Accounting - Module 9 - Eug

Front 1

What are the characteristics of Financial and Management Accounting

Back 1

1) Accouting is a service function and not an end in itself
2) Accounting deals with economic information and avoids occuerences of events or happenigs which cannot be quantified (management AC is not really worried about translating these quantities into money terms)
3) Accounting is a communication device

Front 2

Whats the difference between management accounting and financial accounting

Back 2

financial accounting reports on management
management accounting reports for management

Front 3

What does a manager do

Back 3

1) Plans and Coordinates
2) Directs and controls

Front 4

What does a manager do in planning role

Back 4

1) Develops objectives for his function
2) Considers best way for these objectives to be reached
3) works out costs and revenues associated with each alternative
4) Selects favorite alternative and commences operations

Front 5

What does a manager do in controlling role

Back 5

1) Checks actual performance against planned
2) takes remedial steps to resolve problems

Front 6

Under what headings can we compare MA and FA

Back 6

1) Structure
2) Rules
3) Compulsory
4) Money Terms
5) Whole or parts
6) Audit
5) Time Span

Front 7

Whats the difference between MA and FA under the heading "Structure"

Back 7

MA - No formal structure
FA - structured around accounting equation

Front 8

Whats the difference between MA and FA under the heading "Rules"

Back 8

MA - No externally imposed rules
FA - uses the GAAP

Front 9

Whats the difference between MA and FA under the heading "Compulsory"

Back 9

MA - No, but companies need to be able to understand there internal systems
FA - companies required by law to produce external accounts

Front 10

Whats the difference between MA and FA under the heading "Money Terms"

Back 10

MA - can use money but not exclusively (labor hours etc)
FA - exclusively in money terms

Front 11

Whats the difference between MA and FA under the heading "Time Span"

Back 11

MA- information tends to be future orientated
FA - records and reports past events based on GAAP

Front 12

Whats the difference between MA and FA under the heading "Whole or parts"

Back 12

MA- is fragmented by nature, depends on what management need
FA- reports on the whole company

Front 13

Whats the difference between MA and FA under the heading "Audit"

Back 13

MA- No, but external auditors may what to test internal controls by examining the accounting system
FA- Yes, companies must produce accounts and are required to have them audited

Front 14

Why are costs so important

Back 14

costs are the fundamental control mechanism in a management information system

Front 15

What must you always doing when talking about costs

Back 15

Costs should always be accompanied by its adjective...or it is meaning less

Fixed costs
Variable costs
semi-variable
etc

Front 16

What are prime costs of a unit

Back 16

Direct Materials + Direct Labor

Front 17

What are manufacturing costs of a unit

Back 17

Prime costs + manufacturing overheads

Front 18

What is the total costs of a unit

Back 18

Prime costs + manufacturing overheads + non-manufacturing overheads

Front 19

What are manufacturing overheads

Back 19

depreciation of machinery, supervisors wages, energy costs etc

Front 20

What are non-manufacturing overheads

Back 20

dep of office equipment, computers office staff, selling and admin etc

Front 21

define variable cost

Back 21

varies directly with volume of production

Front 22

Is labor a variable cost

Back 22

in short term no, in long term yes because you can decide to lay people off

Front 23

What are fixed costs

Back 23

they do not vary with level of output

Front 24

When do fixed cost become variable in nature

Back 24

When you unitize them

Front 25

What are direct costs

Back 25

cost related directly to the production of the item (materials, labor)

Front 26

What are indirect cost

Back 26

manufacturing and non-manufacturing overhead

Front 27

What are traceable and common cost

Back 27

Traceable costs can be related directly to the production of the item
Common costs are indirect costs which is incurred by the business to support all production

Front 28

What are standard costs

Back 28

cost which are budgeted, based on benchmarks and recent experience

Front 29

What are actual costs

Back 29

are the cost actual incurred and are measured period to period (variance between standard and actual needs explanation)

Front 30

Define break-even point

Back 30

It the point where if the business sold all its units made, total costs (fixed and variable) would equal revenue

Front 31

Define margin of safety

Back 31

the difference between the break-even point and the actual output achieved, if greater then break-even point

Front 32

Define Profit/Volume Ratio

Back 32

The P/V ratio indicated the amount of profit available to cover fixed costs

i.e if P/V ratio = 0.4 then for every $1 made 0.40 can be used to cover the fixed costs

Front 33

How is P/V ratio calculated

Back 33

P/V = Sales price - variable costs/sales price

Front 34

Define contribution margin

Back 34

Contribution margin = Sales revenue - variable costs

Front 35

What is one of the most important things to look out for in A/C exam

Back 35

Total costs and unit costs.
Fixed costs will be based on an allocation key

Front 36

How do you calculate the break-even point

Back 36

Fixed costs/contribution margin

Front 37

If you need a certain level of profit how would you calculate sale required

Back 37

Fixed costs + target profit required/contribution margin

Front 38

What are the assumption underpinning cost-volume-profit analysis

Back 38

1) All cost can be identified as variable and fixed
2) sale price per unit remain unchanged
3) Sales mix is held precisely as budgeted
4) All production is sold