Managerial Accounting 2302 - Sandra Bitenc
Managerial Accounting 2302 - Sandra Bitenc ACCT 2302 - 003
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ACCT 2302 - 003
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This 4 page Study Guide was uploaded by Faris Hijjazi on Sunday April 24, 2016. The Study Guide belongs to ACCT 2302 - 003 at University of Texas at Arlington taught by Sandra H Bitenc in Fall 2015. Since its upload, it has received 108 views. For similar materials see PRINCIPLES OF ACCOUNTING II in Accounting at University of Texas at Arlington.
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Can you just teach this course please? lol :)
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Date Created: 04/24/16
Managerial Accounting 2302 – Exam 4 Study Guide Chapter 25: ShortTerm Business Decisions How managers make decisions? Define business goals Identify alternative courses of action Gather and analyze relevant information: compare alternatives Chose the best alternative Define and understand: Relevant information Relevant costs Irrelevant information Sunk costs Know the role of nonfinancial relevant information. Define and understand differential analysis/incremental analysis. How does pricing affect short term decisions? Know the three questions that managers must consider when setting the price. Price setters Price takers Define and understand both, know the differences between both and be familiar with the types of pricing approaches each uses. (target pricing and costplus pricing) Define and understand target pricing. To determine target full product cost: Revenue at market price – desired profit = target full product cost Understand how target pricing works and what the company should do if operating income is not as expected. Define and understand cost plus pricing. To determine the costplus price: Full product cost + desired profit = costplus price Understand how costplus pricing works and how the costprice is determined Define and understand special pricing. Know what managers should consider when accepting a special order. Be able to prepare a differential analysis for special pricing. Be able to understand how managers decide what products to sell and what products to produce. Understand and be familiar with the considerations that managers must keep in mind when dropping an unfavorable product. Understand the effect of fixed costs. Know which fixed costs are relevant or irrelevant. Understand the differential analysis of dropping a product when the fixed costs change, and when they don’t change. Managers must take other considerations when dropping a product. Understand and define product mix. Define and understand constraint. Managers must know which products to produce and sell. Define and understand sales mix. Display space is one of the most common merchandising company constraints. Understand why managers chose to outsource and process further decisions. There are two questions to consider. Define and understand outsourcing. Define opportunity. There are some aspects that management needs to consider when outsourcing. Understand the differential analysis of outsourcing when fixed costs change and when they don’t change. Know some of the alternatives that a company might consider when outsourcing. Understand how a company might sell the product as is, or process it further. Managers must determine several items before making the decision. Understand the differential analysis when selling the product as is or processing it further. Chapter 26: Capital Investment Decisions What is capital budgeting? Capital asset Capital investment Capital budgeting Be able to define and understand each. The capital budgeting process. Understand how this process works and the steps taken in the process. Capital rationing Postaudit Be able to define and understand each. Know the four popular methods of analyzing potential capital investments. Know the stages in the capital budgeting process. Capital budgeting focuses on cash flows. Read and understand Understand the life cycle of capital investments. Know the two capital investment analysis methods that companies use to evaluate shorter capital investments. Define and understand payback. Understand payback with equal annual net cash inflows. amountinvested Payback = expected annualnet cashinflow Be familiar with and understand payback with unequal annual net cash inflows. Understand the criticism of using the payback method. Define and be familiar with the accounting rate of return. averageannualoperatingincome ARR = averageamountinvested Know which decision to take when using the accounting rate of return. Understand the concept of time value of money. Know the several key factors that time value of money depends on. Be able to distinguish between simple interest and compound interest. Be able to define both and know how to calculate each. Determine the future value: Future value = present value + interest earned Be able to use present value tables to calculate a lump sum or annuity. Present value of a lump sum: Present value = future value x PV factor Present value of an annuity: Present value = amount of each cash inflow x Annuity PV factor Know the methods used to overcome the weakness of not recognizing the time value of money Net present value (NPV). Define and understand Internal rate of return (IRR) Define and understand discount rate. Understand how the decision methods works under NPV. Define and understand the profitability index. presentvalueof net cash flows Profitability index = initialinvestment Define and understand the Internal Rate of Return (IRR). Know how to calculate the applicable interest rate by determining the annuity factor. Understand how the decision for the internal rate of return works and options to consider. Understand the differences between the different capital analysis methods. Refer to Exhibit 2612. Understand sensitivity analysis and how it works on Microsoft excel. Understand the different steps used in capital rationing decision process. Refer to Exhibit 2615.
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