242 FINAL

Y = a + bX (TC = F + V(X))

formula for the least-squares regression line

x

the activity that is the level of cost driver in the least-squares regression line formula?

beginning RM inv + purchases - ending RM inv

raw materials used in production formula

profit center

segment has control over both costs and revenues

gross amounts

when preparing a statement of cashflows both financing and investing activities are reported @ ____________

bill of materials

where the type and quantity of each type of direct material needed to complete 1 unit listed

Degree of Operating Leverage

- Contribution Margin / Net Operating Income - decreases as sales and profits rise - is not a constant - is greatest at sales levels near the BE point

vertical analysis

the relations among financial statement items at a given point in time

cost structure

the relative proportion of each type of cost in an organization

sales mix

the relative proportions in which a company's products are sold

marginal revenue

the revenue from selling one additional unit of product

financial leverage

the use of borrowed funds to increase the return on owners' equity

fixed costs + NI

total CM margin

DM used in production + DL + applied MOH

total manufacturing cost formula

total

total or per unit? total fixed cost remains the same even when the activity level changes

total

total or per unit? variable cost changes as activity level changes

per unit

total or per unit? variable costs remain the same over activity

flexible budget

- shows costs that should have been incurred at the actual level of activity - helps managers control costs - improve performance evaluation

R²

- the percentage of total variation in cost that is explained by activity - measure of goodness of fit

opportunity, sunk, differential costs

costs associated with decision making

committed fixed costs

costs that cannot be easily changed

working capital

current assets - current liabilities - operating liquidity

cost behavior

how individual costs react to changes in activity level

less

if additions to PPE are consistently ______ than depreciation the company is not investing enough to maintain noncurrent assets

accounts receivable turnover

sales/ average net AR

common fixed cost

supports the operations of more than one segment and they should not be used in evaluating a profit center

matching principle

the accrual concept that costs incurred to generate a revenue are expensed in the same time period the revenue is recognized

High-Low Method

- a method of separating a mixed cost into its fixed and variable elements by analyzing the change in cost between the high and low activity levels - only uses 2 data points - linear cost behavior

relevant information

- bearing on the future - differs among competing alternatives

average sale period

365 days / inventory turnover

current ratio

CA/CL

Beginning WIP + total manufacturing costs - ending WIP

COGM formula

sales volume, total fixed costs, mix of products sold, selling price, unit variable cost

CVP analysis focuses on how profits are affected by ...

RM used in production - indirect materials

DM used in production formula

gross margin percentage

Gross Margin / Sales

ROI

NI/Avg operating assets

EPS

NI/avg # of shares outstanding

job cost sheet

The document that records the materials, labor, and manufacturing overhead costs charged to a job

price-earnings ratio

The relationship between the market value per share and earnings per share of a stock

nonmanufacturing

___________________ costs are not included in job costs

cost object

any item for which cost data is desired

operating activities

any transaction not categorized as financing or investing - including activities that affect net income

investing activities

any transaction that involves acquiring or disposing of long-term assets such as PPE, long-term investments, loans to another entity or investments in other businesses

Financing Activities

any transaction that involves obtaining cash from lenders or owners and any transaction that involves repaying lenders or distributing earnings to owners

operating

interest is always an ______________ activity

P/E ratio

market price/ EPS

Y

the dependent var that measures total cost in the least-squares regression line formula?

revenue and spending variances

the difference between the actual revenue/ cost and the flexible budget revenue/ cost

Beginning FG + COGM - Ending FG

unadjusted COGS

investment center

control over profits and invested capital - ROI - RI

inventory turnover

cost of goods sold/average inventory

indirect labor

cost of personnel who do not work directly on the product

direct material

cost of raw material that is used to make, and can be conveniently traced, to the finished product

direct labor

cost of salaries, wages, and fringe benefits for personnel who work directly on the product

per unit

per unit or in total? fixed cost per unit goes down as activity level goes up

cost center

- segment has control over the incurrence of costs

make v buy

- should we outsource some activity - should we add or drop a service, product, or department?

DuPont Analysis

- (NI/Sales) x (Sales/ Avg Assets) x (Avg Assets / Avg Equity) - margin x asset turnover x equity multiplier

budget

- a tool to help you plan your financing activities - allow you to anticipate your cash needs and to negotiate your line of credit during a period when you can receive favorable terms

MOH other costs

- dep on PPE - property taxes - insurance - utilities

advantage of RI

- encourages managers to make profitable investments that may be rejected by managers using ROI - as long as RI pf project a positive amount project deemed attractive

contribution margin

- excess of revenue over variable costs - covers the company's fixed costs and provides the profit

financial accounting

- external users - regulated - comply with GAAP - total entity focus - financial measures - largely historical

least squares regression

- fits a line to data that minimizes variance from the line - calculates a line that minimizes the sum of te squared differences between the actual data points and the regression line

traceable fixed cost

- fixed cost that's incurred because of the existence of the segment and if the segment were eliminated it would go away - used in evaluating a profit center

manageral accounting

- internal users - unregulated - timeliness over precision - look at subunits - both financial and non-financial measures

Residual income

- measure investment center's performance - net operating income that an investment center earns above the minimum required return on its operating assets - NI - (avg operating assets*minimum required rate of return)

indirect method

- net income is reconciled to cash flow from operating activities - no supplemental schedule is required - used by 99% of companies

direct method

- net income is reconstructed on a cash basis - requires a reconciliation of net income to cash flow from operating activities - used by 1% of companies

purposes of managerial accounting

- provide information for decision making and planning - assist managers in directing and controlling operations - motivate managers/ employees to accomplish org's goals - measure performance against goals - assess competitive position

cost volume profit analysis

- relationship between sales volume, revenue, expenses, and profit - means that management may use to estimate profit for any given volume - allows for comparison of management's strategies

costs that cannot be controlled by the segment manager

- traceable fixed costs - segment margin - common fixed costs

Average collection period

365/accounts receivable turnover

activity variances

difference between planning budget revenues and expenses and flexible budget revenues and expenses

b

estimated coefficient of variable cost per unit of activity, the slope of the cost line in the least-squares regression line formula?

indirect materials

materials used to support the production process

discretionary fixed costs

may be altered in the short term by current managerial decisions

average

unit product cost is an _____________, not an incremental cost

PPE, A/D, land, N/R

what are the accounts for investment activities

segregation of duties, performance evaluations, required absences

what are the common features of internal controls?

N/P, B/P, CS, RE

what are the financing activities accounts on the stmt of cashflows?

indirect labor, indirect materials, other costs

what are the manufacturing overhead costs?

selling and admin costs

what are the period costs

DM, DL, MOH

what are the product costs?

a

what is the intercept term that is the estimate of fixed costs in the least-squares regression line formula?

MOH Dr COGS Cr

what's the journal entry for overapplied overhead?

COGS Dr MOH Cr

whats the journal entry for underapplied overhead?

Beginning FG inv + COGM - ending FG inv

whats the unadjusted COGS formula?

subsidiary ledger

when all of a company's job cost sheets are viewed collectively