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AC 222 Final Exam "Cheat Sheet"

by: Frankie Fucci

AC 222 Final Exam "Cheat Sheet" AC 222

Marketplace > Boston University > Accounting > AC 222 > AC 222 Final Exam Cheat Sheet
Frankie Fucci
GPA 3.4

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About this Document

This is my note sheet from the final exam (Fall 2015(. This is what I took into the exam with me. It has information from each chapter based on the breakdown of how much from each section would be ...
Managerial Accounting I
Patricia Doherty
Study Guide
Accounting, managerial accounting, Study Guide
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This 3 page Study Guide was uploaded by Frankie Fucci on Wednesday January 13, 2016. The Study Guide belongs to AC 222 at Boston University taught by Patricia Doherty in Spring 2016. Since its upload, it has received 424 views. For similar materials see Managerial Accounting I in Accounting at Boston University.


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Date Created: 01/13/16
Midterm 1 Why NOI different (lower) in var. pricing BUT can help make decisions T-accounts costing: incurs ALL FOH on IS while about cost drivers, allocation rates absorption only includes direct FOH in and pricing relation to units made Traditional vs. ABC Product costs *Difference in $income=difference in Traditional: over/undercosts some $ invent. products  reports artificially low/high Notes from Problem 6-16 product margin; assigns idle/org- Company BE > sum of dept. BE sustaining costs to products  high because dept don’t include common prod. cost/low product margin FC in BE calc – segments can BE but ABC view increases prod margin of form still has FC to cover undercosted in traditional, etc. / For seg BE – ignore common FC only Drives OH cost away from units w/ tracebl. high vol prod. (low vol prod. use less CM drives NI, ^NI driven by CM efficiently CM ratio doesn’t change(?) Why different product margins: Ex: increase sales by 75000 in MINN.  Traditional allocates all MOH to Explain seg. margin ratio change – product using one allocation base total CM changed but FC did not  FC even if may not be dominant cost spread over more sales  SM ratio driver across depts. / ABC assigns Equations: bigger / constant FC spread over more nonmanufacturing OH to products on CM=est. effect on profit of change in sales  decrease TOTAL cost/unit  cause-effect basis (period costs in rev increase proportionate NI relative to traditional) BE($)= FC/CM ratio sales Activity-based management: BE(units)= FC/CM unit important use of ABC – how can info TP($)= (FC+TP)/CM ratio Chapter 7: Activity-based Costing be used to improve manufacturing TP(units)= (FC+TP)/CM unit (ABC) process, etc. / benchmarking: which MOS($)= current $sales – BE $sales; ABC answers question: what is activities have greatest potential for how secure/far below/above BE misallocation of departmentalized OH improvement OL factor= CM/NI; sensitivity of NI to affects product costing? % chg. sls. Activity: event that causes Chapter 12: Relevant Costs – short % change income= OL x % change in consumption of OH term dec. sales Activity cost pools: “bucket” in Relevant costs must be: future which costs are accumulated that costs AND differ between alternatives; Chapter 6: Variable/Absorption Costing relate to single activity measr fixed or variable Variable Costing: only VARIABLE Activity measure: allocate base in Why not use all: take focus away from manufacturing costs are product costs ABC system; aka cost driver – two critical items  can make wrong (DM, DL,VOH); FC is a period cost; most common types decisions, may not know all costs uses CM IS format; COGS/cost per unit Transaction drivers: simple counts Types of decisions: does NOT include FC; internal of #time activity occurs; used more Add/drop segment: watch out for manager use often / Duration drivers: amount of FC: only consider traceable/avoidable Absorption costing: ALL time to perform activity; more not common FC; compare lost CM with manufacturing costs (VC/FC) are accurate but takes more time saved FC: if avoided FC>lost CM  product costs; traditional IS; external Activity levels: how often do activity drop line use relative to # units of product you’re Make or buy: incremental (including *Selling/admin ALWAYS period cost producing  opportunity) cost to make item; will Variable vs. Absorption: key is Unit: done individually for each buying item cost < making them? FOH: in VC FOH is period cost, AC FOH product Special order: selling price of order – is product cost Batch: done one for group of product; incremental cost to make; opportunity Benefits of decentralization: top size of bath determined by product cost(?), is incremental cost of making mngmt focus on long term strategy; Product: done for product line – then extra < CM generated at lower selling empower lower mngt; train managers make as many units/batches as in price firm wants for high responsibility; quick response demand Constraint: anything that prevents time/Risks: lower mnmgt don’t have Customer: customer-orientated you from getting more of what you ‘big picture’; lack of costs, different for each customer, not want; has smallest capacity; coordination/comunction each product managers must decide which prod. Types of segments (responsibility Organization sustaining: costs not makes best use of constrained centers): Cost center=manager allocated in traditional ABC (modified resources; FC usual unaffected; controls costs but not rev or ABC for GAAP – allocated into unit CM/unit of constrained resource: investments / profit center=controls level) CM/amount of constrained resources costs/revs but not invstmt / *unit-based cost driver (used in plant- need per unit; decision that will investment center=controls costs, wide and dept. rates) won’t accurately maximize total CM should be used revs, investments in assets capture way products use non-unit Inventory: FASB rules – all manuf Segment margin=Sales-VC- level activities costs no S&A traceable fixed costs or CM-traceable Steps for making ABC: Promotional costs: increased CM- FC; best indicator of long-term profit/ 1) ID OH costs incrmntl FC good for decisions to do with capacity 2) Define OH activities/assign OH Sell as is/process further: Break even: segments can BE but costs to actvt. incremental revenue – incremental company as whole may still suffer loss 3) Select cost driver for each activity cost; joint costs not relevant; because common FC 4) determine #units of cost drivers profitable to process further if *Difference in NOI between two firm will use incremental rev from processing methods= FOH/unit x CHANGE in 5) Calculate activity rates: total cost exceeds incremental processing cost inventory (units)  inventory of activity/total units of cost driver (4 incurred after split off increases=>absorption costing has COMPANY) EX: SP after process – SP at split = higher NOI but if inventory 6) Apply OH to products: activity rate gain in revenue if process – cost to decreases=> variable costing has x actual units of cost driver process = gain (loss) to process higher NOI *ABC changes way allocate indirect EX: SP at split – 10,000 costs; does not change those costs or SP after process – 35,000 Gain in revs = 25000 (35-10) If actual activity higher=> VC higher Cost to process – 10,000 (increm. If activity lower=> VC lower than Cost) expected Gain/loss to process – 15000 (increm. Output vol: convert master->flex.; Rev.) master=vol. expected to achieve, If increm rev > increm cost => flex=actual vol. achieved process further Cost formula (VC): budgeted cost Joint products: products made from per unit – master budget/#units in common input master budget Split off point: point in manuf. FC: flexible budget for FC = master Process where joint products can be budget; vol. should not affect level of recognized separately FC Joint cost: cost incurred up to split-off Variance analysis: evaluate perfm. point against what should’ve happened, Types of costs: based on budget Differential: different between two Activity variance: actual activity alternatives differs from budgeted, causes Incremental: increase in cost less/more income; diff between between two alts. planning/flexible budgets that occur Avoidable: eliminated by not Production: manufacturing solely due to change in activity level performing actvty Inventory purchases: Rev/Spending var: diff. between Opportunity: value of alternative you merchandising; amount to be bought what flex. Says should’ve happened at give up; $ you WON’T bring in actual level of output and what actual because didn’t choose alt. from suppliers during period revs/exps were at actual level Sunk: past cost, cannot be changed *Invoice cost for merch purch=COGS Revenue var: actual vs flexible rev.; DM: RM to be bought to fulfill (never relevant) production/inventory reqs budgeted revenue/unit x actual ABC helps: ID potential relevant costs, DL: hours to reach production budget activity improves traceability MOH: all prod. costs other than Spending var: line items of actual *DON’T assume traceable => expense vs. flexible budget amount avoidable DM/DL; separated into FOH and VOH; for each; managers look at these common noncash MOH closely because can be controlled; cost=depreciation Chapter 8 FC: cost of supplying capacity to variable: budget cost/unit x actual Budget: detailed plan for future make prod., process orders, handle volume; FC=budget (doesn’t mean no expressed in formal terms, calls, etc.; amount of capacity FC variance, just not caused by quantitative plan for acquiring/using volume, in short term) resources over time required depends on expected level of Favorable var: more NOI activity: expected>current Two purposes: Planning – develop capacity=>FC may need to increase / Unfavorable var: less NOI budgets to achieve goals/Control – expected<current=>decrease; once gather feedback to ensure plan is chosen – FC levels are fixed properly executed/modified FG inventory budget: complete Advantages: communication, planning, resource allocation, other budgets to compute unit product cost for units made; need to constraints/bottleneck, coordination, determine COGS on IS/value EI on BS benchmarking S&A Expense: other than Responsibility accounting: manufacturing costs; variable and managers held responsible for line fixed components (& deprec.) items they can control; personalizes accounting info by holding individuals Cash budget: four major sections – *when activity level increases by % -> Receipt: lists all cash inflows (expect responsible for revenues/costs financing, mostly sales) income increases by more than that % Continuous/perpetual: 12-month Disbursements: all cash payments because FC budget that rolls forward one planned / Cash excess/deficiency: if Perf report can be prepared for cost month/qtr and current month/qtr center but have no revenues online ends; keeps managers focused at cash deficiency exists or not at min expense variances least one year ahead cash EB  borrow money / Financing: borrowings/interest Top-down: management dictates, Budgeted IS: planned profit; others follow benchmark perf. Bottom-up: all level managers Budgeted BS: used other budgets to prepare budgets Self-imposed: budget prepared with develop participation from manager at all Budget prep: Sales budget first (collection from customers) / levels; more accurate estimates, production/merchandise purchases higher motiv/commit., accountability budget (PAYMENTS to supplier, not on mangers; BUT managers can make purchases) / selling and admin / cash suboptimal budgets/budgetary slack Master budget: # separate (cash available, cash disbursements, interdependent budgets lay out financing) / budgeted IS then BS company’s goals Chapter 9 Static budget: master/planning Chapter 10 budget; one level of activity good for Quantity standard: specify how plan/not control much of an INPUT should be used to Flexible budget: how costs change make product at different volumes; budgeted costs Price standard: how much should be for actual level of output (sales) PAID for each unit of INPUT achieved; estimate of what revs/costs DM standard – standard quantity per SHOULD HAVE BEEN given ACTUAL unit: amount of DM should be used for level of activity each unit of products (includes scrap) / standard price per unit: price *Variance analysis: decomposes AH x SR=>actual DLH/unit x #suits x should be paid for each unit of DM spending variances from flexible std PVOH (final delivered cost of those budget into 2 types: price paid for SH x SR=>std DLH/unit x #suits x std materials) input / amount of input used POH rate DL standard – standard hours per DM Price variance: actual cost of FOH budget variance: actual FOH unit: amount of DLH should be used to materials purchased compared to spent compared to budgeted FOH produce unit of FG / standard rate per actual quantity purchased at standard FOH volume variance: FOH budget hour: expected DL wage rate per hour price compared to FOH applied to standard (includes tax/benefits) DM Quantity variance: actual inputs for actual output; FOH applied VMOH standard – standard price: quantity used at standard price at POR to actual output rate/unit expect to pay for compared to standard quantity Budgeted FOH=PFOR x budget DLH VMOH=variable portion POR / allowed for actual output at standard – FOH applied to standard input for standard hours per unit: amount of price (from standard cost card) budgeted output allocation base from company’s POR DL rate variable: actual amount paid FOH applied to standard input for required for unit FG for actual DLH used compare to actual actual output: PFOR x std DLH/unit x Standard cost card: standard DLH used at standard price #units made (std DLH for units quantity/hrs and standard price/rate of DL efficiency variance: actual DLH made=>actual # units should have inputs required for 1 unit use at standard rate compared to to taken __ hours) *******POR=standard Actual cost allowed for actual standard DLH allowed for actual rate output=Actual output at standard rate *FOH is fixed=>no more/less would be Standard cost allowed for actual VOH spending variance: actual VOH spent if produced more/less units, only output=Flex spent vs actual units of cost driver over/under apl. Standard cost allowed for planned used times PVOR (which is VOH *Under applied=>Unfavorable output=Bgt standard) variance Variable efficiency variance: POR Standard quantity allowed (DM) / times actual units of cost driver used Standard hours allowed (DL/VOH): compared to PVOR times standard amount of input should have been units of cost driver allowed for actual used to manufacture ACTUAL output output; this is cost driver variance  of FG during period *when DL is base for VOH=>DL Practical standard: allows for efficiency is favorable  VOH unavoidable waste or inefficiency efficiency is favorable too (measures Budgets: efficiency of cost driver)


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