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40 Cards in this Set
- Front
- Back
Differences between managerial and financial accounting:
users |
insiders vs. outsiders
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Differences between managerial and financial accounting:
info type |
economic and physical data vs. financial data
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Differences between managerial and financial accounting:
level of organization |
local info vs. global info
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Differences between managerial and financial accounting:
regulation |
none vs. SEC, FASB, and GAAP
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Differences between managerial and financial accounting:
Info. Char. |
Estimates vs. factual data
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Differences between managerial and financial accounting:
time horizon/reporting frequency |
continuous vs. past only
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product costs
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overhead
materials labor not expensed till good is sold |
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period costs
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general operating costs
selling and administrative interest cost of income taxes |
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material costs
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raw materials: inventory, CGS
direct: easily traced to raw materials |
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labor costs
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selling and admin.
production wages (inventory then expensed) - direct labor |
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indirect costs
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manufacturing overhead: indirect materials, labor, factory utilities, rent on facilities, depreciation on assets
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cost allocation
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TC/cost object
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If expense is misclassified as an asset, then:
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assets and NI are overstated, and income taxes are overpaid
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Stadards of ethical conduct
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competance
confidentiality objectivity |
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upstream costs
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before manufacturing process
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downstream costs
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transportation
advertising sales commision bad debts |
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Total Quality Management
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Achieve zero defectects and achieve customer's satisfaction
Continuous improvement |
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Inventory Holding Costs
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financing
warehouse space supervision theft damage |
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Just In Time
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Reduces inventory holding costs and increases customer satisfaction
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Fixed costs:
When activity increases: Total: per/unit |
constant
increases |
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Fixed costs:
When activity decreases: Total: per/unit |
constant
decreases |
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Variable costs:
When activity increases: Total: per/unit |
increased proportion
constant |
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Variable costs:
When activity decreases: Total: per/unit |
decreased proportion
constant |
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Operating leverage
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small change in revenue leads to BIG change in profit
once sales cover FC, each additional $ rep. pure profit |
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Calculation for % Change:
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% change = (alternative measure - base measure)/base measure
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Shift from FC to VC:
Expect: rev to increase rev to decrease |
reduces risk and pot. for profit
use FC use VC |
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Contribution Margin
Magnitude of Op. Leverage |
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 |
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Affect of change in activity level on:
FC VC |
TC: constant
C/unit: changes in proportion TC: changes inversely C/unit: constant |
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relevant range
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specific range of activity for FC
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High/Low method of est. FC and VC:
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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 |
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scattergraph method
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draw visual fit line
slope: est. VC/unit y-int: FC |
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Cost-volume profit analysis
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changes in sales vol. are relevant to changes in sale price
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Break-even vol/units
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FC/CM per unit
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Sales vol/units
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FC+Desired profit/CM per unit
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Decrease in profit leads to:
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decrease in CM and increase in sales volume
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Target pricing
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det. market price at which the product will sell
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margin of safety
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cushion btwn budgeted sales and the break-even point
amount actual sales can fall before losses are incurred MOS=Budgeted-BE/Budgeted |
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prestige pricing
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pay more for a new product
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profit =
CM ratio = |
CM-FC
CM/sales use to find BE in $=FC/CM ratio |
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Equation Method
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selling price x # units = VC/unit x # units + FC + [desired profit]
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