costs in service business

A

creative efforts by employees

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20
Q

overhead costs in service business

A

support infrastructure, management costs

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21
Q

work in process services

A

resources invested into a creating a service that customer has not yet received
includes materials, labor and overhead

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22
Q

How are inventory costs related to merchandise inventory expensed?

A

as a period cost

under selling and general admin expense on income statement

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23
Q

formula for income statement for mfgr

A

Net Income = Revenue - COGS - Operating expenses

24
Q

formula for income statement for merchandiser

A

Net Income = Revenue - COGS - Operating expenses

25
Q

diff between income statements for merch and mfgr

A

Net Purchases instead of COGM

merchandise vs goods inventories

26
Q

income statement for service business

A

Net Income = Revenue - Operating expenses

no COGS

27
Q

CVP analysis

A

Cost Volume Profit
seeing how changes in revenue, cost, activity level impact profits
determine what activity level is needed to make reasonable profit
classify all costs as either fixed or variable

28
Q

variable costs

A

costs that change in direct proportion to activity level

29
Q

basic concept of CVP

A

margin between revenue and variable costs must first be used to cover fixed costs

30
Q

stepped costs

A

costs that change in stair step fashion in proportion to activity changes

31
Q

mixed costs

A

costs that have both variable and fixed components

32
Q

2 most important concepts of CVP

A
  1. important for planning operations and profitability

2. must identify appropriate key activity to measure and know how costs react to changes in that activity

33
Q

examples of variable costs

A

sales commissions
materials
hourly labor

34
Q

relevant range

A

range of operating level where changes in variable costs are proportional to activity changes
per unit variable costs are fixed within relevant range

35
Q

economy of scale

A

decreasing costs per unit as activity increases for fixed costs
per unit fixed costs vary within relevant range

36
Q

example of mixed cost

A

sales employee who gets salary plus commission

37
Q

indirect costs are usually variable for fixed?

A

fixed

38
Q

steps in Accounting for mfging overhead

A
  1. estimate mfg overhead at start of year
  2. as costs are incurred, record actual mfg overhead as debits (additions) to mfg overhead
  3. as activity occurs, record applied mfg overhead as credits to (subtractions) to mfg overhead
  4. compare actual and applied overhead balances, close out difference
39
Q

Estimated mfg overhead

A

budgeted overhead costs for upcoming year
used to calculate overhead rate applied to production in upcoming period
unit overhead rate determined by estimated overhead cost divided by total activity (ie total labor hours)

40
Q

Actual mfg overhead

A

mfg costs outside direct material and labor

recorded as mfg costs

41
Q

Applied mfg overhead

A

amount of overhead applied to goods produced during upcoming period
uses predetermined rate to apply mfg overhead
used because actual overhead costs are too sporadic to be used throughout the year

42
Q

underapplied vs overapplied mfg overhead

A

underapplied - actual > applied, leads to under charging for products, losing money
overapplied - actual < applied, leads to over charging for products, losing customers

43
Q

contribution margin

A

difference between total sales and variable costs
used to pay fixed costs and provide profit
calculated as total and per unit
- costs separated by behavior

44
Q

contribution margin in relation to fixed cost with regard to breaking even

A

must be equal to break even

45
Q

benefit of using contribution margin

A

arranges income statement by behavior, easier to see affect of changes in activity volume on profit

46
Q

What key values can CVP be used to determine?

A

Net Income
Break even number of units
number of units required to reach a given profit target

47
Q

Limitation of CVP

A

not all costs can be neatly broken into fixed or variable

48
Q

Which two costs are equal at the break even point?

A

Total Revenue and Total Costs

49
Q

differential costs definition, alternate names

A

future costs that change as a result of a decision
aka incremental, relevant
identical to direct cost

50
Q

sunk costs

A

past costs that can’t be changed as a result of a future decision
not dependent on any decision

51
Q

out of pocket costs vs opportunity costs

A

out of pocket - costs that require an outlay of cash or other resources
opportunity - lost benefits by choosing one decision over another

52
Q

contribution margin equation

A

Sales Revenue - Variable Costs

53
Q

Break Even Point formula

A

Sales Revenue - Variable Costs - Fixed Costs = $0

54
Q

CVP equation

A

Sales Revenue - Variable Costs - Fixed Costs = profit

55
Q

return on sales ratio

A

pct net income of sales

way of setting goal in CVP as % return instead of $ amount

56
Q

variable cost ratio

A

ratio of variable cost to sales

expresses activity in term of sales $

57
Q

contribution margin ratio

A

ratio of contribution margin to total sales
useful for comparing profitability of various products
% sales left after variable costs are deducted

Accounting D1 96 (6 decks)

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