Managerial Accounting Ch1-3

Front 1

Differences between managerial and financial accounting:

users

Back 1

insiders vs. outsiders

Front 2

Differences between managerial and financial accounting:

info type

Back 2

economic and physical data vs. financial data

Front 3

Differences between managerial and financial accounting:

level of organization

Back 3

local info vs. global info

Front 4

Differences between managerial and financial accounting:

regulation

Back 4

none vs. SEC, FASB, and GAAP

Front 5

Differences between managerial and financial accounting:

Info. Char.

Back 5

Estimates vs. factual data

Front 6

Differences between managerial and financial accounting:

time horizon/reporting frequency

Back 6

continuous vs. past only

Front 7

product costs

Back 7

overhead
materials
labor

not expensed till good is sold

Front 8

period costs

Back 8

general operating costs
selling and administrative
interest
cost of income taxes

Front 9

material costs

Back 9

raw materials: inventory, CGS
direct: easily traced to raw materials

Front 10

labor costs

Back 10

selling and admin.
production wages (inventory then expensed) - direct labor

Front 11

indirect costs

Back 11

manufacturing overhead: indirect materials, labor, factory utilities, rent on facilities, depreciation on assets

Front 12

cost allocation

Back 12

TC/cost object

Front 13

If expense is misclassified as an asset, then:

Back 13

assets and NI are overstated, and income taxes are overpaid

Front 14

Stadards of ethical conduct

Back 14

competance
confidentiality
objectivity

Front 15

upstream costs

Back 15

before manufacturing process

Front 16

downstream costs

Back 16

transportation
advertising
sales commision
bad debts

Front 17

Total Quality Management

Back 17

Achieve zero defectects and achieve customer's satisfaction
Continuous improvement

Front 18

Inventory Holding Costs

Back 18

financing
warehouse space
supervision
theft
damage

Front 19

Just In Time

Back 19

Reduces inventory holding costs and increases customer satisfaction

Front 20

Fixed costs:
When activity increases:
Total:
per/unit

Back 20

constant
increases

Front 21

Fixed costs:
When activity decreases:
Total:
per/unit

Back 21

constant
decreases

Front 22

Variable costs:
When activity increases:
Total:
per/unit

Back 22

increased proportion
constant

Front 23

Variable costs:
When activity decreases:
Total:
per/unit

Back 23

decreased proportion
constant

Front 24

Operating leverage

Back 24

small change in revenue leads to BIG change in profit
once sales cover FC, each additional $ rep. pure profit

Front 25

Calculation for % Change:

Back 25

% change = (alternative measure - base measure)/base measure

Front 26

Shift from FC to VC:

Expect:
rev to increase
rev to decrease

Back 26

reduces risk and pot. for profit

use FC
use VC

Front 27

Contribution Margin

Magnitude of Op. Leverage

Back 27

amount available to cover FC and therefore provide profits

CM=Rev-VC

MofOL=CM/NI
X% change in rev will produce X%xOp. Leverage increase in profit

Front 28

Affect of change in activity level on:
FC
VC

Back 28

TC: constant
C/unit: changes in proportion

TC: changes inversely
C/unit: constant

Front 29

relevant range

Back 29

specific range of activity for FC

Front 30

High/Low method of est. FC and VC:

Back 30

1. assemble sales vol. and cost history
2. select high/low pts. in data set
3. det. est. VC/unit

VC/unit=change in TC/change in Vol

4. det est. TFC
FC=TC-VC

Front 31

scattergraph method

Back 31

draw visual fit line
slope: est. VC/unit
y-int: FC

Front 32

Cost-volume profit analysis

Back 32

changes in sales vol. are relevant to changes in sale price

Front 33

Break-even vol/units

Back 33

FC/CM per unit

Front 34

Sales vol/units

Back 34

FC+Desired profit/CM per unit

Front 35

Decrease in profit leads to:

Back 35

decrease in CM and increase in sales volume

Front 36

Target pricing

Back 36

det. market price at which the product will sell

Front 37

margin of safety

Back 37

cushion btwn budgeted sales and the break-even point
amount actual sales can fall before losses are incurred

MOS=Budgeted-BE/Budgeted

Front 38

prestige pricing

Back 38

pay more for a new product

Front 39

profit =

CM ratio =

Back 39

CM-FC

CM/sales
use to find BE in $=FC/CM ratio

Front 40

Equation Method

Back 40

selling price x # units = VC/unit x # units + FC + [desired profit]