New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

Ch. 8 and Ch. 10 (aka Midterm)

by: Anna Claire Loftis

Ch. 8 and Ch. 10 (aka Midterm) ACCT 2210

Marketplace > Auburn University > Accounting > ACCT 2210 > Ch 8 and Ch 10 aka Midterm
Anna Claire Loftis
GPA 3.35

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

Typed Study Guide
Principles of Managerial Accounting
Talitha S. Smith
Study Guide
50 ?




Popular in Principles of Managerial Accounting

Popular in Accounting

This 3 page Study Guide was uploaded by Anna Claire Loftis on Monday March 21, 2016. The Study Guide belongs to ACCT 2210 at Auburn University taught by Talitha S. Smith in Spring 2016. Since its upload, it has received 27 views. For similar materials see Principles of Managerial Accounting in Accounting at Auburn University.


Reviews for Ch. 8 and Ch. 10 (aka Midterm)


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 03/21/16
Managerial Accounting ▯ Ch. 8 and Ch. 10 Study Guide▯ By:Anna Claire Loftis▯ ——————————————————▯ Chapter 8▯ ▯ 1. Master Budget: a number of prepared Budgets, the basic principle of this chapter.▯ 2. Advantages of Budgeting: It helps communicate management’s plans, forces managers to think and plan ahead, allocating resources, uncover potential “bottlenecks,” coordinate the entire organization’s activities, define goals and benchmarks! whoop whoop.▯ 3. Planning and Control: Planning deals with developing goals and budgets; Control deals with ensuring the budgets work/executing the budgets▯ 4. Responsibility Accounting: Managers are held responsible for ONLY the items under their control.The point isn’t to penalize the managers if the budget goals and actual results don’t match up- but it keeps somebody responsible for each and every item. Explain the discrepancies and the steps taken to correct the deviation if the outcome is unfavorable.▯ 5. Budget Period: Fiscal Year vs. Continuous/Perpetual Budget. Fiscal years is an operating budget that lasts a year. Four quarters subdivided into months.The year’s beginning month and end month may vary depending on the company or organization. Perpetual Budgets are 12 month budgets that continuously roll forward a month. Easier to look 1 year in advance!! ▯ 6. Self Imposed Budget: budget prepared not only by top managers but EVERYONE. Negatives to this strategy- failure to support the strategy(how do the low paid managers know what’s going on in headquarters?) and allowance for too much “slack” Positives- motivation to meet the goals you help set yourself!▯ 7. Bonuses: Budget target are usually set low by companies therefore they are highly attainable… lots of time resulting in a BONUS if budget is MET or EXCEEDED.▯ 8. A budget shouldn’t be used as a pressure device but as a positive instrument that assists in establishing goals, measuring operating results, and isolating areas that need attention.▯ 9. The Sales Budget is the KEYto the Master Budget. ▯ ▯ ▯ MASTER BUDGET: Looks at the layout of the company’s sales, production, and financial goals. Look at Exhibit 8-1 on page 346 for a visual layout.This budget should answer 10 questions dealing with WHAT IS THE sales revenue, cash collection, raw materials needed, manufacturing cost incurred, cash paid to suppliers/direct laborers/manufacturing overhead resources, TOTAL cost of Fixed Goods transferred over to Cost of Goods Sold, Selling and Administrative expenses and what of that is paid out, amount borrowed and repaid, net operating income earned, and what the balance sheet looks like! Also, keep in mind that the budget hinges on estimation. ▯ ▯ ▯ ▯ Mini Budgets that make up the MASTER BUDGET… which culminates into the cash budget, budgeted income statement, and budgeted balance sheet. (in bold)▯ ▯ Sales Budget: key to master budget, budgeted unit sales, price per unit▯ Selling andAdministration Budget: based on “units” sold▯ Production Budget: “units” needed for production▯ Direct Materials Budget: manufacturing, production “needs” NOTunits, conserve cash, ▯ Direct Labor Budget: manufacturing,WILL NOT HAVETO DOTHIS ON EXAM▯ Manufacturing Overhead Budget: variable and fixed manufacturing, subtract depreciation. ▯ Ending Inventory Budget: WILL NOT HAVETO DOTHIS ON EXAM▯ Cash Budget:borrow when you need money, pay back when you can Budgeted Income Statement: Budgeted Balance Sheet: final budget analyzing assets, liabilities, and Stockholder’s Equity.▯ ▯ * YELLOW: Know the concept only.▯ * GREEN: Know the concept and SCHEDULES!!! You did these in your HomeWork!▯ * Know how to do a cash collections schedule.▯ ▯ Practice the budgets and know how to do them backwards and forwards. ▯ ▯ ▯ Chapter 10▯ ▯ * KNOW: Direct Materials and Direct Labor Variances ▯ * Don’t need to know VOHVariances▯ ▯ 1. Standard: a benchmark for measuring performances.There are price standards(how much should be paid per unit) and quantity standards(how much of an input should be used per unit or to provide a service.) Standard costs are good because it allows mangers to focus on other issues, it simplifies bookkeeping, and under “responsibility accounting” it keeps costs under control through that particular individual/manager. Standard costs present a problem if the cost is out of date(aka poor decisions), if variances are used to assign blame, and if excess build up is created due to a push in production.An emphasis on quality, costumer service, and competition areALL NEEDED.▯ 2. There are often differences between the standard costs and the actual costs!▯ 3. Standard quantity per unit: defines the AMOUNTof direct materials that should be used for each unit of finished products; also includes allowance for inefficiencies(ex. scrap and spoilage)▯ 4. Standard price per unit: defines the price that should be paid for each unit of direct materials and it should reflect the final, delivered cost of those materials. ▯ 5. Multiply the standard quantity per unit x standard price per unit to compute the direct materials cost per unit!!! Example found on page 429.▯ 6. Standard hours per unit: defines the amount of direct labor-hours that should be used to produce one unit of finished goods. Assume a “tight but attainable” labor standard.▯ 7. Standard rate per hour: defines the company’s expected direct labor wage rate per hour, including employment taxes and fringe benefits.▯ 8. Multiply the standard hours per unit x standard rate per unit to compute the standard direct labor cost per unit.▯ 9. If the actual cost is LESS than the standard cost that is considered FAVORABLE.▯ 10. If the actual cost is MORE than the standard cost that is considered UNFAVORABLE.▯ 11. Spending Variance: look for the word “differ” in the problem. This will be a difference between the left and right side of each model. In order for the outcome to be favorable, you want the left side to be LESS than the right side :) ▯ 12. PriceVariance: the difference between theACTUAL amount paid for an input and the standard amount that SHOULD HAVE BEEN paid multiplied by the actual amount of the input purchased.▯ 13. QuantityVariance, RateVariance, and EfficiencyVariance also fall along the same lines at PriceVariance- just know that its difference betweenACTUAL(quantity used, hourly rate, hours used) and what SHOULD HAVE BEEN(quantity used, hourly rate, hours used.) Price and Quantity go hand in hand with Direct Materials. Rate and Efficiency go hand in hand with Direct Labor.▯ 14. Purchasing Manager: in charge of the “Price.”▯ 15. Production Manager: in charge of the raw materials actually used to make the product. aka “Quantity.” They also usually have way more work to do such as hiring, scheduling, etc.▯ 16. DIRECTMATERIALS MODEL: Quantity is ALWAYS a total! Price isALWAYS a unit! Materials price variance and materials quantity variance are computed using the same model. (EXHIBIT10-3 on page 433)▯ 17. DIRECTLABOR MODEL: Labor rate variance and labor efficiency variance are computed using the same model. (There can also be a variable overhead rate and efficiency variance.) (EXHIBIT 10-6 page 437)▯ 18. SQ: standard quantity allowed; quantity that SHOULD HAVE BEEN used ▯ 19. SH: standard hours allowed; hours that SHOULD HAVE BEEN used▯ 20. LOOK AT PAGE 466. JUST DO IT. Both models are found here.▯ ▯ ▯ * MAKE SURE you know how to do the models on pages 433 and 437. Look at the Model Methods and NOT the equation methods. Our teacher advised on drawing out the models for the questions on the test that EVER ask any information that would be on the models.▯ You don’t need to know the Variable OverheadVariances. Praise the Lord.▯ * ▯ GOOD LUCK!!! Colossians 3:23 says, “Whatever you do, work at it with all your heart as working for the Lord not for men.” YES, Please use this as an aid to study, but dive into the book and understand it all for yourself. It pays to understand and not memorize!!▯


Buy Material

Are you sure you want to buy this material for

50 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."

Allison Fischer University of Alabama

"I signed up to be an Elite Notetaker with 2 of my sorority sisters this semester. We just posted our notes weekly and were each making over $600 per month. I LOVE StudySoup!"

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."


"Their 'Elite Notetakers' are making over $1,200/month in sales by creating high quality content that helps their classmates in a time of need."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.