Exam 1
Financial vs Management Accounting: Uses all available data to focus on future performance.
Managerial
Segments: When should a segment be dropped?
They have negative segment margin
Which budgeting approach has the advantage of reducing the "Super-Star" syndrome?
Top-down approach
What is an advantage of decentralization?
Timely decisions
Top management can focus on overall corporate strategy
Empowers employees and leads to job satisfaction
Lower-level managers gain experience in decision-making
Direct vs Indirect: A cost that can be traced back to a specific cost object.
Direct Cost
Capital Budgeting: To calculate this metric you have to determine an expected value for the project.
Sensitivity analysis
If the purchasing manager bought less expensive raw materials of lower-than-average quality, what variances would this create?
Favorable materials price variance and unfavorable materials quantity variance.
Company performance measures use...
both financial and non-financial indicators.
Misc: If one more unit of our product s sold, the amount of the change to net operating income will be?
The unit contribution margin of the product (remember fixed costs do NOT change if we sell another unit)
Capacity: When you have a constrained resource, what metric should you focus on when deciding which products to make first?
Contribution margin per one of the constrained resource or contribution margin per one of the constraint.
The material spending variance is $550 F and the material quantity variance is $600 U. The actual amount spent on materials was $37,570. What amount appears in the as-if budget.
$38,720
Mat spending var = Mat Qty Var + Mat Price Var
$550F = $600U + X
Mat price var = $1,150F
As-if = 37,570+1,150F= 38,720
What is a disadvantage for using ROI as a performance indicator?
Can foster underinvestment
Costs: These are used to separate mixed costs out of given data.
High-Low analysis: Used when there is small amounts of data
Regression analysis: Used when there is large amounts of data
Misc: When NPV is positive, will IRR be higher or lower than the cost of capital?
Higher
If the flex budget contribution margin is $27,000 and the master budget contribution margin is $30,000, what is the total activity variance (or sales volume variance)?
$3000 unfavorable
Master-Flex= 30,000 - 27,000
What is a disadvantage of using residual income as a performance indicator?
It favors large divisions.
Cost-Volume-Profit: If fixed costs are $15,000 and variable costs are $4/unit, what are the break even units if each unit sells for $10?
2,500 units
NPV: Disadvantage of NPV method.
Can not compare projects with different initial investments.
A company provides the following info:
Material price variance: 800F, Material spending variance: 250F
Budgeted material/unit: 1.5 ft, Budgeted material price: $6/ft
Actual units produced: 100, Budgeted units produced: 120
What is the material quantity variance?
$550 U
SQA: 100units*1.5ft = 150ft*$6=$900
Mat Spending Var = Mat Qty Var + Mat Price Var
250F = X + 800F
Mat Qty Var = 550U
An effective performance evaluation will do what?
Reward behavior that benefits the company and will include multiple performance measures