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Managerial Accounting Concepts > Exam 1 > Flashcards

Exam 1 Flashcards

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1
Q

Cost of Goods Sold =

A

product cost x units sold/units made

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2
Q

Ending Inventory =

A

units made - units sold

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3
Q

relevant range

A

total fixed costs don’t change for a range of activity, aqnd then jumps to a new higher cost for the next higher range of activity

range of activity over which the definitions of fixed costs and variable costs are valid

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4
Q

Supplies used in the plant managers’ office would be categorized as

GSA or product, asset or expense

A

product

asset

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5
Q

cost allocation

A

process of dividing a total cost into parts and assigning the parts to relevant objects

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6
Q

Wages of administrative building security guards would be categorized as

GSA or product, asset or expense

A

GSA

expense

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7
Q

Contribution Margin Ratio =

A

Contribution Margin/Revenue

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8
Q

We use the contribution margin ratio to

A

calculate money needed to break even or get profit

See the percentage of sales that goes to fixed costs

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9
Q

Raw Material Equation =

A

Beginning Inventory + Materials Purchased - Materials Used = Ending Inventory

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10
Q

Depreciation on vehicles used by salespeople would be categorized as

GSA or product, asset or expense

A

GSA, expense

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11
Q

cost-volume-profit graph

A

horizontal axis-activity
vertical axis-$

fixed cost line- constant at total fixed cost
total cost line - slants upwards as costs increase

sales line - revenue

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12
Q

Operating leverage =

A

Contribution margin/Net income

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13
Q

Cost volume profit limitations

A

1) selling price is constant
2) costs are linear: VC per unit is constant, FC don’t change, efficiency is consistent
3) sales mix constant
4) inventory levels constant
5) All CVP variables are within the relevant range

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14
Q

product costing

A

classifying and accumulating costs (materials, labor, overhead) to determine the cost of making a product or providing a service

managers need to know the costs of their products and servicesWhat is

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15
Q

Operating leverage means

A

how a % change in sales will affect profits

how much of an organization’s costs are fixed

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16
Q

Margin of Safety =

A

(units expected - break-even units)/units expected

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17
Q

When product cost is expensed, what is it expensed under? What financial statement?

A

Cost of Goods sold in the income statement

Asset/Inventory/Materials in the balance sheet

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18
Q

Work in Process Equation =

A

BI + Material used + Labor + Overhead - Cost of Goods Manufactured = EI

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19
Q

Definitions of fixed and variable costs depend on

A

context

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20
Q

Cost of merchandise shipped to customers is categorized as

GSA or product, asset or expense

A

Product, expense

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21
Q

Variable costs ___ when activity increases or decreases

A

increase or decrease proportionally

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22
Q

The variable cost assumption (constant unit variable cost) applies within the ______

A

relevant range

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23
Q

Mixed costs have both ____ and ____ components.

A

fixed, variable

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24
Q

Lubricant used to maintain factory equipment would be categorized under

GSA/product, asset/expense

A

Product, Asset

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25
Increasing variable costs ____ operating leverage
decreases
26
The Cost of a delivery truck would be categorized under GSA or product, asset or expense
GSA, asset
27
The break-even point is where
cost = profit zero net income CM = fixed costs (you've covered all your fixed costs)
28
Cost of goods sold =
product cost - COGM
29
Gross margin income statement
``` Revenue (COGS) Gross Margin (SGA) Operating Profit/Loss ```
30
Fixed cost per unit ___ when activity increases and ___ when activity decreases
decreases, increases
31
When is a product cost expensed
At the point of sale
32
Partially complete products or materials to which some labor and or overhead have been added are called
work in process inventory
33
manufacturing process
financial assets -> manufacturing process -> physical assets
34
Completed products awaiting sale are
Finished Goods
35
BI + cost added = ____ + EI | What equation is this
cost transferred | Inventory
36
A lower contribution margin means ____ break-even volume in units
greater
37
EQN method
selling price per unit (u)= variable cost per unit (u) + fixed cost + desired profit "u"-number of units
38
____ costs better if volume is increasing but ___ costs are better if business is declining
fixed, variable
39
Fixed costs ____ when activity increases/decreases
remains constant
40
Variable cost per unit ____ when activity decreases/ increases
remains constant
41
Total units need to break-even with multiple products =
Total fixed cost/ weighted average contribution margin
42
Mixed product CM income statement
Sales of A Sales of B Total Sales (VC A) (VC B) Contribution Margin (FC) Net income/loss
43
Contribution Margin Per Unit Method to get the break-even point in units
Fixed cost/Contribution Margin per unit
44
CM Ratio method to get break-even point in dollars
FC/CM ratio FC/(CM/Sales) = FC x Sales / CM
45
Manufacturing costs consist of
Direct material, direct labor, and overhead
46
Depreciation on computers used in a factory would be categorized as GSA or product, asset or expense
Product, asset
47
Depreciation on factory assets is considered
overhead
48
Calculating the # units to reach a profit =
(Fixed cost + desired profit)/Contribution margin per unit
49
commodity
there is no difference between products, making price a deciding factor
50
Service/period costs are expensed when?
immediately, in the period in which the economic sacrifice is incurred
51
Period cost is also know as
GSA | General, Selling, and Administrative
52
Unless otherwise stated, cost per unit means
average cost per unit
53
Average cost per unit =
total cost/# units
54
Cost-plus pricing
Selling price = cost + markup (equal to a percentage of the cost) a common business practice
55
Raw materials used to make a product would be categorized as GSA or product, asset or expense
Product, asset
56
CVP Graph
See physical index card
57
Computers for the accounting department would be categorized as
GSA, Assets
58
Companies with highly fixed cost structures will have ____ break-even points than those with lower
higher
59
raw materials
materials waiting to be processed
60
If the Contribution Margin is $0.25 and there are 7000 additional units, for every additional unit past the break-even unit you pay a certain amount
(7000) (0.25-0.05) (7000) (0.2) 1400
61
upstream cost
costs incurred before manufacturing begins
62
downstream cost
costs incurred after manufacturing is complete
63
How much product cost should be expensed?
Units sold/units made = x/product cost
64
Gross profit margin =
revenue - COGS
65
Value-added principle
only report info that adds value by helping make better decisions
66
If the operating leverage is 6, a 10% increase in sales will increase profit by how much?
60%
67
Multiple product
1) Sales mix 2) WACM 3) Total units needed to break-even 4) how much of each product 5) verify with income statement
68
Overhead
unrelated to manufacture but still a cost, like utilities
69
Increased fixed cost, __ leverage, ___ risks, ___ profit
increase, increase, increase if volume increasing
70
Weighted average contribution margin
sales mix 1 x contribution margin 1 + sales mix 2 x contribution margin 2
71
Period costs are related to manufacturing of a product, T/F
False
72
Break-even volume in units
fixed cost/contribution margin per unit
73
Break-even volume in sales dollars
fixed cost/contribution margin per unit x selling price per unit
74
Break-even ratio in units
Fixed cost/CMPU
75
Break-even ratio in dollars
Fixed cost/CM ratio
76
Sales revenue - variable cost
Contribution margin
77
Cash dividend to stockholders would be categorized as
neither product nor GSA, asset nor expense
78
Earning volatility is
what happens to the bottom line if the unit number fluctuates
79
Increased fixed costs, increases leverage, which ___ volatility
increases
80
Increased variable costs, ___ volatility
decreases
81
Depreciation is added/subtracted to SGA/period costs
added
82
managerial vs. financial
managerial: internal, value-added, estimates, relevant, continuous financial: external, SEC IFRS GAAP FASB government and investors, facts, quarterly/annually, reliable, consistent
83
Which costs increase income (when volume is increasing) from most to least?
Fixed mixed variable
84
When fixed costs are covered, net income will increase by
the contribution margin
85
What is the total contribution margin at the break-even point?
Fixed costs
86
Contribution margin =
Revenue-variable costs
87
CM Income Statement
``` Revenue (VC) CM (FC) NI ```
88
BI + COGM - ____ = EI is which EQN
COGS, Finished Goods Inventory
89
Gross margin
Sales - COGS
90
When fixed costs are covered, NI will increase by
CM

Managerial Accounting Concepts (3 decks)

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