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*