Managerial Accounting Final
What is included in (average operating assets)?
Cash, prepaid expenses, accounts receivable, inventory, and fixed assets (refers to the normal amount of those assets needed to conduct the ongoing operations of a business)
Net Present Value Equation
Initial Investment -
How do you calculate (average operating assets)?
Average operating assets = Residual Income / (ROI - Minimum Required Rate of Return)
How do you calculate margin?
Margin = Net operating Income/ Total sales
How do you find (net operating income)?
NOI = Sales revenue - cost of goods sold - operating expenses (such as selling and administrative expenses, fixed expenses, and variable expenses.)
how to find annual cash inflows
Net Income + Depreciation
How do you calculate (residual Income)?
RI = Net operating income − (Average operating assets × Minimum required rate of return)
How do you calculate turnover?
Sales / average operating assets
How to calculate scrap value
Total cost of asset - depreciation
(T/F) A future cost that does not vary among alternatives under consideration is irrelevant.
True
(T/F) Eliminating nonproductive time is particularly important in a bottleneck operation.
True
How to find payback period
initial investment/Annual cash inflows
What is Net operating income (NOI)?
All revenue from the property minus all reasonably necessary operating expenses.
(T/F) Sunk costs are costs that have proven to be unproductive.
False
PV of annuity factor
1-(1+R)^-n / r
How do you calculate ROI? (2 ways)
1. ROI = Margin x Turnover 2. ROI = Net operating income ÷ Average operating assets
(T/F) An existing asset should not be replaced until its original cost has been fully recovered.
False
(T/F) Consistency demands that a cost that is relevant in one decision be regarded as relevant in other decisions as well.
False
(T/F) In a special order situation, any fixed cost associated with the order would be irrelevant.
False
How do you find relevant cost per unit?
price - variable costs
