Coat Accounting Flashcards
(27 cards)
How is residual income calculated?
Sales 50 mil
Avg invested capital (total assets) 20 mil
Net operating profit 3 mil
Cost of capital 8%
Operating income -(RRR x operating assets)
20 mil x 8%= 1.6 mil
3 mil - 1.6 mil = 1.4 mil
How do you calculate operating profit?
(Sales - COGS - G&A expenses)/ sales
How do you calculate inventory turnover?
COGS/avg inventory
How do you calculate book value per share?
(Common stock + RE)/outstanding shares
How do you calculate WACC?
Cost of project: 50,000,000
To finance:
-15,000,000 of 20- yr bonds at 101 with a rate of 8%
-35,000,000 of funds generated from earnings
Assume cost of debt is 7% and cost of equity is 12%
15mil/50mil= 30% (comes from debt)
35mil/50mil= 70% (comes from equity)
(30% x 7%) + (70% + 12%)= 10.5%
What does the b in the y=a+bx equation stand for?
The x is the independent variable.
For example if someone wants to predict setup costs and has y=400+200x, the x is the number of setups.
What is the CAPM formula?
RR=RFR+B(ERR-RFR)
RR=rate of return
RFR=risk free rate (usually US bonds rate)
B=beta (sensitivity to market)
ERR= expected rate of return
What is the profitability index?
This ranks projects after considering NPV and cost.
PV Project inflows/PV of project cost
What are the after tax cash flows in year 2?
Investment 500,000 Cash flow yrs 1-5: 140,000 Yearly tax depreciation 90,000 Cost of capital 10% PV of $1 after 5 years .621 PV of annuity for 5 yrs 3.791 Marginal tax rate 30%
Figure out what we will pay taxes on:
140,000-90,000= 50,000
Figure out tax expense:
50,000 x 30%=15,000
After tax cash:
140,000-15,000=125,000
What is the effective interest rate?
One year loan of 500,000 at 8%. Company must maintain a compensating balance of of 20%.
Cost/net benefit
Cost of loan:
500,000 x 8% =40,000
Available amount to use:
500,000 x 20%= 100,000
500 - 100= 400 (benefit)
Effective interest rate:
40,000/400,000=10%
What is the accounting rate of return?
Equip cost 100,000
Savings if equip acquired 20,000 a year
Eat useful life 10yrs
Straight line w no residual
What is the ARR?
ARR=(avg annual incremental revenue-avg annual incremental expenses)/ initial(or avg) investment
Only technique that uses depreciation expense.
Problem:
Revenue or savings - expense or depreciation/ initial investment
20,000-10,000*/100,000=10%
*100,000/ 10 yrs
Using the FIFO method how do you account for the equivalent units of production for conversion costs? And cost per share unit?
Completed production 92k
Ending WIP. 24k
Beg WIP 16k
Beg inventory 60% complete for materials and 20% for conversion costs.
End inventory 90% complete for materials and 40% for conversion costs.
Costs incurred in current month 182,880 (direct labor), 391,160 factory OH.
Conversion cost:
92k
+9,600 (24k x .4)
-3,200 (16k x .2)
=98,400 units
Conversion per unit cost:
(182,800 + 391,160)/98,400= 5.83
What is Annualized percentage rate(APR)?
(Discount lost/principal)/time fraction of year
2/10 n/30
(.02/.98)/(20*/365)
*30-10
How do you account for the proper charge to the loss from abnormal spoilage?
Normal spoilage is defined as 4%
Units failing inspection 1,500
Good units passing inspection 28,500
Direct labor:
2 DLH @ &16 /DLH
Manufacturing overhead:
2 DLH @ &30 /DLH
1,500
-1,140 (28,500 x .04)
=360 abnormal spoilage
Rework cost:
$16 x .25= 4.00
$30 x .25=+7.50
=11.50
11.50 x 360= 4,140
How do you calculate COGS?
Raw material is 55,000 (beg) and 65,000 (end)
WIP is 96,000 beg) and 80,000 (end)
FG is 50,000 beg) and 85,000 (end)
During 2012:
Raw material purchased is 400,000
Direct manufacturing labor is 220,000
Factory overhead is 330,000
Beg finished goods. 50,000
Add COGM:
Raw mat used. 390,000*
Dir. many. Labor 220,000
Factory OH. 330,000
End WIP. (80,000) = 956,000
Less end FG. (85,000)
COGS. 921,000
*55,000+400,000-65,000
What are conversion costs?
Direct labor and manufacturing overhead costs
What is the break even formula?
Fixed costs/ (sales per unit-variable cost per unit)= units
Or
Fixed costs/contribution margin
How do you calculate the amount of direct materials charged to a job?
WIP Balance 03/01 balance. 12,000 03/31 direct mat. 40,000 03/31 direct lab. 30,000 03/31 manu. OH. 27,000 03/31 FG. (100,000)
OH is applied at a rate of 90% of direct labor. Only job at end of Mar. has been charged 2,250 in manufacturing OH.
- Calculate total costs charged:
12,000+40,000+30,000+27,000-100,000=9,000 - Figure out direct labor charged to job:
2,250/90%=2,500
- Figure out direct materials charged to job:
9,000-2,250-2,500=4,250
What is the economic order quantity?
Sales 1,800
Carrying cost 20% of inventory value
Purchase price is $20 per unit
Cost per order is $25
Square root of (2 x demand x ordering cost)/carrying cost
2x1,800x25/(20% x 20 per unit)= 22,500
Sqrt of 22,500 is 150
What is the cost volume profit analysis?
R-VC-FC=OI
Revenue - VC =contribution margin - fixed costs = operating income
How do you calculate ending WIP?
Completed production 92,000
Ending WIP 24,000
Ending inventory was 90% complete for materials and 40% for conversion
Ending WIP= material + conversion costs
97,200 (24k x 90%)
55,968 (24k x 40%)
=153,168
What are the 3 steps to process costing?
- Determine equivalent units.
- Compute cost per unit
- Determine costs transferred out and costs remaining in ending WIP
What are the two processing cost methods?
Weighted avg (work done to this point)
and FIFO (work done this period)
Weighted avg method:
Beg WIP 16,000
Completed work 92,000
Ending WIP 24,000
Beg inventory was 60% complete for materials and 20% for conversion. Ending inventory was 90% complete for materials and 40% for conversion.
Beg inventory cost are: 54,560 materials, 20,320 DL, 15,240 OH.
Current Costs incurred: 468,000 materials, 182,880 DL, 391,160 OH.
What is the total unit cost of end. WIP?
- Determine equivalent units:
DM: 92,000 + 21,600 (24,000 x .9) =113,600
CC: 92,000 + 9,600 (24,000x .4) = 101,600 - Compute cost per unit:
DM: 522,560*/113,600=4.60
*54,560+468,000
CC: 609,600*/101,600=6.00
*20,320+15,240+182,880+391,160
- Determine costs transferred out and costs remaining in ending WIP:
21,600 x 4.60=99,360
9,600 x 6.00=57,600
99,360+57,600=156,960 total cost of units in end WIP
