Accounting 2 Test 1
Accounting 2 Test 1 2102
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This 3 page Study Guide was uploaded by Vraj Patel on Tuesday February 2, 2016. The Study Guide belongs to 2102 at Georgia State University taught by Abdel Rahim in Spring 2016. Since its upload, it has received 26 views. For similar materials see PRIN OF ACCT II in Accounting at Georgia State University.
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Date Created: 02/02/16
Chapter 1 § Understand the definition of relevant information as it pertains to managerial account ng o What is managerial accounting? The process of identification, measurement, accumulation, analysis, preparation, interpretation, and communication of financial information used by management to plan, evaluate, and control within an organization and to assure appropriate use of and accountability for its resources. § Define Managerial Accounting and understand objectives o A profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization’s strategy o Managerial Accounting vs. Financial Accounting Ø An Internal focus rather than external focus Ø Lack of mandated Rules Ø Focus on operating segments Ø Focus on the future Ø Emphasis on timeliness § List and understand the responsibilities of managerial accountant . o Planning: Ø Setting strategic and operational goals and objective translating these into specific activiti Allocating resources for their achievement o Controllin Ø Monitoring day-to-day operations, exerting managerial influence on operations to conform to plans, taking corrective action as needed o Evaluating Ø Comparing actual results to planned results, assessing individual performance, taking corrective action as needed o Decision Making Ø Using information to choose the best alternative from available options made in pursuit of a particular goal or objective § Understand the purpose and value of managerial accounting reporting o An organization needs to set strategies first and then determine the information required to monitor achievement of those strategies o Financial and nonfinancial data from operations > is processed by decision makers > which leaders to a decision and action § Understand objectives of just -in- time inventory managemen o An inventory management philosophy that attempts to minimize the amount of inventory on hand o Requires frequent deliveries of small lots of materials o Requires a complementary quality program since there is no extra inventory to replace defective components § Understand the goals of the supply chain o A network of trading partners (customers and suppliers) o From raw material creation to end user o Get the right products to the right location, in the right quantities, at the right time, at the right cost Chapter 2 § Understand the definitions and applications of fixed, variable, mixed a nd step c sts o Variable Ø Cost per unit remains constant with changes in volume; Total cost varies proportionately with changes in volume o Fixed Ø Total cost remains constant with changes in volume; Unit cost changes inversely with changes in volume; Fixed relationship only holds over the relevant range o Step-Variable Ø Cost remains fixed in total over small range of volume or activity; These small ranges are smaller than the relevant range of fixed cost o Mixed Ø Cost contains both fixed and variable components; Total cost AND unit cost varies with changes in volume § Use the high-low method to calculate both variable and fixed costs o Find the high and low points in terms of activity level o Compute the variable cost per unit o Calculate the fixed cost using either the high point or the low point o Complete the cost equation y = mx + b. § Understand advantages and disadvantages of regression analysis o Statistical technique to calculate variable and fixed components of mixed costs o Gives the “best” line that fits a set of cost points o Easy to do with Excel § Understand and calculate contribution margin and contribution rati o Sales Revenue – Total Variable Expenses o Contribution margin is the revenue remaining to cover fixed expenses and provide profit after variable expenses have been covered o Contribution Margin Ratio = Contribution Margin/ Sales Revenue § Understand and calculate contribution margin and operating inc ome and given sales, variable costs and fixed cost o Sales Revenue o - Variable Expenses o = Total Contribution Margin o - Total Fixed Expenses o = Operating Income § Define and identify fixed vs variable cos s o Examples of Variable Cost: Hotel chain; Commercial airline; Cereal manufacturer; Automobile manufacturer o Fixed cost: remain the same over change of units § Understand mixed and step costs o y = mx + b § y is total cost § m is the variable cost per unit § x is the level of activity (number of units) § b is total fixed cost Chapter 3 § Understand and calculate margin of safety o Current Sales – Breakeven Sales = Margin of safety § Understand concept of breakeven point and calculate in both dollars and units. o Total revenues = total expenses; Profit = $0 o Dollars: Fixed Cost / Contribution Margin per unit o Sales: Fixed Cost / Contribution Margin Revenue § Calculate selling price per unit using break -even analysis o
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