ACG 2071 Exam 1 35 questions Breakdown by chapter Chapter 1 1 question 1 is a conceptual question Chapter 2 10 questions 3 are conceptual questions Chapter 3 12 questions 3 are conceptual questions Chapter 4 8 questions 4 are conceptual questions Chapter 7 4 questions 1 is a conceptual question Major topics covered Chapter 1 Users of accounting information Users who are w in the organization managers Internal Users External Users Users who are outside of the organization investors creditors Managerial accounting vs Financial accounting Internal users Non GAAP Divisional departmental reporting as needed Future Oriented Reports prepared as needed External users Complies w GAAP Company wide Reporting Historical Reports prepared the end of the accounting period Uses of managerial accounting information 1 Planning 2 Controlling Companies that need managerial accounting manufacturing companies service 3 Evaluating 4 Decision making firms merchandising companies non profit organizations Chapter 2 Cost behavior Variable costs costs that vary in total as the cost driver activity changes changes in direct proportion to changes in the cost driver activity increases by the same amount Ex ingredients supplies variable Fixed costs costs that remains constant does not change in total as the cost driver activity changes Ex rent salary straight line depreciation on office equipment advertising Step costs Cost that remains constant for a small range of activity but then changes abruptly once outside of the range of activity Ex buying a package of things minutes shipping billed in 100 lbd increments Mixed costs cost that has both a fixed component which remains constant a variable component which varies as the cost driver activity varies Ex telephone charges Variable Fixed Mixed Variable Fixed Mixed As the Cost Driver Level Increases As the Cost Driver Level Decreases Total Cost Increases No Change Increases Total Cost Decrease No Change Decrease Cost Per Unit No Change Decreases Decreases Cost Per Unit No Change Increase Increase Visual fit analysis placed through the data where the user thinks it fits the best eye Cost estimation cost functions Scattergraph visual fit method balling where the line should be drawn Is a very subjective method High low method Pick pts Based on the activity a axis Only uses 2 data pts Which ignores many others Equations Needed y mx b Cost Activity historical data available Regression analysis know conceptually wont have to calculate on the test Use statistical software in order to derive a cost function from all of the Best method Income statement formats Contribution Margin Format VS GAAP Format Sales Variable Cost Contribution Margin Fixed Cost Operating Income Sales COGS Gross Profit Selling Admin Expense Operating Income Ratio Formulas all found in per unit used for the below example Sales Ratio 100 COGS Ratio COGS Sales Price Shipping Ratio Shipping Cost Sales Price Total Variable Expense Ratio TotalVariable ExpenseCost CM Ratio CM Sales Price Sals Price Ex Chapter 3 Cost volume profit analysis Breakeven analysis Pt which revenues equal expenses income is equal to zero Either in units or in dollars Equation Sales Variable Expenses Expenses Operating come Op Inc set to zero Margin of safety Target operating income Equation Current Sales Breakeven Sales Equation Sales Variable Expenses Expenses Operating Income Set Op Inc to what you want to reach and solve equation Convert Net Income into Operating Income Net Income Target net income 1 Tax Rate before solving w regular equation What if analysis Changes in VC unit VC unit CM unit Breakeven pt VC unit CM unit Breakeven pt Changes in sales price unit Sales price unit in breakeven pt CM unit Sales price unit breakeven pt CM unit Changes in Fixed Expenses Fixed Cost breakeven pt Fixed Cost breakeven pt Doesn t change the CM all Multiproduct Cost Volume Profit CVP analysis Sales variable expenses sales variable expenses fixed expenses operating income CM CM FE op Inc Pay attention to sales mix b c sell more of 1 product than the other means times it by a greater than just 1x Will generally result in 2 diff CM for the equation Proportion of FC compared to VC is what affects operating leverage Change in operating income relative to a change in sales Equation CM Operating Income Operating leverage Pricing Cost Plus Pricing vs Target Costing Chapter 4 Cost classifications Sales COGS GM Cost plus pricing Known Known Known Known A markup is added to the cost of producing the product or providing the service so that the company can convert its operation costs earn a profit Marke up is often expressed as a of the cost Cost markup sales price Markeup sales price cost Cost Target costing Approach to pricing in which the company first does research to determine Company will then determine the max cost that can be incurred to produce the price that customers are willing to pay the product or provide the service at the market price Direct costs vs Indirect costs Cost that can be directly traced to the Costs that cannot be directly traced to the final product cost associated w final product materials to make the final product having a business Ex having a blender Ex cups ice fruit electricity Indirect Materials glue used to strengthen the bed frame joints staples use to secure upholstery fabric to the chair seats Indirect Labor the sawmill foreman s salary wages paid to the forklift operator in the raw materials warehouse Product costs vs Period costs Manufacturing cost incurred to manufacture a product Direct Materials materials that can be directly traced to the final product Ex wood sheetrock maple logs purchased cut in the sawmill foam used in stuffing sofa cushions silk brocade fabric used to upholster chairs Direct Labor wages paid to the workers who transform direct materials into a final product Ex assembly line workers construction workers wages paid to the woodworkers who assemble dresser drawers Manufacturing Overhead indirect manufacturing cost that cannot be easily Non manufacturing cost associated w the selling of products the administration of the business Selling Cost cost associated w the storage sale delivery of the final product Ex shipping product to a customer adverting a book sales force General Administrative cost all of the cost associated w the general management of the company Ex wages of security personnel at a best buy store sales commission to employees traced to the final product Ex plant manager
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