Podcast
Questions and Answers
What distinguishes managerial accounting from financial accounting?
What distinguishes managerial accounting from financial accounting?
- Managerial accounting is primarily concerned with historical data, whereas financial accounting projects future performance.
- Managerial accounting focuses on external reporting to investors, while financial accounting is for internal use.
- Managerial accounting is governed by strict accounting standards, unlike financial accounting.
- Managerial accounting provides flexibility for companies to tailor their approaches, while financial accounting adheres to standard rules. (correct)
In calculating the total product cost, which of the following elements are included?
In calculating the total product cost, which of the following elements are included?
- Materials, labor, and overhead (correct)
- Labor and overhead only
- Materials and labor only
- Materials and overhead only
Which of the following is an example of a period cost?
Which of the following is an example of a period cost?
- Factory rent
- Raw materials used in production
- Direct labor costs
- Manager salaries (correct)
What is the primary focus when using job-order costing for custom homes?
What is the primary focus when using job-order costing for custom homes?
Which of the following items would be included in work-in-process inventory?
Which of the following items would be included in work-in-process inventory?
What is the purpose of cost transfer between departments in a production process?
What is the purpose of cost transfer between departments in a production process?
How do machine hours relate to activity-based costing?
How do machine hours relate to activity-based costing?
What happens to total variable costs as production levels increase?
What happens to total variable costs as production levels increase?
What is a key characteristic of fixed costs?
What is a key characteristic of fixed costs?
What does achieving the breakeven point signify for a company?
What does achieving the breakeven point signify for a company?
In managerial accounting, what is the initial step for profit planning?
In managerial accounting, what is the initial step for profit planning?
What does the margin of safety indicate?
What does the margin of safety indicate?
What role does a budget play in financial decision-making?
What role does a budget play in financial decision-making?
Which of the following is a part of execution in the master budget overview?
Which of the following is a part of execution in the master budget overview?
Which of the following is typically part of the Operating Budget?
Which of the following is typically part of the Operating Budget?
If a company budgets sales of 50,000 in July, 48,000 in August and 51,000 in September, and desires ending inventory to be 40% of the next month's sales, what is the desired ending inventory in August?
If a company budgets sales of 50,000 in July, 48,000 in August and 51,000 in September, and desires ending inventory to be 40% of the next month's sales, what is the desired ending inventory in August?
What portion of Credit Sales are cash receipts in February, according to the graphic?
What portion of Credit Sales are cash receipts in February, according to the graphic?
A company anticipates cash receipts of $43,000 and cash disbursements of $32,000 in February. If the beginning cash balance is $12,000, what is the end cash balance?
A company anticipates cash receipts of $43,000 and cash disbursements of $32,000 in February. If the beginning cash balance is $12,000, what is the end cash balance?
What are costs directly tied to production?
What are costs directly tied to production?
How can managerial accounting enhance decision making?
How can managerial accounting enhance decision making?
In the Balanced Scorecard approach, which perspective evaluates efficiency and effectiveness?
In the Balanced Scorecard approach, which perspective evaluates efficiency and effectiveness?
How are costs handled when a department completes its part in a production process?
How are costs handled when a department completes its part in a production process?
What is analogous to fixed costs?
What is analogous to fixed costs?
If someone needed to sell eight cookies to break even but sold ten, what is the safety margin?
If someone needed to sell eight cookies to break even but sold ten, what is the safety margin?
In the Jellybean Metaphor, what is the purpose?
In the Jellybean Metaphor, what is the purpose?
Flashcards
Managerial Accounting
Managerial Accounting
Managerial accounting highlights critical information for better decision-making.
Important Info
Important Info
Focuses on identifying important information.
Custom approaches
Custom approaches
Involves custom approaches tailored to specific company needs.
No Product-Related Costs
No Product-Related Costs
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Materials
Materials
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Labor
Labor
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Overhead
Overhead
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Not Product-Related
Not Product-Related
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Manager Salaries
Manager Salaries
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Advertising
Advertising
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Track Costs
Track Costs
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Unique Builds
Unique Builds
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Materials in WIP
Materials in WIP
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Labor in WIP
Labor in WIP
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Overhead in WIP
Overhead in WIP
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Department No. 1
Department No. 1
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Next Department
Next Department
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Machine Hours
Machine Hours
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Electricity Usage
Electricity Usage
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Varies in Total
Varies in Total
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Constant/Fixed per Unit
Constant/Fixed per Unit
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Fixed in Total
Fixed in Total
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Budget Planning
Budget Planning
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Breakeven Point: Units
Breakeven Point: Units
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Breakeven Point: Profit
Breakeven Point: Profit
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Study Notes
- Managerial accounting highlights critical information for better decision-making
Detective Work
- Managerial accounting helps focus on important information like a magnifying glass
- Managerial accounting helps discover areas of success and improvement
- Managerial accounting improves decision making to better the business
The Balanced Scorecard Approach
- Financial Performance measures profitability and revenue growth
- Customer Satisfaction assesses how happy customers are
- Internal Processes evaluates efficiency and effectiveness
Flexibility
- Managerial accounting has no strict rules unlike financial accounting
- Managerial accounting is not governed by accounting standards
- Companies tailor managerial accounting to their specific needs
Total Product Cost
- The components of total product cost are materials, labor, and overhead
- Materials include costs of raw materials
- Labor includes expenses of workforce
- Overhead includes indirect costs of production
Period Costs
- Period costs are not product-related, so not directly tied to production
- Manager salaries and advertising are examples of period costs
Job-Order Costing
- Job-order costing is useful for custom homes
- Job-order costing tracks each house's expenses
- Job-order costing is useful for unique builds as every home is distinct
Work-In-Process Inventory
- Materials are added to inventory as used
- Labor time spent is accounted for
- Indirect costs are included in overhead calculations
Cost Transfer
- Department No 1 Completes its part and passes costs
- The next department receives costs for further processing
Activity-Based Costing
- Machine hours directly impact costs
- Electricity usage causes costs to rise with use
Variable Costs
- Variable costs are inextricably linked to production levels
- When the quantity of production increases, the total variable costs rise correspondingly
- The cost per unit typically remains constant, despite changes in total output
- Understanding variable costs is pivotal in pricing strategies and profitability analysis
- Variable costs directly affect the company's bottom line
- An analogy of this is buying ice cream, where total expenditure escalates with each additional scoop
Fixed Costs
- Fixed costs remain constant regardless of production output
- Rent, insurance, and straight-line depreciation of equipment are examples of fixed costs
- Fixed costs provide stability and a predictable financial outlay within budget plans
- This predictability is necessary for strategic forecasting
- This is similar to a car incurring a yearly maintenance fee which is constant whether the car is used or not
Breakeven Point
- A sale of 5000 units is usually imperative to achieve breakeven
- The sale covers both variable and fixed costs
- At the breakeven point the company makes neither profits nor incurs losses
- At this point, the company maintains a financial equilibrium
- The breakeven threshold is met when subsequent sales translate into profit
- Selling 50 cups of lemonade equates to recouping the costs of lemons and sugar in a scenario
Profit Planning
- Determining the number of units to sell that covers all costs is crucial
- Identifying the sales volume required to achieve the sought-after profit margin comes into play
- Calculate how many products to sell after covering all their costs to earn a specific profit
Safety Margin
- The safety margin delineates the extent to which sales can decline before losses are incurred
- The safety margin serves as a cushion against market volatility
- Companies like Maxie's ensure profitability even when sales underperform to a certain degree, with a safety margin
- Selling ten cookies instead of the eight needed to break even, makes two extra cookie surplus: a safety margin.
Budgets
- A budget orchestrates both income and expenditure, laying a foundation for financial decision-making
- Contrasting actual revenues and expenses against budgeted figures illuminates deviations and suggests corrective measures
- A useful analogy is guessing how many jellybeans are in a jar and comparing the guess to the actual number
- A budget is similar to guessing how much you need, then finding out how much you used
Master Budget
- The master budget includes research, planning and execution
- The master budget encompasses detailed analysis and groundwork to inform future financial directives
- It involves meticulous planning, synthesizing a plethora of smaller budgets into a unified financial vision
- Operationalizing the master budget involves executing each sub-budget with precision to achieve overarching objectives
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