Accounting Jargon
The practice of identifying, measuring, analyzing, interpreting, and communicating financial information to management of key decision making
What is: Managerial Accounting
How do you calculate product margins?
What is: Product Margin = Sales - Direct Costs - Overhead
What is the first budget completed in a master budgeting process?
What is: Sales Budget
Spending Variances are broken down into Price and Quantity Variances. However, they are not recorded together. Why are Price and Quantity Variances Separate?
What is: They are separate because they occur at different times, and under different managers.
What is the biggest criticism in using Return on Investment (ROI)?
What is: ROI may reject profitable investment opportunities.
The practice of creating financial statements within an organization to show to the organization’s financial performance to outsiders.
What is: Financial Accounting
Manufacturing companies typically combine their activities into five classifications (activity levels). What are the titles of all Five Activity Levels?
What is: “Unit-Level Activity,” “Batch-Level Activity,” “Product line-level Activity,” “Organization-Sustaining Activity,” and “Customer-level Activity.”
In a budgeted balance sheet, what rows should yield the same final number?
What are: Total assets, total liabilities & stockholders equity
When Calculating the Direct Materials Quantity Variance, why do we multiply quantity by Standard Price?
What is: We do not want price changes to affect the variances, standard price is a fixed amount.
Victoria’s Landscaping company reports having a Net Operating Income of $45,000, an Average Operating Assets of $500,000, Sales of $600,000, and Operating Expenses of $470,000. What is Victoria’s Landscaping’s Turnover?
What is: 1.2
Turnover = Sales / Average Operating Assets = $600,000 / $500,000 = 1.2
Adding wait time to throughput time will get you this cycle.
What is: The Delivery Cycle Time
What is one reason why companies do not usually use activity based costing for external reporting, and only use it for internal reporting?
What is: (four potential choices)
External reports are less detailed
Difficult to make changes to companies accounting system
ABC does not conform to GAAP
Allocation is a subjective process
In the direct labor budget, labor hours required are multiplied by what to find total direct labor costs?
What is: Hourly wage rate
Edward & Brothers Inc. has the direct standard for their Flannel jackets: 0.5 lbs of wool per flannel at $8.00 per lb. Last month Edward & Brothers Inc. purchased and used 1,125 lbs of wool to make 2,500 flannel jackets. The wool cost a total of $10,000. What is Edward and Brothers Inc. Actual Price that they will use to compute their Direct Material Quantity Variance.
What is: $8.89/lb
AP = Total Cost/Quantity used = $10,000 / 1,125 = $8.89/lb
What is one disadvantage of decentralized organizations is?
What is: Lower level managers may make decisions without seeing the big picture OR Lower level managers objectives may not be those of the organization OR May be a lack of coordination among autonomous managers OR May be difficult to spread innovative ideas in the organization
Benchmarks or norms for measuring performance are known as?
What are: Standards
The total cost of customer orders for Sestito Industries is $5,520,000, and the total activity for customer orders is 50,000 orders. What is the activity rate for Sestito Industries customer orders cost pool?
What is: Activity Rate = total cost / total activity, Activity rate = $5,520,000 / 50,000 orders = $1,104 per order.
These variances occur when actual revenue is greater than budgeted revenue.
What are: Favorable variances
Bomber Inc. has the following direct labor standard for its jacket production: 2.4 standard hours per jacket at $12.00 per hour. Last month, student employees actually worked 1,500 hours at a total labor cost of $30,000 to make 4,000 jackets. What is the Direct Labor Rate Variance of Bomber Inc.?
What is: 12,000 Unfavorable
DLRV = (AR-SR) * AH. SR = $12/hr, AR = $30,000/1,500 hours = $20/hr, AH = 1,500 hrs. DLRV = ($20/hr - $12/hr) * 1,500 hrs = $ 12,000 unfavorable, because the actual rate is greater than the standard rate.
The investment center has control over what?
What are: costs, revenues and investments
This cycle is known when you divide "Value added time" by "Manufacturing cycle time"
What is: Manufacturing Cycle Efficiency
Sestito Industries finished the fiscal period with $1,000,000 in sales. Their cost of goods sold included $100,000 in Direct Materials, $250,000 in Direct Labor and $150,000 in Manufacturing overhead. If Selling and Administrative expenses were $300,000, is Sestito Industries operation at a loss or a profit?
What is: Operating at a Profit
$1,000,000 - [$100,000 + 250,000 + 150,000] - $300,000 = $200,000. A positive NOI yields a profit to Sestito Industries.
In Fallon Corporation, the collection pattern is: 60% collected in the month of sale and 30% collected in the following month. The December total sales were $40,000. What are January sales collections if Total Sales in January were $50,000?
What is: $42,000
Fallon Corporation has the following variable manufacturing overhead for their model airplanes: 4.0 standard hours at $10.00 per hour. The employees actually worked 2,000 labor hours to make 4,000 model airplanes. Actual variable manufacturing overhead for the month was $30,000. What is the VMRV?
What is: $10,000 Unfavorable
VMRV=(AR-SR)*AH. AR=$15/hr,($30,000/2,000) SR=$10/hr, AH=2,000 hrs
Edward and Brothers Inc. has average operating assets of $500,000 and is required to earn a return on 30% on these assets. In the current period, the division earns $200,000. What is the residual income?
What is: $50,000 RI
$500,000*.30=$150,000
$200,000-$150,000=$50,000