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110 Cards in this Set
- Front
- Back
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Types of Activities |
Operating, Investing, and Financing |
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Operating |
Day-to-Day Profit making |
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Investing |
Buying, Selling LT assets |
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Financing |
Borrowing or Paying Back |
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Statement of Cash Flows |
Shows overall Increases and decreases in cash |
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Income Statement setup |
Sales -Cogs ________ Gross Profit -Operating Expenses ______________________ Net Income |
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Indirect Method |
Starts with Net Income and adjusts to cash from operations |
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Direct Method |
Operating Activities on a cash basis |
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Free Cash Flow |
Cash Flow from Operating - Capital Expenditures ____________________________ Free Cash Flow |
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General Rule for Indirect Method |
Increase Decrease Current Assets - + Current Liabilities + - |
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Direct Method (Cash received from customers) |
Beginning A/R + Sales Revenue - Cash Collections of A/R Ending A/R |
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Direct Method (Cash payments for insurance) |
Beginning PI + Payment Insurance - Expensed on Income Statement Ending PI |
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Direct Method (Cash payments for Inventory) |
Beginning Inv +Purchases of Inv - COGS Ending Inv |
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Direct Method (Cash payments for AP) |
Beginning AP + Purchases of Inv - Cash payments for AP Ending AP |
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Horizontal Analysis |
year-to-year comparison of performance |
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Vertical Analysis |
Relative size of each line item in financial statements |
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Horizontal Formula |
Change / Base year amount |
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Trend percentages |
Any year $ amount / Base year $ amount |
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Vertical Formula (Income Statement) |
Each item in Income Statement / Sales Revenue |
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Vertical Formula (Balance Sheet) |
Each item in Balance sheet / Total Assets |
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Managers Responsibilities |
Planning, Directing, Controlling |
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Planning |
setting goals and how to achieve them |
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Directing |
Day-to-Day operations |
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Controlling |
Evaluating the results and making adjustments |
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Managerial Accounting |
1. Internal Users 2. Help managers |
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Financial Accounting |
1. External users 2. Help make investing and lending decisions |
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Manufacturing Companies (difference) |
Raw Materials WIP FG Inventory |
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direct cost |
can be traced |
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indirect cost |
can't be traced |
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Period Costs |
Research,Design, marketing, Distribution, and Customer service |
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Product Costs (Inventoriable Costs) |
Production or Purchases |
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Manufacturing Costs |
DM, DL, MOH |
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COGM (Cost of Goods Manufactured) |
Beginning WIP +DM, DL, MOH - Ending WIP Cost of Goods Manufactured |
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COGS (Cost of Goods Sold) |
Beginning FG + COGM - Ending FG COGS |
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Sunk cost |
cost already incurred |
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Process Costing |
Used by companies producing large # of identical products |
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Job Costing |
Used by unique products |
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Predetermined Overhead Rate (POHR) |
Total estimated MOH costs / Total Estimated Allocation Base |
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Allocated Overhead |
POHR x Acutal Amount of Allocation Base |
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overallocated or underallocated means |
overcosted or undercosted |
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If job is overcosted |
decrease COGS |
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If job is undercosted |
increase COGS |
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Activity Based Costing (ABC) four steps |
Step 1. Estimate MOH cost for each activity Step 2. Company selects allocation base for each Step 3. Total estimated Activity Cost / Total estimated Activity Allocated Step 4. Activity Cost Rate x Actual Amount of Activity Allocation |
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Plantwide vs ABC |
Plantwide tend to ABC tend to Low Volume undercost raise unit cost
High Volume overcost lower unit cost |
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Contribution Margin Income Statement (CMIS) |
Sales - Variable ____________ CM -Fixed _____________ Operating Expense |
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Income Statement |
Sales - COGS __________ Gross Profit - Operating Expenses ______________________ Operating Income |
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CM formula |
Sales - Variable |
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Breakeven point is when |
Operating Income = 0 |
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CMR formula |
CM / Sales |
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Breakeven point in $'s |
Fixed + OI ___________ CMR |
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Breakeven Point in units |
Fixed + OI ___________ CM per unit |
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CVP Graph |
Add Picture. |
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Margin of Safety in $'s |
Expected sales in $'s - Breakeven Point in $'s |
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Margin of safety in units |
Expected Sales in units - Breakeven Point in units |
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Margin of Safety as % |
MOS in units or MOS in $'s ______________ _____________ Expected Sales in units Expected Sales in $'s |
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Operating Leverage |
measures risk |
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High Operating Leverage |
Higher FC, CMR, risk, and reward |
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Low Operating Leverage |
Lower FC, CMR, risk, reward |
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Operating Leverage formula |
CM / OI |
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When to accept Special Order? |
If revenues exceeds costs |
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Target Costing |
Revenue - Desired Profit ________________ Target Total Cost |
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Cost Plus Pricing |
Revenue + Desired Profit ________________ Target Total Cost |
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When to outsource? |
If incremental costs of making exceed the cost |
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Capital Budgeting |
Making capital investment decisions |
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Payback Period |
Amount Invested / Expected cash inflow |
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ARR |
Average annual Operating Income - Annual Dep. Expense __________________________________ Initial Investment |
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Annual Dep. Expense |
Initial Cost - Residual Value _____________________________ Useful life |
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Present and Future Value of $1 |
Used for Lump Sum |
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Present and Future Value of Annuity |
Used for annuities |
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Invest if NPV is ... |
Positive |
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Don't invest if NPV is .... |
Negative |
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Equal amounts invested than NPV uses... |
PV of annuity |
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If unequal amounts invested than NPV uses.... |
PV of $1 for every year |
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NPV formula |
Total Present Value - Investment |
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Profitability Index |
Present Value _______________ Investment |
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IRR is ... |
The interest rate that makes NPV equal 0 |
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Annuity PV factor for IRR |
Investment Cost / Amount of annual net cash inflow |
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To find IRR ... |
Set Annuity factor equal to given info and find closest number on the annuity PV chart |
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Master Budget |
Sales Production DM, DL, MOH Operating Expenses Budgeted Income Statement Capital expenditures, Cash, Budgeted Balance Sheet |
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Operating Budget |
Sales Production DM, DL, MOH Operating Expenses Budgeted Income Statement |
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Financial Budget |
Capital expenditures, Cash Budget, Budgeted Balance Sheet |
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Production Budget |
Units needed for sale + Desired ending Inv = Total units needed - Beg. Inv = Units to produce |
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DM budget is like the ... |
Production Budget |
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MOH Budget |
Variable + Fixed = MOH |
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Budgeted Income Statement |
Same except uses budgeted info |
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Budgeted Income Statement Layout |
Sales - COGS Gross Profit -Operating Expenses -Interest Expense - Income tax expense ________________________ Net Income |
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Combined Cash Budget |
Beg. Cash +Cash collections -Cash Payments End. Cash before financing Financing: Borrow Repay Interest Payed ________________ Cash Balance |
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A/R in budgeted balance sheet |
Credit Sales + % of last month not collected - Allowance for uncollectible __________________________________ A/R, Net of Allowance |
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Prepaid tax and ins in budgeted balance sheet |
Semi annual payment in Jan - Jan cost ______________________________ Prepaid Property tax and ins |
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Dep. in budgeted balance sheet |
Last month + Jan. Dep. MOH + Jan. Dep. Operating ________________________ Accum. Dep. |
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Master Budget for Manufacturing |
Instead of DM, DL, and MOH it is COGS, Inv, and Purchases |
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Sales Revenue for Manufacturing |
COGS + Desired ending of next month Total Inv - Beg. Inv Purchases Inventory |
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Cost Center |
Managers responsible for cost |
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Revenue Center |
responsible for sales revenue |
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Profit Center |
responsible for costs and revenues |
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Investment Center |
Responsible for income and invested capital |
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Segment Margin |
OI generated by a profit or investment center before subtracting fixed costs |
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Return on Investment (ROI) |
OI / Total Assets |
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Sales Margin |
OI / Sales |
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Capital turnover |
Sales / Total Assets |
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Volume Variance |
Static Budget - Flexible Budget |
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Flexible Budget Variance |
Flexible Budget - Actual |
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Standard costs |
Cost of a single unit from DM, DL, and MOH |
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DM Price variance useful for |
Purchasing Supervisor |
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DM Quantity variance useful for |
Production Supervisor |
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DL rate variance |
Production and HR supervisors |
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DL efficiency |
Production supervisor |
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How to solve DMQV |
Actual Quantity Produced x Standard used per unit = Standard Quantity Allowed
(Actual Quantity Used - Standard Quantity Allowed) Standard Price
(AQU - SQA) SP |
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SQA |
AQP x Supu
Actual Quantity Produced x Standard used per unit |
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how to solve DLEV |
AQP x STpu = SHA
(AH - SHA) SHR
Actual Quantity produced x Standard Time per unit = Standard Hours Allowed
(Actual Hours - Standard Hours Allowed) Standard Hourly Rate |
