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GSU ACCT 2102 - Managerial Accounting

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Acct 2102 Midterm 1 Study Guide Fall 2019 Chapter 1 1 Define Managerial Accounting and understand characteristics Managerial accounting financial and nonfinancial data from operations is processed by decision makers leading to a decision and an action Characteristics more internal focus less rules than GAAP focus on operating regiments focus on futures emphasis on timelines 2 List and understand the responsibilities and four general activities of managerial accountants Planning Setting strategic and operational goals and objectives translating these into specific activities and allocating resources for their achievement Who upper and middle managers When strategic annually with a 5 to 10 year horizon operational monthly quarterly or annually Controlling monitoring day to day operations exerting managerial influence on operations to conform to plans and taking corrective action as needed Who managers and line workers When in real time hourly daily weekly Evaluating comparing actual results to planned results assessing individual performance and taking corrective action as needed Who managers When weekly monthly quarterly or annually Decision making using information to choose the best alternative from available options made in pursuit of a particular goal or objective Who managers and line workers When as needed 3 Understand objectives and methodology of just in time inventory management Keeping the absolute minimum amount of inventory on hand but enough so that company does not run out 4 Define the goals steps and characteristics of the supply chain Characteristics A network of trading partners customers suppliers that takes raw material to intermediate goods final products then customer delivery Steps plan source make deliver Goals Get the right products to the right location in the right quantities at the right time at the right cost Chapter 2 5 Understand the definitions and applications of fixed variable mixed and step costs Variable Cost cost per unit remains constant with changes in volume but total cost varies proportionately with changes in volume Ex hotel chains buying soap bars each soap bar is 1 but if they buy 10 their total cost is 10 Fixed Cost total cost remains constant cost per unit decreases Ex 3 roommates splitting 900 rent total price stays the same but price per person unit goes down or up depending on how many split the overall price Types discretionary short term Committed long term Step Variable Cost cost remains fixed in total over small range of volume or activity Ex 10 000 paid employee per 30 students Any amount of students over 30 results in hiring more employees by range of 30 students Mixed Costs cost contains both fixed variable components total and unit costs vary with change in volume Ex 200 room rental fee plus 10 per person for meal fixed room rental fee variable for meal per person if the cost increases with increased activity level changes use compute the cost per unit total cost activity level If the cost per unit stays constant to the per unit amount variable If the cost per unit decreases with unit increase mixed If the cost decreases with increased activity level its either mixed or fixed Use the total cost formula cost per unit activity level If the total cost is the same fixed since cost per unit decreases with fixed cost If cost per unit decreases as the activity level increases fixed total cost increases as the activity level increases variable mixed 6 Given income statement information calculate total variable costs Activity X cost total cost 7 Use the high low method to calculate both variable fixed costs and total costs Step 1 find highest lowest points of activity and NOT amount Step 2 calculate variable cost per unit or m by taking highest lowest points and doing Step 3 calculate fixed cost or b by using either the highest point or the lowest point and plugging it in with variable cost to the equation Variable cost per unit X of units fixed cost total cost Step 4 complete the cost equation by plugging in the m and b values you solved for to calculate for total costs simply plug in values into the y mx b equation and solve for y 8 Understand and calculate contribution margin and contribution margin ratio Contribution margin revenue left over to cover the fixed expenses and provide profit after variable expenses have been covered sales revenue total variable expenses Contribution margin ratio the sales amount in percent form that can be used to pay off fixed costs contribution margin sales revenue 100 9 Understand and calculate contribution margin and operating income given sales variable costs and fixed costs Sales revenue variable expenses costs contribution margin fixed expenses costs operating income 10 Define and identify fixed vs variable costs Fixed A cost that does not change in total with changes in activity but per unit cost varies indirectly with changes in activity Ex salaries expense utilities expense rent expense insurance expense Variable costs that stay the same per unit but change depending on volume Ex shipping per unit commissions per unit cost of goods sold 11 Understand and compute the total cost equation y mx b m the variable cost per unit x the level of activity such as number of units b total fixed cost and y total cost 12 Understand the relationship between sales price sales volume contribution margin and operating profit Selling price and sales revenue are interchangeable Contribution margin sales revenue total variable expenses OR selling price per unit variable cost per unit Operating profit and operating income is the same thing Operating income total contribution margin total fixed expenses OR cm per unit X units sold fixed expense 13 Given points on a scattergraph calculate variable cost per unit Approximate the best line through the points on the scattergraph and wherever the line intersects the y line is your b or fixed cost Use the point the line lands on variable cost and do y2 y1 x2 x1 to solve for m or variable cost per unit Finally plug in m b into the equation and use one of your points on the scattergraph to double check your m b values Variable cost per unit X of units fixed cost total cost 14 Understand the differences between discretionary and committed fixed costs Discretionary are fixed costs that can be changed over the short run Committed cannot be changed over the short run 15 Understand what happens to total and unit costs when activity level changes Depending on the type of cost


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