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Ch 1 - Accounting for Decision Making
Ch 2 - Identifying and Estimating Costs and Benefits
Ch 3 Cost Flows and Cost Terminology
Ch 4 - Techniques for Estimating Fixed and Variable Costs
Ch 5 - Cost Volume Profit Analysis
100
This branch of accounting serves decision-makers inside the firm.
What is Managerial Accounting?
100
A cost or a benefit is ______________ (for a specific decision situation) if it differs across decision options
What is relevant?
100
These costs are related to getting products or services ready for sale (e.g., materials and labor used in production, depreciation of production equipment, rent on factory building)
What are product costs?
100
This type of statement separates fixed costs from variable costs
What is a contribution margin income statement?
100
This type of analysis summarizes the relation between profit and sales volume (#units) or sales revenue (in $) in a single equation
What is CVP
200
This branch of accounting must follow specific standards such as GAAP and FASB
What is financial accounting?
200
This is a term that refers to costs that have been incurred in the past
What are sunk costs?
200
____________ costs are expensed in the period in which they were incurred (not flown through inventory accounts)
What are period costs?
200
These are the three methods for estimating fixed costs and unit variable costs.
What are: 1. Account Classification 2. High-Low Method 3. Regression Analysis
200
This is the formula for the cost-volume-profit relation (main version or version 1)
What is Profit = unit CM × Volume – FC
300
The value of of what you give up by making a decision (i.e., the value of the best other option)
What is opportunity cost?
300
In the ___________ term, capacity resources are fixed and non-controllable
What is short?
300
This is the formula known as the inventory equation for a merchandising firm
What is cost of beginning inventory + + cost of goods purchased during the period – – cost of ending inventory
300
This is the formula for calculating the unit variable cost using the high low method
What is: (TC high - TC low) / (Volume high - Volume low)
300
This is the formula when sales volume at which profit=0 (i.e., you break even)
What is: breakeven volume = FC / unit CM
400
This formula, Benefits - Costs, is known as
What is Value?
400
FC + unit VC × volume is the formula to calculate this.
What is total cost?
400
Wallmart is a small retailer. Its beginning inventory in 2009 was $15,000. It purchased $60,000 worth of merchandise in 2009. Its ending inventory for 2009 was $25,000. Its sales revenue for 2009 was $80,000. _________ is the amount of the COGS.
What is 50,000
400
Your firm produces between 1500-3000 units per month. ?You’ve estimated: Fixed costs = $25,000 Unit variable costs = $12 The total cost of producing 200,000 units per month?
What is not enough information. 200,000 is outside the relevant range.
400
These are two common measures for evaluating operating risks
What are margin of safety and operating leverage
500
You’re considering several part-time jobs for the summer: job A: $250 salary job B: $50 salary + $250 tips job C: $350 salary, but spend $70 on transportation Which option should you choose?
What is job B?
500
Variable costs per unit are as follows: Raw materials $2.15 Direct labor $1.45 Fixed costs are $5,000 per month If the company produces 4,000 units in the month of March their total costs will be: A. $14,400 B. $19,400 C. $13,600 D. $18,000
What is B? TC = FC + Unit VC * Volume TC = 5,000 + [ (2.15+1.45) * 4000 ] = 5,000 + 14400 = 19,400
500
This is the formula for cost of materials used
= cost of beginning inventory of materials + + purchases of materials – – cost of ending inventory of materials
500
Joe the Plumber recently opened a plumbing business. His fixed costs are $500 per month. During the first month, the company had 100 service calls at a price of $100 per call. The unit variable costs are $20 per call. Joe expects 120 service calls for next month (120 is within the relevant range). Compute expected profit for next month.
What is 9,100 (120 * 100) = 12,000 (120 * 20) = 2,400 CM = 9,600 FC = 500 NI = 9,100
500
If selling price per unit and unit variable cost increase by 5% and fixed cost remain the same, indicate if the following increase or decrease: 1. CM/ Unit 2. BE units 3. Total profit
1. Unit CM: increases 2. BE units: decreases (FC / unit CM; because unit CM increases while FC does not change) 3. Total profit: increases (because unit CM increases while FC remain unchanged)