Managerial Accounting FSU Final – Flashcards
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Financial Accounting
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External Users GAAP format Historical Focus Reliable&Objective information Looks at whole company Required reports annually or quarterly
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Managerial Accounting
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Internal users Future Focus Relevant information Looks at segments and divisions Reports not required and made when needed
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How do inventoriable product costs flow through the financial statements?
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The costs are treated as an asset (par of inventory) on the balance sheet until the product is sold
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How do period costs flow through the financial statements?
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The costs are expensed in the period incurred. Period costs are comprised of the "operating expenses" or "selling & administrative expenses" incurred by a company
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Inventoriable product cost formula
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Cost of item + freight in + import duty = Product cost
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Raw materials inventory formula
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Beginning raw materials inventory + Purchases of direct material = Raw materials available for use - Ending raw materials inventory = Direct materials used
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Work in process inventory formula
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Beginning WIP inventory + DM used + DL used + MOH= Total Manufacturing Costs - Ending Work in process inventory = COGM
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Finished Goods Inventory Formula
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Beginning FGI + COGM = Cost of Goods Available for Sale - Ending FGI= COGS
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Types of Costs Encountered in Decision Making
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Controllable Costs Uncontrollable costs Relevant Costs Irrelevant Costs Differential Costs Sunk costs
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Predetermined MOH Rate
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Estimated Total MOH costs / Estimated total allocation base
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How do manufactures allocate some MOH to each job?
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Predetermined MOH X Actual use of allocation base
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Under allocated MOH
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If actual > allocated COGS is understated
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Over allocated MOH
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If allocated > actual COGS is overstated
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Allocate MOH using activity based costing system
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Total Estimated Costs in Pool / Total Estimated Amount of Allocation Base then Activity Allocation Rate X Actual Amount of Allocation Base used by each job
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Types of Cost Behavoir
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Fixed Variable Mixed Step- costs that are fixed over a small range of activity and then jump to a different fixed level with moderate changes in volume Curvilinear Costs- costs that are not linear
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Mixed Cost using Hi-Lo method
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1. Pick the volume of high and low months 2. Find the slope- Change in cost/Change in Activity 3. Find the intercept of the high or low month 4. Write cost equation
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Contribution Margin per unit formula
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Sales price - VC per unit = CM per unit
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Contribution Margin per unit percentage formula
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CM/Sales
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Cost Volume-Profit Analysis formula (Target operating income)
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# units = Fixed Expenses + Operating Income/CM per unit
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Break Even Point Formula
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FC/CM% or FC/CM per unit
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Margin of Safety Formula
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Current Sales - Breakeven Sales
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Margin of Safety Formula Percentage
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Margin of Safety/Current Sales
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What is margin of safety
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How far sales could drop before a company is is in a loss position
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What is operating leverage?
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The relative degree of a fixed and variable costs in a company's cost structure
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Operating leverage factor formula
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Contribution margin/Operating Income
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Special Order Decisions
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Additional Sales Revenue-Additional Costs= Additional Operating Income
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Pricing Decisions
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1. Determine if they are a price taker or Price Setter If Price Taker use Target Costing Sales Price-Cost=Profit If Price Setter Use Cost-Plus Pricing Sales Price-Cost=Profit
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Discontinuing Products, Departments, or Stores
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Lost Sales (Negative) + VC Savings + FC Savings = Impact on Operating Income
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Product Mix Decisions
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1. Determine CM per hour 2. Maximize most profitable item
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Outsource Decisions (Make or Buy)
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Cost to make vs. Cost to Buy Don't forget fixed MOH
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Selling as is or Process Further Decision
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Additional Sales Revenue - Additional Cost = Additional Operating Income
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Sales Budget
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Cash Sales + Credit Sales = Total Sales Revenue
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COGS, Inventory and Purchases Budget
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COGS + EI = Total Needed - BI = Amount to Purchase
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Budgeted Income Statement
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Sales Revenue - COGS = Gross Profit - Operating Expenses = Operating Income
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ROI formula
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Sales Margin X Capital Turnover Operating Income/Assets
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Sales Margin
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Operating Income/Sales
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Capital Turnover
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Sales/Assets
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RI formula
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Operating Income-(Target Rate of Return x Assets)
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What is lowest acceptable transfer pricing at excess capacity
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Variable or Avoidable Cost
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What is lowest acceptable transfer pricing at full capacity
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Market
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Master Budget Variance
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Master - Actual
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Volume Variance
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Master - Flexible
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Flexible Variance
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Flexible - Actual
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Direct Material Price Variance
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| AP - SP | X ATQ
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Direct Material Quantity Variance
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| ATQ - STQ | x SP
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Direct Labor Price Variance
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| AP-SP | x ATQ
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Direct Labor Efficiency Variance
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| ATQ - STQ | x SP
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Payback Period Formula (equal cash flow)
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Initial Investment/Annual Net Cash Inflow
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Accounting Rate of Return Formula
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Avg. Annual Operating Income from Asset / Initial Investment
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PV of $1 is
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how many years out in the future does the cash flow occur
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PV of Annuity =
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for how many years does the cash flow reoccur
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Net Present Value Formula
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(Cash Inflow x Present Value of Annuity Table Value for useful years) - Initial Investment
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Internal Rate of Return formula
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PV inflows - PV outflows = $0 Find X Check present value of annuity table and see what x is in-between for the useful years value
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Profitability Index formula
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PV of net cash inflows / Initial Investment
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Payback Period (unequal cash flow) formula
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Add up cash flows until you reach investment amount Find out how much of next year you need
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Max price to pay for project? (NPV)
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PV of inflows x IR
