Managerial Accounting: final exam – Flashcards
Unlock all answers in this set
Unlock answersquestion
Factor of internal rate of return
answer
Investment required / net annual cash inflow
question
Payback period
answer
Initial investment / net annual cash inflow
question
Activity Variance
answer
The difference between a revenue or cost item in the staticplanning budget and the same item in the flexible budget An activity variance is duesolely to the difference between the level of activity assumed in the planningbudget and the actual level of activity used in the flexible budget
question
Revenue Variance
answer
§ The difference between howmuch the revenue should have been, given the actual level of activity, and theactual revenue for the period§ A favorable (unfavorable)revenue variance occurs because the revenue is higher (lower) than expected,given the actual level of activity for this period
question
Spending Variance
answer
§ The difference between howmuch a cost should have bee, given the actual level of activity, and the actualamount of the cost§ A favorable (unfavorable)spending variance occurs because the cost is lower (higher) than expected,given the actual level of activity for the period
question
Ideal Standards
answer
§ Standards that assume peakefficiency at all times
question
Labor Efficiency Variance
answer
§ The difference between theactual hourly rate and the standard rate, multiplied by the number of hoursworked during the period
question
Materials Price Variance
answer
§ The difference between theactual hourly rate and the standard rate, multiplied by the number of hoursworked during the period
question
Materials Quantity Variance
answer
§ The difference between theactual quantity of materials used in production and the standard quantityallowed for the actual output, multiplied by the standard price per unit ofmaterials
question
Price Variance
answer
§ A variance that is computedby taking the difference between the actual price and the standard price andmultiplying the result by the actual quantity of the input
question
Standard Cost Per Unit
answer
§ The standard quantityallowed of an input per unit of a specific product, multiplied by the standardprice of the unit
question
Standard Hours Allowed
answer
§ The time that should havebeen taken to complete the period's output§ It is computed bymultiplying the actual number of units produced by the standard hours per unit
question
Standard hours per unit
answer
§ The amount of direct labortime that should be required to complete a single unit of product, includingallowances for breaks, machine downtime, cleanup, rejects, and other normalinefficiencies
question
Standard Price Per Unit
answer
§ The price that should bepaid for an input
question
Standard quantity allowed
answer
§ The amount of an input thatshould have been used to complete the period's actual outputIt is computed by multiplying the actual number ofunits produced by the standard quantity per unit
question
Standard quantity per unit
answer
§ The amount of an input thatshould be required to complete a single unit of product, including allowancesfor normal waste, spoilage, rejects, and other normal inefficiencies
question
Standard Rate Per Hour
answer
§ The labor rate that shouldbe incurred per hour of labor time, including employment taxes and fringebenefits
question
Variable Overhead Efficiency Variance
answer
§ The difference between theactual level of activity (direct labor-hours, machine-hours, or some otherbase) and the standard activity allowed, multiplied by the variable part of thepredetermined overhead rate
question
Variable overhead rate variance
answer
§ The difference between theactual variable overhead cost incurred during a period and the standard costthat should have been incurred based on the actual activity of the period
question
Cost of Capital
answer
§ The average rate of returna company must pay to its long-term creditors and shareholders for the use oftheir funds
question
Internal Rate of Return
answer
§ The discount rate at whichthe net present value of an investment project is zero; § the rate of return of aproject over its useful life
question
Net Present Value
answer
§ The difference between thepresent value of an investment project's cash inflows and the present value ofits cash outflows
question
Out-of-pocket costs
answer
§ Actual cash outlays forsalaries, advertising, repairs, and similar costs
question
Payback Period
answer
§ The length of time that ittakes for a project to fully recover its initial cost out of the net cashinflows that it generates
question
Project Profitability Index
answer
§ The ratio of the netpresent value of a project's cash flows to the investment required
question
Working Capital
answer
§ Current assets less current liabilities
question
Relaxing (or elevating) the constraint
answer
§ An action that increasesthe amount of a constrained resource§ Equivalently, an actionthat increases the capacity of the bottleneck
question
Total Contribution Margin
answer
Total Revenue - Total Variable Costs
question
Total Contribution Margin (on a unit basis)
answer
Sales Price - Unit Variable Costs
question
Total Profit
answer
Total Revenue - Total Costs
question
Total Revenue
answer
Sales Price x Number of Units Sold
question
Total Costs
answer
Total Variable Costs + Total Fixed Costs
question
Total Variable Costs
answer
Unit Variable Costs x Number of Units Solds
question
Break-Even (in units)
answer
(Total Fixed Costs)/ (CM per Unit)
question
Break-Even (in dollars)
answer
(Total Fixed Costs)/ (CM %)
question
Target Profit (in units)
answer
(Total Fixed Costs + Total Profit)/ (CM per Unit)
question
Target Profit (in dollars)
answer
(Total Fixed Costs + Total Profit)/ (CM %)
question
After Tax Profit
answer
Before Tax Profit - Before Tax Profit (Tax Rate)
question
Operating Leverage
answer
Contribution Margin/Net Operating Income
question
Margin of Safety (in $$)
answer
Projected Sales - Break Even Sales
question
Total Sales
answer
Budgeted Sales in Units * Selling Price per Unit
question
Total Cash Collections
answer
A/R Beginnning Balance + Q1 Sales + Q2 Sales + Q3 Sales + Q4 Sales
question
Total Needs
answer
Budgeted Unit Sales + Desired Ending FGI
question
Required Production (in units)
answer
Total Needs - Beginning FGI or Budgeted Unit Sales + Desired Ending FGI - Beginning FGI
question
Required Purchases
answer
Budgeted COGS + Desired Ending Merchandise Inventory - Beginning Merchandise Inventory
question
Raw Materials Needed to meet Production Schedule
answer
Required Production of units of Finished Goods * Raw Materials required per unit of Finished Goods
question
Total Raw Material Needs
answer
Raw Materials Needed to meet production schedule + Desired Ending RMI
question
Raw Materials to be purchased
answer
Total Raw Material Needs - Beginning RMI or Raw materials needed to meet production schedule + Desired ending RMI - Beginning RMI
question
Cost of Raw Materials to be purchased
answer
Raw Materials to be Purchased * Unit cost of raw materials
question
Total Cash Disbursements for Materials
answer
A/P Beginning Balance + Q1 Purchases + Q2 Purchases + Q3 Purchases + Q4 Purchases
question
Total DL Hours Needed
answer
Required Unit Production * DL-hours per unit
question
Total DL Cost
answer
Total DL Hours Needed x DL Cost Per hour or Required Unit Production x DL Hours per unit x DL cost per hour
question
Variable MOH
answer
Budgeted Cost Driver * Variable MOH Rate
question
Total MOH
answer
variable MOH + Fixed MOH
question
Cash Disbursements for MOH
answer
Total MOH - Depreciation OR Variable MOH + Fixed MOH - Depreciation
question
Variable S&A Expense
answer
Budgeted Unit Sales * Variable S&A Expense per unit
question
Total Fixed S&A Expenses
answer
Advertising + Exec. Salaries + Insurance + Property Taxes + Depreciation
question
Total S&A Expenses
answer
Variable S&A Expense + Total Fixed S&A Expense
question
Cash Disbursements for S&A Expenses
answer
Total S&A Expenses - Depreciation OR Variable S&A + Fixed S&A - Depreciation
question
Total Cash Available
answer
Cash Balance, Beg. + Receipts (like Collections from Customers)
question
Total Disbursements
answer
Direct Materials + Direct Labor + MOH + S&A + Equipment Purchases + Dividends
question
Excess (Deficiency) of cash available over disbursements
answer
Total Cash Available + Total Disbursements
question
Total Financing
answer
+ Borrowings (@ beginning of quarter) - Repayments (@ end of year) - Interest
question
Cash Balance, Ending
answer
Excess (deficiency) of Cash available over disbursements +/- Total Financing OR Total Cash Available - Disbursements +/- Total Financing
question
Minimum Required Borrowings (Required Balance at Beginning of Quarter)
answer
Desired Ending Cash Balance + Deficiency of Cash available over disbursements
question
Total Interest accrued
answer
Interest on ___ borrowed @ beg. of Q1 + Interest on ___ borrowed @ beg. of Q2 + Interest on ___ borrowed @ beg. of Q3 + Interest on ___ borrowed @ beg. of Q4
question
Gross Margin
answer
Sales - COGS
question
Net Operating Income
answer
Gross Margin - S&A Expenses OR Sales - COGS - S&A Expenses
question
Net Income
answer
Net Operating Income - Interest Expense OR Sales - COGS - S&A Expense - Interest Expense
question
Flexible Budget Performance Report
answer
Revenue - Expenses = Net Operating Income 1
question
Activity Variance
answer
Planning vs. Flexible
question
Spending Variance
answer
Flexible vs. Actual
question
Quantity/Usage Variance
answer
Flexible vs. Actual @ Standard
question
Price/Rate Variance
answer
Actual @ Standard vs. Actual
question
No Spending Variance When...
answer
Amount Purchased =/= Amount Used!
question
Remove Depreciation for Statements:
answer
Statements of Cash Flows
question
Remove Depreciation for Budgets:
answer
MOH Expense S&A Expense
question
Working Capital (cash on hand)
answer
Current Assets - Current Liabilities (not taxed)
question
Internal Rate of Return
answer
Investment Required / Annual Incremental Change in Cash Flows
question
Payback Period
answer
Investment / Net Annual Incremental Cash Flows
question
Net Present Value
answer
Annual Cash Flows * Annuity One-time inflow * Present Value $$
question
Net Annual Cash Inflow
answer
Net Operating Income + Depreciation
question
Present Value of Cash Flows = Positive
answer
GOOD
question
Present Value of Cash Flows = Negative
answer
BAD
question
Present Value of Cash Flows = Zero
answer
GOOD
question
Order of Columns in Total Cost Budgeting
answer
Item Year Amount of Cash Inflows NPV Factor NPV of Cash Flows
question
Depreciation: Payback Period
answer
Ignore!
question
Depreciation: Internal Rate of Return
answer
Ignore!
question
Net Cash Inflow
answer
Cash Receipts - Yearly Cash Operating Expenses
question
Depreciation: Net Cash Flow
answer
Subtract Out!
question
After-Tax Cost (Net Cash Outflow)
answer
(1 - Tax Rate) * Tax-Deductible Cash Expense
question
After-Tax Benefit (Net Cash Outflow)
answer
(1 - Tax Rate) * Taxable Cash Receipt
question
Tax Savings from the Depreciation Tax Shield
answer
Tax Rate * Depreciation Deduction
question
Capital Budgeting: Tax-Deductible Cash Expense After-Tax Cost
answer
Multiply by (1 - Tax Rate)
question
Capital Budgeting: Taxable Cash Receipt After-Tax Cash Inflow
answer
Multiply by (1 - Tax Rate)
question
Capital Budgeting: Depreciation Deduction Tax Savings from the Depreciation Tax Shield
answer
Multiply by the Tax Rate
question
Net Present Value: Columns incl. Taxes
answer
Items Year Amount Tax Effect After-Tax Cash Flows (Amount * Tax Effect) PV Factor Present Value of Cash Flows
question
When variance is negative for Revenue, variance is ___
answer
UNFAVORABLE
question
When variance is negative for Expenses, variance is _____
answer
FAVORABLE
question
When Variance is negative for Net Operating Income, variance is ____
answer
UNFAVORABLE
question
Order in which I like to compute Standard Cost Variances
answer
Quantity Price Output
question
Variance Categories: Flexible
answer
Standard Quantity Standard Price Actual Output
question
Variance Categories: Actual @ Standard
answer
Actual Quantity Standard Price Actual Output
question
Variance Categories: Actual
answer
Actual Quantity Actual Price Actual Output
question
Variance Categories: Purchased
answer
Quantity Purchased Amount Paid
question
Naomi calls FGI Budget ....
answer
STANDARD COST BUDGET
question
Standard Cost (in units) =
answer
DM + DL + MOH per unit
question
(DM + DL + MOH) * number of units in FGI
answer
COGS! (on Budgeted Income Statement)
question
Statement for Accrual
answer
Budgeted Income Statement
question
Statement for Cash Basis
answer
Cash Budget!
question
Question for dropping a line!
answer
Is the cost avoidable? (Traceable) (Specific) Is the cost unavoidable? (allocated) (untraceable) (common)
question
What's a sunk cost?
answer
You've already spent it. Cost isn't relevant to the conversation. Odds are, it's Depreciation!
question
If net contribution margin is NEGATIVE, do you drop the line?
answer
NO!
question
If net contribution margin is POSITIVE, do you drop the line?
answer
YES!
question
If net contribution margin is ZERO, do you drop the line?
answer
Use qualitative factors to make the decision. (Probably keep it.)
question
Dropping a line math:
answer
- (Contribution Margin) + (Costs) = Net Contribution Margin
question
How much $$ are you making PER UNIT of Constrained Resource?
answer
Find the Contribution Margin (in dollars) PER UNIT of the Constrained Resource of the different options
question
Taxable: Gains/Losses?
answer
Yes! multiply by tax rate
question
Taxable: Cash Expenses/Receipts?
answer
Yes! Multiply by (1 - Tax Rate)
question
Taxable: Selling Machine?
answer
Yes! Multiply by (1 - Tax Rate)
question
Taxable: Depreciation?
answer
Yes! Multiply by (tax rate)
question
Taxable: Working Capital?
answer
No!
question
Taxable: Release of Working Capital?
answer
No!
question
Taxable: Initial Investment/Purchase of Equipment?
answer
No!
question
Net Cash after a LOSS
answer
Cash Outflow + (Loss x Tax Rate) = Net Cash
question
Net Cash after a GAIN
answer
Cash Inflow - (Gain x Tax Rate) = Net Cash
question
Revenue Variance
answer
Change in Selling Price
