Final Exam Study Materials for Accounting 2

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Accounting - Financial Accounting

user_kumartyv Created by 5 mon ago

Cards in this deck(57)

Financial accounting focuses on the external side, used by people like investors, creditors, or anyone that wants to know about a company Managerial accounting focuses on internal side, used by company employees, managers, directors

assigning cost to cost objects (indirect and direct), accounting for manufacturing companies (materials, labor, overhead, S & A), preparing financial statements, predicting cost behavior to activity changes (variable, fixed, mixed), making decisions (relevant and irrelevant costs)

Direct costs can be easily and conveniently traced to unit of product (direct material/labor). While indirect costs cannot be easily or conveniently traced to a product (manufacturing overhead) DEPENDS ON WHAT THE COSTS ARE RELATIVE TO

indirect costs incurred to support a number of cost objects, therefore cant be easily traced to individual cost object. (such as a pilot)

anything which cost data is desired (product, customer)

direct raw materials, direct labor, manufacturing overhead raw materials -> work in process -> finished goods inventory (BS) then COGS on IS

all manufacturing costs except direct materials and direct labor. cant be readily traced to finished products (includes indirect materials and labor costs) examples: depreciation, utilities, property taxes, insurance premiums on factory

Direct Materials + Direct Labor. Primary costs incurred before conversion begins.

direct labor + manufacturing overhead. After prime costs, conversion process begins. (work in procress inventory)

cost necessary to secure the order and deliver product, can be direct or indirect.

All executive, organizational, and clerical costs associated with the general management of an organization rather than with manufacturing or selling. direct or indirect.

a measure of whatever causes the incurrence of a variable cost

all selling and admin expenses (expenses on income statement)

y = a + bx

Committed - long tern, cant be significantly reduced in short term without fundamental changes Discretionary - May be altered in the short term by current managerial decisions.

The range where all the fixed costs and variable costs per unit are the same (cost is flat). cost that should be considered when making decisions.

rely on cost classification for preparing financial statement (product/period), past transactions

use cost classification for predicting cost behavior, future focus. (CM=rev-variable cost)

difference in cost/revenue between any 2 alternatives (fixed or variable)

Irrelevant costs that should be ignored

increase in cost between two alternatives.

job costing is used by companies that produce unique, custom-ordered products, or relatively small batches of different products. Requires cost allocation to each specific job. Real-time cost calculating. Process costing is used when products are identical/homogeneous, costs are averaged to all units. Cost calculated periodically

measure of activity used to assign manufacturing overhead to individual jobs (costs to cost objects). Used bc hard to trace OH jobs, OH costs can be fixed, OH consists of many different items.

FORMULA = estimated total MOH cost for coming period / estimated total units in the allocation base for coming period -used to apply overhead to jobs, determined before the period begins. The allocation base is the cost driver! -Helpful because the actual OH rate is unknown until the end of period -Estimate job costs during the period

1) Estimate total allocation base 2) Estimate total fixed MOH cost and variable MOH cost using Y=a+bx to computer total MOH a= fixed b= variable x= allocation base 4) use formula to determine POHR (total MOH/Total activity)

used when theres more than 1 cost driver 1) calculate total OH cost for each dept 2) calculate POHR for each dept 3) calculate the amount of OH applied from both dept to a job (hours * POHR) 4) calculate total job cost

a technique to assign product costs based on links between activities that drive costs and the production of specific products

Planning- establishing goals controlling- gathering feedback decision making- choosing between two alternatives budget- a plan of future expenses

-Manufacturing companies turn raw materials into finished goods -Merchandising companies buy finished goods from manufacturing, and resell without changing form -service companies provide intangible goods to customers

all of a companies job cost sheets collectively form this.

provide an underlying set of financial records that explain what specific jobs compromise the amounts reported in work in process and finished goods on the BS.

A job-costing sheet also shows what specific jobs compromise in COGS.

when a company applies too little or too much OH to production than actually occurs. COGS must be adjusted when this happens. Under applied adjustment increases COGS, decreases net income, over applied adjustment decreases COGS, increases net income.

Doc showing qty of each type of direct material required for product

Doc specifying type and qty of materials to be drawn from storeroom and the job charged for the cost of those materials

form that records the direct materials, labor and MOH costs to a job

costing system that applies OH cost to jobs by multiplying a POHR by the actual amount to allocation base by job. (allocation base lets indirect materials be traced to a activity base)

variable expense as a % of sales. VE/sales

CM as a % of sales. CM/sales OR CM per unit/unit selling $

additional rev * CM ratio

CM per unit / price per unit

Measure of how sensitive net operating income is to a % change in sales = CM/Net operating income

Sales change % * OL

Units to break even = Fixed/unit CM Dollar sales to break even = fixed/CM ratio or 0 = unit CM * Q - fixed solve for Q

excess of budgeted or actual sales $ over break even volume of sales dollars. = total sales - break even sales In units = margin/selling $ per unit

Unit sales target profit = (Target+fixed)/CM per unit Dollar target = (target+fixed)/CM ratio or target profit = unit CM * Q - fixed solve for Q

A graphical representation of the relationships between an organization's revenues, costs, and profits on the one hand and its sales volume on the other hand.

relative proportion in which a companies products are sold(%) For sales mix, must multiply each product sales mix % by total $ sales to break even.

an analytical approach that focuses only on those costs and revenues that change as a result of a decision

An income statement format that organizes costs by their behavior. Costs are separated into variable and fixed categories rather than being separated into product and period costs for external reporting purposes.

product = direct material, direct labor, variable MOH period = fixed MOH, variable and fixed S&A cost. Income only affected by changed in unit sales, not production (provides accurate cost of 1+ unit)segment

product = direct material, direct labor, variable and fixed MOH cost Period = variable and fixed S&A cost Income influences by changed in unit sales and production (doesnt provide accurate cost for 1+ unit, makes fixed MOH seem like variable cost)

any part or activity of an organization about which managers seek cost, revenue, or profit data (CM format, Traceable fixed cost)

arise bc of certain segment, can possibly go away

arise bc overall operation, no disapearing. not allocated to different segments bc could make business look unprofitable

Computed by subtracting traceable fixed cost of a segment from its CM

all direct labor and manufacturing OH costs as fixed period costs, direct material is only product cost.

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Final Exam Study Materials for Accounting 2

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