ACC122 Final Exam
Unit CM
Once the break-even point has been reached, net operating income will increase by the amount of the _____ for each additional unit sold
Planning Budget
Prepared for a single, planned level of activity
Differential Revenue
Future revenue that differs between any two alternatives
Avoidable FC
Has ALTERNATIVE USE Salary of line manager, Advertising (direct), Rent (factory space)
Differential Analysis
1. Define the alternatives being considered 2. Relevant costs and relevant benefits should be considered when making decisions; irrelevant costs and benefits should be disregarded when making decisions 3. The key to effective decision making is differential analysis Focusing on the future costs and benefits that differ between the alternatives
Performance Report
Combines the activity variances and revenue & spending variances
Ending Finished Goods Budget
A budget showing the dollar amount of unsold finished goods inventory that will appear on the ending balance sheet
Cash Budget
A budget that estimates cash inflows and outflows during a particular period like a month or a quarter
Direct Labor Budget
A detailed plan that shows the direct labor-hours required to fulfill the production budget
Sales Budget
A detailed schedule showing expected sales expressed in both dollars and units
Budget
A detailed, quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period
Differential Cost
A future cost that differs between any two alternatives
Special Order
A one time order that is not considered a part of the company's normal ongoing business
Master Budget
A presentation of an organization's operational and financial budgets that represents the firm's overall plan of action for a specified time period
Participative Budget
AKA Self-Imposed Budget Prepared with the full cooperation and participation of managers at all levels
Incremental Cost
An increase in cost between two alternatives
Activity Variance
Arises solely due to the difference in actual level of activity and the level of activity included in the planning budget
Standards
Benchmarks or norms for measuring performance. ie. DM standards, DL standards, VMO standards
Total Revenue equals Total Costs
Break-even point is the level of sales at which
Avoidable Cost
Cost that can be eliminated by choosing one alternative over another
Manufacturing OH Budget
Lists all costs of production other than direct materials and direct labor
Estimated COGS
Net Sales - Estimated Gross Profit
Cash Collection Budget
Records the actual movement of cash that goes in. We need to take into account the dates when the actual cash was coming in not when it was recorded. Cash collections budgets is based off of Sales Revenue Budget just that it gets adjusted to take into account when CREDIT sales are actually taken in.
Revenue and Spending Variances
Shows variances due to managerial efficiency
Flexible Budget
Shows what costs should be for the actual level of activity
Actual Price
The amount actually paid for the input used (AP)
Actual Quantity
The amount of direct materials, direct labor, and variable manufacturing overhead actually used (AQ)
Standard Price
The amount that should have been paid for the input period (SP)
Quantity Variance
The difference between how much of an input was actually used and how much should have been used for the actual level of output, multiplied by the standard price/rate of the input (AQ-SQ) x SP
Price Variance
The difference between the actual price paid for the input and the standard price, multiplied by the actual amount of the input purchased (AP-SP) x AQ
Standard Quantity
The quantity allowed for the actual output of the period (SQ)
Cost-Volume Profit Analysis
The study of the effects of changes in costs and volume on a company's profits. 1. Selling price is constant 2. Price of a product/service will not change as volume changes 3. Costs are linear and can be accurately divided into variable and fixed components 4. The VCs are constant per unit and FCs are constant in total over the relevant range 5. In multiproduct companies, the mix of products sold remains constant
Graph Method
To draw total cost line: When units=0, total costs=total fixed costs When units=100, total costs=total VC+total FC To draw sales revenue line: When units=0, total sales=0 When units=100, total sales=100xprice BE point is where the total cost line meets sales revenue line
Purchasing Manager
Who is responsible for the Materials Price Variance?
Production Manager
Who is responsible for the Materials Quantity and Labor Variance? *Note: the standard price is used to compute the quantity variance so that the production manager is not held responsible for the purchasing manager's performance*