Managerial Accounting - Final Exam

FIFO method of process costing

method in which equivalent units and unit costs relate only to work done during the current period I cannot say it better than this link: *https://courses.lumenlearning.com/sac-managacct/chapter/equivalent-units-and-cost-per-equivalent-units-fifo-method/*

Homework 1

*1.1.1 - Predetermined OH Rate* Predetermined OH Rate = Est'd OH / Est'd Allocation Base --- *1.1.2 - Applied OH* *Applied OH, or Overhead Applied to a Particular Job = Predetermined OH Rate x Actual Amt Allocation Base Incurred by the Job* --- *1.1.3a - TMC* *TMC = DM used + DL incurred + MOH applied to WIP, not actual MOH* --- *1.1.3b - Unit Product Cost* TMC = DM Used for Both Depts + DL Used for Both Depts + MOH Applied to WIP for both depts, aka Predetermined OH Rate x Actual Allocation Base Then divided the TMC by # units contained --- *1.2.a - Plantwide Predetermined OH Rate" Fill in this blank: The Predetermined OH Rate = __% of DL cost Plantwide Predet OH Rate = Plantwide Budgeted TMOH / Plantwide Budgeted Allocation Base, here, DLH = 140% for this q --- *1.2.1b - MOH Applied to a Job* "Using the plantwide approach, determine the amt of MOH cost applied to the Koopers Job" = 140% from last question x Actual DLH in Koopers Job = (Est OH plantwide / Est allocation base plantwide) x actual job allocation base --- *1.2.2a - Deperatmental Predetermined OH Rates* =(Est.d Dept OH for plant / Est.d Dept Allocation Base for plant) Do this for each department --- *1.2.2b - Departmental Predetermined OH Rates - Applied to a Job* = Using (Est'd Dept OH for plant / Est'd Dept Allocation Base for plant) x Actual DLH for Koopers Job Do this for each dept --- *1.2.4a - Bidding on Jobs* It's customary to bid jobs at 150% of TMC (DM used + DL incurred + Applied OH). What's co's bid price on Koopers job using a plantwide predetermined OH rate *IMPORTANT: The question says 150% of TMC, so make sure you include DM used + DL incurred + Applied OH* and not just applied OH Step 1 - Calculate OH Let's calculate for OH: = 140% of DL costs for Koopers job = $865,200 total plant MOH / $618,000 total plant DLD = 1.4 x $11,400 DL costs for Koopers job = $15,960 total OH estimated for Koopers job [we also found this in Q 1b if you CTRL + F for $15,960] Step 2 - Calculate for TMC Add up DM + DL + OH for Koopers job = $5,900 DM Koopers (given) + $11,400 DL Koopers (given) + $15,960 OH for Koopers job (calculated in Step 1) = $33,260 Total manufacturing costs for Koopers job using plantwide predetermined OH rate Step 3 - Calculate answer, or 150% of TMC 150% of TMC = 1.5 x $33,260 (Calculatedin Step 2) --- *1.2.4b* "4b.Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labor, and applied overhead). What would the bid price have been if departmental predetermined overhead rates had been used to apply overhead cost?" [Note: This Q is asking about Koopers specifically; I know they don't specify.] If we were calculating FOR KOOPERS: In 2b we calculated: Fabricating Dept. = $1.75 rounded estimated OH for Fabricating Dept per DL dollar x $4,000 DL dollars in Fabricating dept. = $7,000 manufacturing OH cost that would have been applied to Koopers job in Fabricating dept. Machining Dept. = $4.00 estimated OH for Machining Dept per DL dollar x $600 DL cost in Machining dept for Koopers job = $2,400 manufacturing OH cost that would have been applied to Koopers job in Machining dept. Assembly Dept. = $0.30 estimated manufacturing OH for Assembly Dept. per DL dollar x $6,800 DL cost in Assembly dept for Koopers job = $2,040 manufacturing OH cost that would have been applied to Koopers job in Assembly dept. Robin: OH costs would therefore be: Step 2: Calculate $7,000 + 2,400 + 2040 =$11,400 total OH costs for Koopers job Step 3: Calculate TMC DM + DL + OH = $5,900 DM Koopers + $11,400 DL Koopers + $11,440 MOH Koopers = $28,740 TMC Koopers Step 4: Calculate 150% of TMC = 1.5 x $28,740 = $43,110 ---

Homework 10

*10.1 - STUFF I KEEP FORGETTING THE MOST:* Return on total assets = (NI + (IE x (1-TR))) / ATA =(Net income + (interest expense x (1 - tax rate))) / average total assets*** *Return on Equity = ROE = NI / ASE = Net income / Average stockholders' equity**** Times Interest Earned Ratio = TIE = EBIT / IE = Earnings Before INTEREST and TAX / Interest Expense "Imagine a frog (EBIT sounds like RIBBIT) wearing a TIE with a monocle over his IE" *Equity Multiplier = EM = ATA/ASE = Average total assets / Average stockholders' equity* Gross margin percentage = Gross margin / sales Net profit margin percentage = Net income / sales Return on total assets = (NI + (IE x (1-TR))) / ATA =(Net income + (interest expense x (1 - tax rate))) / average total assets*** Return on Equity = ROE = NI / ASE = Net income / Average stockholders' equity*** All the "Return on" (ROE and ROTA) formulas have Net Income somewhere in the numerator, and average Whatever the Ratio's Named After in the denominator. ROE has ASE in denominator, ROTA has ATA. TAT (Total asset turnover) = S/ATA "TATtoos are the mark of S/ATAn" *Earnings Per Share = NI/A#CSO*** *Price-Earnings Ratio = MPPS/EPS*** *Dividend Payout Ratio = DPS/EPS*** *Dividend Yield Ratio = DPS/MPPS*** Remember that for the dividen ratios, DPS is always in the numerator *Book Value Per Share = TSE / #CSO*** Exhibit 15-6 has all these formulas in the textbook -------------------------- HOMEWORK: *10.1.1: Ratios, Ratios, Ratios* Working Capital = Current assets - Current liabilities Current ratio = Current assets / Current Liabilities Acid-test ratio = (Cash + Cash equivalents + Marketable Securities + A/R + Short term Notes receivable) / Current liabilities Average collection period = 365 days / ART = 365 / (Sales on account / Ave AR balance) Average sale period = 365 days / IT = COGS/Ave inventory balance Operating Cycle = ASP + ACP = Average sale period + average collection period Total Asset Turnover = TATs = S/ATA = Sales / Ave total assets. Mnemonic: "TATtoos are the mark of SATAn." Totally don't believe this statement, but it remains unforgettable Debt-To-Equity Ratio = Total Liabilities / Total Stockholder's Equit Times Interest Earned Ratio = TIE = EBIT / IE = Earnings Before INTEREST and TAX / Interest Expense "Imagine a frog (EBIT sounds like RIBBIT) wearing a TIE with a monocle over his IE" Equity Multiplier = EM = ATA/ASE = Average total assets / Average stockholders' equity *Other formulas:* Gross margin percentage = Gross margin / sales Net profit margin percentage = Net income / sales Return on total assets = (NI + (IE x (1-TR))) / ATA =(Net income + (interest expense x (1 - tax rate))) / average total assets*** Return on Equity = ROE = NI / ASE = Net income / Average stockholders' equity*** Earnings Per Share = NI/A#CSO*** Price-Earnings Ratio = MPPS/EPS*** Dividend Payout Ratio = DPS/EPS*** Dividend Yield Ratio = DPS/MPPS*** Remember that for the dividen ratios, DPS is always in the numerator Book Value Per Share = TSE / #CSO*** --- *10.1.2B: Income Statement (Regular)* Sales (COGS) =Gross margin (SGA) =NOI (Int expense) =NI before tax (Inc tax) =Net income --- *10.2.1: SOCF - indirect method (partial)* Net Income Adjustments to convert net income to cash basis: +: Increase A/P -: Increase A/R -: Decrease in acrrued liabilities +: Increase inc tax payable -: increase inventory +: Decrease in prepaid expenses -: Gain on sale of equipment +: Depreciation exp =Net cash provided by operating activities --- *10.2.3: FCF* *Free Cash Flow = Net Cash Provided by Operating Activities - Capital Expenditures - Dividends*

Quiz 10

*10.1 - Using Cash* Easy question. Which of the following is a "use" of cash for purposes of constructing a statement of cash flows? These don't use cash: -Depreciation -A/P and A/R and Accrued liabilities -- the whole point is someone in your Accounting team said, "[bleep] it, we're not paying this today. Push it until later" means that NO CASH EXCHANGED HANDS. IOU's are exactly that. Use cash: -Prepaid expenses = paying early --- *10.2 - How to Handle Depreciation Under Indirect Method* Accumulated depreciation increases $50,000. On the SOCF, we'd want to enter this under the indirect method as an *addition* to net income of $50k to get to net cash provided by operating activities --- *10.3 - What are Investing* What are investing activities? Better question yet, here's a recap of everything: *Operating Activities* Collecting cash from customers <-- inflow Paying suppliers for inventory purchases --> outflow Paying insurance bills, utility bill --> Paying wages and salaries to employees --> Paying taxes to gov't --> Paying interest to lenders (interest expense) --> *Dividends received is operations under GAAP* <-- Generally Accepted Accounting Principles (GAAP) vary from International Financial Reporting Standards in that under GAAP rules, dividends received from a company's investing activities is reported as an "operating activity" <-- Really nasty mnemonic, but it works: imagine you're a surgeon performing -operations- on a pig. As you -divide- the pig's skin with your scalpel, money (dividends) comes out. You take all the dividends and shove them into your surgical lab coat. *Receiving dividends is an operational activity* I chose a pig because, well, piggy banks. *Investing Activities* Buying PPE --> Selling PPE <-- Buying stocks and bonds (of other co.s) for LT investment --> Selling stocks and bonds for LT investment <-- Lending money to another entity --> *Here, Inigo. Borrow some of my cash so you can avenge your father-->* Collecting principal on a loan to another entity <-- *Financing Activities* Borrow money from creditor <-- *Oh, thanks, Finn. I'll pay back the cash once I avenge my father <--* Repaying the principal amt of debt --> Collecting cash from sale of common stock <--- I think we're selling our own stock here <-- Paying cash to buy back your own common stock --> Aka treasury stock --> Paying dividend to stockholders --> *Paying dividends is Financing*--> Imagine the Monster from the Black Lagoon, dressed in an Armani suit, stepping out of the swamp. He clears his throat and steps onto Wall Street and begins throwing money around to everyone, Oprah style, and he says in Oprah's voice, "You get a dividend. And you get a dividend!" *Paying dividends is a FINancing activity" You can also imagine him tossing goldfish everywhere. Gold = money, and the more fin's in finance, the better. From p 687 in textbook. Go read. In this particular question, these items are investing: -cash collected on loan made to supplier (cash inflow from lending; when you're a lender be, you're investing. When you're receiving a loan, it's financing) -cash received from sale of a stock investment (this is assumimng we're selling an investment we bought from antoher company and meant to hold for LT investment. If we were buying treasury stock, it'd be financing) -Cash used to purchase land --- *10.4 - NCPBOA* This company uses indirect method. In prepping the SOCF, what is net cash provided (used) by operating activities? Net Income Add: decrease in A/R Add: decrease in merch inventory Subtract: decrease in A/P Add: increase in taxes payable We don't do anything about retained earnings because it's not operations Add: depreciation expense =NCPBOA net cash provided by operating activities --- *10.5 - NCPBOA* Net cash provided by ops for the year: NI (AR Increase) Don't include cash (Increase invenotry) Don't include PPE cos it's investing Accum Dep Increase AP (Decrease W/P) (Decrease T/P) Don't include Bonds/P (Decrease Deferred Taxes) DOn't include CS Don't include RE =NCPBOA *TWO errors: I need to ADD back in depreciation, not subtract it. And two, I almost didn't include deferred taxes, but it should be included. And three... I didn't forget this time, but bonds payable most certainly should NOT be included* --- *10.6 - NCPBOA* NCPBOA = ??? Step 1: ΔCash account = ΔOperating + ΔInvesting + ΔFinancing Step 2: Operating: $W dollars provided (used) by operating activities Investing: +$XXX net cash provided Financing: ($YYY) net cash used =SUM: $ZZZincrease in cash Step 3: ZZZ + YYY - XXX = $W provided by operating activities [correct] --- *10.7 - Free Cash Flow (Easy)* FCF = NCPBOA - CE - D Free cash flow = net cash prov by operating activities - capital expenditures - dividends *Capital expenditures is a fancy way to say "what we spent on PPE."* The hardest part is calculating NCPBOA -- in this q it's straightforward but in orders you gotta calculate it from scratch --- *10.8 - Free Cash Flow (Hard)* FCF here Net income Decrease A/R Decrease Inventory Prepaid Exp (zero here) Dep (Decrease AP) Accrued liab Taxes/P Deferred taxes =NCPBOA (Increase PPE) (Dividends paid) =FCF *Accrued liabilities increase should be added because it's a pooling up of all the bills and stuff you didn't want to pay* *Deferred taxes should be added--deferred means that you still got the liability; you're just pushing it out further* *Don't include cash* *Don't include cash equivalents* *Don't include LT investments in NCPBOA; but you do have to deduct capital expenditures, aka payments for PPE, in FCF* *Don't include bonds payable* --- *10.9 - Net Cash Provided by Investing Activties* NCPBIA Net cash provided by investing activities *Issuance of bonds payable is a FINANCING activity so DON'T include it* PPE is investing activities Don't include $5 increase in common stock Dont include $64 increase in retained earnings DON'T include: Paying $18 cash dividends is a financing activity Don't include bonds payable (issuance of bonds payable is a financing activity) Don't include issuance of common stock or preferred stock (financing activity) Don't include other increases in LT liabilities and SE (financing activities) --- *10.10* Debt-to-equity: Total Liabilities / Total SE =TL/TSE *Dividend yield ratio: Dividend per share / Market price per share* *=DPS/MPPS* *EPS = NI / Ave Number Common Shares Outstanding* *=NI/A#CSO* *Dividend payout ratio = Dividend per share / earnings per share* *=DPS/EPS* --- *10.11 - Obsolete Inventory is Written Off's Effect on Current and Acid Test Ratios* CR = CA/CL Acid Test = Cash + Cash Equiv + Mktble Securities + A/R + ST N/R, all divided by CL --- *10.12 - Acid Test Ratio* Acid Test = Cash + Cash Equiv + Mktble Securities + A/R + ST N/R, all divided by CL --- *10.13 - Dividend Payout Ratio* DPR = DPS/EPS Remember DYR = MPPS/EPS EPS = NI/ANCSO For this question, to calculate for DPR, you have to find out DPS, and that means added dividends per share for common stockholders + dividends per share for preferred stockholders. We can also do an alternative formula: DPR = Total Dividends / Net Income, or total dividends / total earnings --- *10.14 - Average Collection Period* ACP = 365 days / ART = 365 / (SOA / (AARB)) Average collection period = 365 days / AR Turnover = 365 / (Sales on account / Average A/R balance) --- *10.15 - Return on Total Assets* ROTA = (NI + (IE x (1-TR))) / ATA ROTA the dog = (Never Inquire + (If Ever x (1 - There Rests))) / A Truer Ally *Most common error is forgetting it's 1 - TR*, not just TR --- *10.16 - Times Interest Earned* TIE = EBIT / IE = Earnings Before Interest and Tax / Interest Expense A frog wearing a tie with a monocle over his IE. He croaks, "EBIT. EBIT. EBIT." --- *10.17 - Return on Total Assets* --- *10.18 - Price-Earnings Ratio* PER = MPPS/EPS =Mkt price per share/ earnings per share *I STILL DON'T KNOW HOW TO SOLVE THIS ONE* --- *10.19 - Working Capital* WC = CA - CL --- *10.20 - Inventory Turnover* Inventory Turnover = COGS/AIB =Cost of Goods Sold / Average Inventory Balance NOT TO BE CONFUSED WITH THIS: ROI = Margin x Turnover = NOI/Sales x Sales/AOA = NOI / Ave Operating Assets Not to be confused with RI = NOI - (AOA x MinROR)

Things to bring to exam

*2 DAYS BEFORE EXAM* Email/call in to ask if the exam is still scheduled on time and they've received my testing materials [Check--Not sure if they received the materials but I'm good to go for the exam] *NIGHT BEFORE EXAM:* -Take 1/2 a Benadryl + a non-drowsy Allerclear at least 11 hours before you need to wake up. Helps you sleep/eases your nerves + helps prevent allergies on day of exam. (Fun fact: Also great if you're prone to allergies and need to scuba dive the next morning.) -Turn on alarm at your regular time -Get to bed by 9 pm -Don't eat too much sugar or anything else that may upset your stomach during test-time. -Bring cash, credit card, and/or check for exam. -Download all exam materials so you can study should internet die on you -Drink water as early as you can in the morning; this will be your hydration throughout the 3 hours of exam-taking -*CHARGE PHONE TO 100% SO GPS WORKS THE NEXT DAY. Examine the map briefly before driving out so you know which freeways / streets to take* -Check: Google Map the testing site so you know what to expect -In order to obtain a library card, please present both of the following: Documentation of current address, such as: Car registration Personal check Recent piece of mail Utility bill Valid --- driver's license or identification -Fill car with gas to full (optional) *DAY BEFORE EXAM, PACK:* -Stamped and addressed 9 x 12 envelope -Pencil (0.7 lead OR Number 2 pencil) -Good erasers -Calculator (Bring 2-3, nonprogrammable, just in case one gets rejected) -Pen for writing my name/signing stuff -Sharpie, in case I need to edit anything on the envelope -Photo ID / Driver's License of my face -A piece of postage addressed to me, unopened. I might as well create a library card while I'm there, once I'm done with the exam -Eat something plain that won't get you sick. I also packed Belvita crackers in the trunk of the car. -Drink water early in the day, but don't drink too much water before exam; not sure what the restroom policies are but you may be stuck for 3 hours. -Show up 1 hour early, find parking. The adddress should already be entered in your phone + phone numbers of people *ONCE I FINISH THE EXAM* -I should make sure I'm signed up for the next class, Intermediate Accounting I -Consider signing up for 2 classes this quarter. I should have the time to study for 2, but it'll be like holding a 2nd full-time job, in terms of hours I'll need to study. -Study for the upcoming class for up to 7 hours, just reading the textbook. Explore the testing area a bit, see if it can't be a new study spot for you. -You can't access class materials till 1st day of class officially starts, so just study from the textbook, read as much as you can. -Take some time to relax and go somewhere at night, if you're up for it. If not, take it easy and just sleep in. -Study throughout weekend

Quiz 3

*3.1* *If Sales increase, NOI = CM Ratio x dollar increase in sales." This holds true because CM Ratio = (Sales - VCs) / Sales, or how much CM there is per dollars of sales Since TFCs will remain the same no matter how sales changes, we can see that: NOI = Sales - VCs - FCs NOI = [(Sales - VCs)/Sales, times Sales] - FCs To measure how NOI changes (For FC will never change), then we must measure the change in CM, or the change in (CM/Sales)(Sales). For these types of questions, you can also plug in values and test things out: If sales increases, say, by $100: Old contribution margin ratio = 100 sales - 50 VC / 100 sales = 50/100 = 0.5 New contribution margin ratio = 100 sales + 100 increase - 50 VC / 100 + 100 = 200 - 50 / 100 = 150 / 100 = 1.5 --- *3.2* Let's say we're the owners of Fiji Corporation, and we make three products: Artlor, Bandersham, and Cranbore Unit contribution Artlor > UCM for Bandersham > UC for Cranbore What item would be most likely to decrease the company's break even point? *Break-Even point = FC / UCM* in units *Break even point in dollars = FC / CM Ratio = FC / (S-VC/S)* --- *3.3 - How Will NOI change if UCM increases, FCs decrease, and everything else same?* For this question, solve it conceptually first, with algebra Then, if you have time later, plug in some simple values, like 100, 200, 300, then solve for it mathematically. See if you get the same answer. *This question in particular doesn't require it, but be very careful when the change is in units sold. Because if units sold change, not only does revenue increase, but ALSO, VCs will increase. Keep that in mind because questions like that have been asked in other chapters of the Managerial Accounting course* --- *3.4* In this case, unit VC increases by $2 (which is the difference between the new UVC and the old UVC), and total FCs increases. You should solve these problems fairly easily --- *3.5 - Degree of Operating Leverage* CM/NOI (S-VC)/(S-VC-FC) --- *3.6 - Overall CM Ratio for the Company as a Whole* CM Ratio = CM/Sales = (S-VC)/S DON'T do CM company / Sales company Do it per product for the company (and you know these are the only 3products the co makes) CM Ratio for product A x Monthly sales of Product A DO this for all 3 products Add it up Then divide this sum by the sum of the sales of A, B, and C products --- *3.7 - If company takes on a special order, how much mroe would it have to sell to maek an extra $40k profit?* Step 1: Ignore FCs; since they aren't affected by the production of extra units beyond the original units that were sold Step 2: Don't count sales commissions because question says so [given] Step 3: Calculate for unit CM Step 4: To get 40k profit from selling 10k units, we'd need CM of $4 We know VCs per unit Step 5: figure it out, do the math. Pretty simple question *Just remember that if we are producing extra units beyond the original first batch for extra profit, then don't include the costs of FCs and pay attention to any changes in sales price or VCs per unit.* --- *3.8* If a company has higher FCs and lower VCs, how would CM and VCs compare to a co with a lower FC and higher VCs? Pretty straightforward CM = Sales - VCs VCs Do the math. --- *3.9 - NOI from producing and selling 110k units == ?* NOI = Sales - VCs - FCs I'm pretty sure that for NOI, you use units sold throughout. So VCs are based on units SOLD, not units produced. The reason being is because Sales is based...duh... on units sold ?????? *Is NOI based 100% on units sold?* See Ch. 4 quiz as well --- *3.10 - CM ratio for co as a whole* CM ratio for co as a whole Find CM pe rproduct CM Ratio X x Sales X CM Ratio Y x Sales Y CM Ratio Z x Sales Z SUM = CM for all X Y Z Then do SUM Sale X Y Z - CM X Y Z, then divided it all by Sale X Y Z Duh. --- *3.11 - FCs and CM per unit changed. How many units must be sold this year to earn same profit as last yr?* --- *3.12 - Margin of Safety Percentage* Margin of Safety = Sales - BEP in dollars = Sales - FC/CM Ratio Margin of Safety Percentage = Sales - BEP in dolalrs,a ll divided by Sales MOS% = (S - (FC/((S-VC)/S)))/S ^you get the idea. --- *3.13 - Break Even Sales* Sales - Break even point in dollars = break even sales BEP in dollars = FC/CM Ratio ... For this question, you cannot calculate it on a per-product basis because you aren't given FCs per product --- *3.14 - Number of Units needed to be sold to achieve a desired NOI* --- *3.15 - CM Ratio for the business model* ONLY look at the Business Model product Remember to add ALL VCs while calculating CM Ratio So VC production, VSGA, that all's fair game --- *FIN*

Homework 3

*3.1.1 - NOI and CM* CM = Sales - VCs = Units sold x Unit CM Contribution income statement: Sales (VCs) =CM (FCs) =NOI --- *3.1.2 - Degree of Operating Leverage, Break Even Point* DOOL = CM / NOI = (S - VCs) / (S - VCs - FCs) BEP in units = FC / UCM BEP in sales dollars = FC / (CM Ratio) = FC / ((S-VC)/S) Margin of Safety in Dollars = S - BEP in dollars = S - (FC / CM Ratio) Margin of Safety Percentage = (Sales - BEP in dollars) / Sales =(Sales - (FC/CM Ratio)) / Sales Margin of Safety in Units = (Sales - BEP in dollars) / Selling Price Per Unit =(S - (FC/CM Ratio))/Selling Price per Unit --- *3.1.3* This is a conceptual question I'll never fully understand. I can only hope that the conceptual questions presented on the final will be . . . simpler and better explained. "The major factor would be the sensitivity of the company's operations to cyclical movements in the economy. Because the new equipment will increase the CM ratio, in years of strong economic activity, the company will be better off with the new equipment. However, in economic recession, the company will be worse off with the new equipment. The fixed costs of the new equipment will cause losses to be deeper and sustained more quickly than at present. Thus, management must decide whether the potential for greater profits in good years is worth the risk of deeper losses in bad years." [McGraw Hill] --- *3.1.4* New break even point in dollar sales BEP in dollars = FC / CM Ratio = FC / ((S - VC)/S) --- *3.1.5 - What happens to Break Even Point as Commission Rates and Management Choices Change?* This is actually a really hard and good question; you should try to redo it You have to be really careful as you calculate for the individual parts of the BEP formula --- *3.2.2* Sales (VMOH) (FMOH) =Gross Margin (Commissions, which are 20% sales here) (F Mktg) (F Admin) =NOI (F Interest Exp) =Inc before Inc tax (Inc tax, or 30% of Inc before inc taxes) =NI Also really good question --- *3.2.3* This is from the SECOND ATTEMPT at the hw, which has diff numbers used and diff data from the 1st Identical sales: X sales - 3,570,000 FOH - 178,500 FMktg - 2,180,000 Fixed admin - 892,500 fixed interest - 0.45 sales as VMfg - 20% sales as commissions EQUALS: X sales - 3,570,000 FOH - 178,500 FMktg - 2,180,000 Fixed admin - $117,300 decrease in admin - 892,500 fixed interest - 3,825,000 increase in FCs - 0.45 sales as VMfg - 0.075 Sales as commission Step 1: Delete all identical items X sales - 3,570,000 FOH - 178,500 FMktg - 2,180,000 Fixed admin - 892,500 fixed interest - 0.45 sales as VMfg - 20% sales as commissions EQUALS: X sales - 3,570,000 FOH - 178,500 FMktg - 2,180,000 Fixed admin + $117,300 decrease in admin costs - 892,500 fixed interest - 3,825,000 increase in FCs - 0.45 sales as VMfg - 0.075 Sales as commission Step 2: Clean up X - 0.20 X = X + 117,300 - 3,825,000 - 0.075 X 0.8X = 0.925X =3,707,700 -0.125X = -3,707,700 X = 29,661,600 [correct] Took me 3 or 4 tries because of silly errors, like I accidentally subtracted instead of adding 117,300, or I mistyped the increase in FCs by $1,000 off --- *3.2.4 - DOOL* Degree of Operating Leverage = CM / NOI = S - VC / S - VC - FC Basically you also calculate DOOL under changing commission rates and circumstances. Just make sure you adjust NOI -AND- VCs and FCs properly. best to think of DOOL as (S - VC) / (S - VC - FC)

Homework 4

*4.1.1A - Absorption Costing, Unit Cost* Product costs under variable costing = DM + DL + VMOH Period costs under variable costing = FMOH + VSGA + FSGA Product costs under absorption costing = DM + DL + VMOH + FMOH Period costs under absorption costing = VSGA + FSGA --- *4.1.1b - Absorption costing income statement* Sales (COGS) =Gross Margin (SGA) =NOI --- *4.1.1c - Deferred and Absorbed FMOH, NOI under AC vs VC* *REALLY GOOD QUESTION THAT I'M BOUND TO FORGET* If NOI Absorption costing < NOI variable costing EI < BI Units Produced < Units Sold Absorption costing FMOH = Units sold x (FMOH under VC/ Units produced) = 28400 sold x (276,320 FMOH under VC / 31400 units produced) = $249,920 absorption costing FMOH Variable costing FMOH = given in this question Differences in NOI = Absorption costing FMOH - Variable costing FMOH =249,920 - 276,320 =26,400 We know units produced > units sold So NOI absorption > NOI variable EI > BI Variable costing NOI = (13,200, or a loss) Add: FMOH cost deferred in inventory under absorption costing of $26,500 =Absorption costing NOI of 13,200 [correct] --- *4.1.3a Variable Costing Income Statement" Sales (V COGS) (V SGA) = CM (FMOH) (FSGA) = NOI *VCOGs includes DM, DL, VMOH --- *4.1.3C - Deferred and Absorbed FMOH, NOI under AC vs VC again* Produced 31,400 < Sold 34,400 UP < US So EI < BI NOI AC < NOI VC Variable costing NOI (loss) is $95,400 The difference in NOI AC and NOI VC is: FMOH VC / units produced, all time units sold =34,400 sold x ($278,320 FMOH VC / 31,400 produced) =$302,720 Variable costing under AC $302,720 FMOH AC (276,320 FOH VC) =26,400 difference between NOI AC and NOI VC, and because Units produced < Units sold, EI < BI and NOI AC < NOI VC NOI VC of 95,400 (26,400) Deduc: FMOH cost *released* from inventory under AC =NOI AC (loss) = 69,000 --- *If NOI AC > NOI VC, aka U produced > U sold, then we must ADD FMOH deferred from inventory under absorption costing* *But if NOI AC < NOI VC, aka U produced < U sold, then we must DEDUCT FMOH released from inventory under absorption costing* U P > U S, NOI AC > NOI VC, ADD Deferred FMOH to NOI VC to get NOI AC VIce versa.... then DEDUCT Released FMOH --- *4.2.1 - Plantwide OH Rate* Plantwide OH Rate = Total Est. MOH / Total Est. MH ...assuming Machine hours is the allocation base --- *4.2.2* Product margin is same thing as profit margin, but for a specific product Activity-based costing means that for OH, you'll have to base it off of what percentage that particular product uses Revenues or Sales: B300: 60,100 units sold × $19/unit = $1,141,900 revenue Costs: B300 Advertising:XXX DM: XXX DL: XXX OH: Machining (machine hours) = (90,600 B300 hrs / 152,800 Total machining hrs) * ($200,168 machining) = $118,686 Setups (setup hrs) = (74 B300 setup hrs / 284 total setup hrs) * ($122,120) = $31,820 Product-sustaining (No. products) = (1 product / 2 total products) * $100,600 = $50,300 SUM: XXXX --- *4.2.3* This compares traditional and activity-based costing systems

Quiz 5

*5.1 - Responsibility Accounting* If it's your fault/you did it, then you're responsible --- *5.2 - Estimated Total Cash Collections during April from Sales and A/R* This question asks about cash collections, not revenue. Just be really careful as you calculate Find out all the cash collected for April only --- *5.3 - How much FGs to produce?* "The co likes to maintain FGI = 30% of next month's estimated sales" We know it's 0.30 x Sales THis entire question is in terms of FGs, there's no DMs or anything to convert from +BI Mugs, aka last month's FGI +Purchases -How many Mugs We're Selling That Month =FG Mugs In other words Quick solution: DO this: (BFGI) Units Sold Units need to be in EFGI =Your answer for Q 5.3 --- *5.4 - Budgeted production for February should be* This Q asks for production of FGs ultimately, not lbs of DM BFGI Purchases (Used) =EFGI 0.3(Feb production needs X) x 2lbs as BFGI 165,000 RM purchases in lbs (X Production x 2lbs) =EFGI of 0.3(100,000 March production)2lbs Solve for X --- *5.5 - DL Cost* Units PRODUCED cos DL is a production cost and how much we sell doesn't affect the cost, it's how much we MAKE x DL hours per unit x Cost per DLH --- *5.6 - Cash Disbursements for MOH on the manufacturing OH budget* FMOH VMOH, which is DLH x VMOH per DLH (Depreciation, which doesn't involve cash) =Answer --- *5.7 - Excess (Deficiency) of cash available over disbursements* What we have - What we spend We don't care about desired ending cash balance. That has nothing to do with how much we make and spend --- *5.8 - A/R Balance* *REALLY HARD QUESTION BECAUSE THERE'S SO MANY MOVING PARTS* The only thing you should care about each month is: how many sales do we have on credit, and how many sales we've collected --- *5.9 - Budgeted Cash Collections for Upcoming December* *Hard question* Take 100% of Nov A/R--I think we assume this is the 40% of Nov Sales to be collected since there's 0% deemed to be uncollectible Add Dec Sales x % collected in Dec of Dec sales --- *5.10 - Units need to be purchased* --- *5.11 - * Total number of units needed = Sales + Desired EI --- *5.12 - Desired EI of DM / Jurislon and MiniWarp question* --- *5.13* --- *5.14* --- *5.15 - Budgeted Cash Disbursements for November* *Hard question* --- *5.16 - Cash Bal at End of Month* --- *FIN* There are some pretty drawn-out and some pretty hard cash balance questions in this chapter.

Homework 5

*5.1 - Revenues and Cash Collections* Revenues != Cash collections; remember that Pay attention to whether you're using units of FGs or units of Materials DM Used = BI DM + Purchases - EI DM --- *5.1.3 - Cash Budget Prep* Beginning Cash Balance Add: Collections from Customers Total Cash Available Less: Cash disbursements: Purchase of Inventory Selling and admin expenses Purchase of equipment Total Cash Disbursements Excess of cash available over disbursements Financing: Borrowing--note Repayments--note Total financing Ending cash balance --- *5.1.4 - Budgeted Income statement* Sales (COGS) =Gross margin (SGA) =NOI (Interest Expense) =NI --- *5.1.5 - BS* This question is trickier than it looks because you gotta keep track of all the increases and decreases in each account --- *5.2.1 Budgeted Sales* ...Is not the same thing as cash inflow or cash outflow! --- *5.2.2 - Cash collections* ...is how much cash you actually get that period --- For the other questions, you have to know how much needs to be purchased DM Used = BI DM + Purchased DM - EI DM

Homework 6

*6.1.1 - Flexible vs. Planning budget* *FLEXIBLE BUDGET: budgeted fixed costs + (actual quantities x budgeted prices)* *PLANNING BUDGET: budgeted fixed costs + (budgeted quantities x budgeted prices)* Everything is BUDGETED under a PLAN. And if we have some FLEXIBILITY, why not put AQ, SP together? in other words FB = SFC + (AQ x SP) PB = SFC + (SQ x SP) --- *6.2 - The Backpack Question* Best to redo the entire question; This one tends to take me one of the longest. One of the hardest points is when you're missing data for DL but you know that VMOH is based on DL hours.

Quiz 7

*7.1 - ROI and RI* ROI = NOI / AOA = Margin x Turnover = NOI/Sales times Sales/AOA RI = NOI - (AOA x MinROR) Residual income = net operating income - (Average operating assets x Min. Req'd rate of return) --- *7.2 - Using NOI and ROI to find how much inventory reduced* --- *7.3 - Calculating RI when missing data* --- *7.4 - ROI* --- *7.5 - ROI* --- *7.6 - RI* --- *7.7 - Division's Turnover* Turnover = Sales / AOA --- *7.8 - MinROR* --- *7.9 - Turnover* --- *7.10 - RI* --- *7.11 - RI* --- *7.12 - Delivery Cycle Time* Delivery Cycle Time = WPIMQ =Wait + Process + Inspection + Move + Queue Peter Parker is delivering pizza "Wimpy Peter Is Meeting Quotas" --- *7.13 - Average Operating Assets (AOA)* --- *7.14 - Division Turnover* =Sales / AOA --- *7.15 - RI* --- *FIN*

Quiz 8

*8.1 - Opportunity Cost and Excess Capacity* --- *8.2 - Relevant v Irrelevant Costs* --- *8.3 - Relevant Costs in Joint Production* --- *8.4 - If We Drop a Division, How Would Co's NOI Change?* *Good question* --- *8.5 - Alternative Options: Buy or Sell?* --- *8.6 - How Would NOI Change - Buy v. Sell?* --- *8.7* --- *8.8 - How Much To Spend on a Constrained Resource?* As much as needed to satisfy demand for the least profitable product, in this case Find (Selling P for least profitable product - VC per unit for the least profitable product) / Minutes spent on the constraint --- *8.9 - Sell v. Process Further* --- *8.10 - Sell v. Process Further* --- *8.11 - Change in NOI Buy v Sell* --- *8.12 - Buy v. Sell* --- *8.13 - Impact on NOI Buy v. Sell* --- *8.14 - Buy v. Sell* --- *8.15 - Making extra units (Special Order)* DON"T Include FCs because they'd be incurred anyways with the original units we're producing Pay attention to unique features for the order, such as whether it's sold for a different price than the original units. --- *8.16 - MInutes on Machine to Satisfy Demand* --- *8.17 - Profitable Use of Machines* You can't just find the overall profit per product line, you have to find profit per product line per unit / minutes per unit --> Profit per minute on the machine Then compare profitability that way --- *8.18 - Sell v. Process Further* You have to compare it for one specific product. Example: If you get $5 if you sell now, vs if you get $15 revenue - $5 cost = $10 profit if you process further, then you aren't getting +$10 advantage, you're getting $10 for one option - $5 for the other option = $5 advantage of processing further over selling immediately --- *FIN*

Comparing Weighted Average and FIFO Methods of Process Costing

*Weighted Average Method of Process Costing* UCTO = Total units completed this period EU based on: Units completed this period + UEWIP Cost per EU Based on: BWIP costs + Costs added this period Assign costs using: EU x Cost per EU for units completed and units in EWIP *FIFO Method of Process Costing* UCTO: Total units finished in BWIP + Units started and completed this period EU based on: Units from BWIP Completed + Units started and completed + Units in EWIP Cost Per EU based on: Costs added this period only Assign costs using: BWIP Costs + EU x Cost per EU for units finished from BWIP, units started and completed, and units in EWIP

Homework 8

*8.1.1 - Let's Make Lipstick Tubes* Avoidable costs usually include Variable manaufacturing costs, such as DM, DL, VMOH. In this question, we calculated for FMOH and cut it out so we could calculate the avoidable costs (DM, DL, VMOH) per unit. --- *8.1.2 - Financial advantage (disadvantage)* Compare the 2 options, see which costs more or less --- Skip skip skip --- *8.1.5 - Max. Price to Pay* The max price we'd be willing to pay per box if we buy it from the supplier is equal to the avoidable manufacturing cost per box from Q. 8.1.1., or $1.85. *BUT WHY?* --- *8.1.6. - Financial (dis)davantage with new circumstances* Compare original data, plus new FCs for the new equipment rental Vs. Cost of buying, which doesn't include any equipment rental --- *8.1.7 - How many to make? To buy?* In general, before we reach the last 38,000 units (aka 203k - 38k = for the first 165k units), it's cheaper to make. For the last 38,000 units, if we choose to make, we'll have to rent equipment for additional FCs of $70k per year As long as the costs of buying are under $70,000 total, after the first 165,000 units, we'll want to buy the remaining 38,000 units --- *8.2.1 - Salaries* Pay attention to what is still incurred (either only partial firing of employees from 1 dept, or shifting one employee to another dept) and what isn't Also pay attention to who would be hired in the spot (alternate options). For example, the manager may be shifted to another position, where she'll earn $15,000 still. That said, if she weren't moved to the new position, they would've hired someone for $13,000. So we save only $2000 on this = $15k - $13k we would've spent anyways. --- You might want to redo 8.2 on your own; these questions are much more complex than a flashcard can handle. These, I recall, are some of the hardest questions for me to answer right the first time because there's so many moving parts to the equation.

Quiz 9

*9.1 - Project Profitability Index* *PPI = NPV / IR* *Project profitability index - Net Present Value / Investment Required* "Police Inspectors use Nets and Presents to catch Investors" --- *9.2 - * --- *9.3* --- *9.4* --- *9.5 - Internal Rate of Return* FIROR = IReq/ANCI *FOR INTERNAL RATE OF RETURN PROBLEMS, YOU MUST CALCULATE FIROR = IR / ANCI FIRST. THEN. YOU MUST FIND THAT VALUE ON THE NPV TABLE, USUALLY THE ANNUITY TABLE, AND FIND THE RIGHT NUMBER OF YEARS. GO RIGHT THEN UP AND THE DISCOUNT RATE SHALL BE YOUR IROR AND YOUR ANSWER.* *SERIOUSLY. DON'T FORGET THIS. I WILL BE VERY FIRORIOUS* --- *9.6 - Project Profitability Index* PPI = NPV / IR --- *9.7 - Payback Period* Payback period = II / CIPP =init investment / cash inflow per period Can also be II / ANCI *Remember for cash flow per period, you only want CASH items, meaning NO DEPRECIATION EXPENSE* --- *9.8 - Simple Rate of Return* *SROR = Annual incrememental NOI / Initial investment* *SROR = AINOI / II* *INITIAL INVESTMENT is whatever you spent initially, but if you get any money back from, say, the sale of old equipment, you MUST subtract it from initial investment* --- *9.9 - NPV of a project* --- *9.10 - PV of Net Cash Flows for a Specific Year* ONLY pay attention to that one year's cash inflows and outflows or you're screeeeeeeeewed. Seriously. This question ONLY asks about Year 6. We don't care how many G's we dropped to get this [bleep] started. We don't care how many more G's we dropped in years 1, 2, 3, 4, or 5. *For these types of questions, pay attention to what the question is asking you. We only want PV of Net Cash Flows in Year 6 alone* --- *9.11* --- *9.12 - Payback Period* *PP = II/CIPP* *Again, don't include depreciation in CIPP cos dep doesn't involve cash* --- *9.13 - How big would annual net cash inflows need to be to make this a financially stable investment?* On the NPV table, we'd look up the value for 14% rate of return, 10 yrs, annuity for this particular question You'd find 5.216 on the table. 5.216 x ??? = $182,560 must be covered --- *9.14 - PPI* NPV = PV of Future Cash Flows - Initial Investment --- *9.15 - Payback period* --- *9.16 - NPV* --- *9.17 - Payback period* --- *FIN.*

Quiz 2

*All the questions asked so far have been under Weighted-Average Method. If any are under FIFO, which we've not learned, I'm dead.* *Read questions carefully and tables carefully. Make sure you don't mix up DM, DL, or OH* --- *2.1 - OH Rate per Hour* OH applied based on MH and thre's 16k MH [given] DM DL Sales Advertising are NOT OH; they're either DM, DL, or SGA The items that ARE OH include: Salary of production supervisor IDM Rent of Factory equipment Calculatal TOH then divide by 16k MH Easy --- *2.2 - Journal entry to record the incurrence of actual MOH costs would include a:* DR MOH actually incurred CR IDL, IDM, whatever DR WIP CR MOH applied to wip DR MOH [correct] for the actual amount that was incurred --- *2.3 - COGM* BWIP DM Used = BI + P - EI DL Incurred OH Applied to WIP (EWIP) --- *2.4 - Predetermined OH Rate based on how many estimated MH?* Predetermined OH Rate = Est'd OH / Est'd allocation base --- *2.5 - COGM August* BWIP DM Used = BI + P - EI [also given to us in Q] DL Incurred OH Applied to WIP (EWIP) --- *2.6 - TMC for November* *Make sure when you calculate for MOH, it's MOH applied* *DM used = BI DM + Purch DM - EI DM* --- *2.7 - WIP Inventory Balance in June 30th* You're solving for EWIP here There's 4 products, but there's only 1 where it hasn't been completed 100% yet and it's the only job that still has EWIP because every other job has been transferred out or delivered --- *2.8 - Actual MOH if OH was Underapplied* Actual MOH = Underapplied amount + Applied MOH --- *2.9 - Cost Per Equivalent Unit for Conversion Costs* Weighted-Average Method Only: Cost Per EU = (Cost BWIP + Cost Added During Period) / (100% UCTO + % Complete EWIP)<--this is the EU Step 4: Equivalent units of production For the W-A Method, EU = UCTO + UEWIP Take 100% of AA,000 units completed and transferred out = AA,000 units Add: BB,000 units EWIP x 60% complete = JJ,000 units Why do we only take 60% of EWIP? Is it because the 60% is the only actual units in EWIP in terms of conversion costs [and all we care about are calculate for EU for conversion costs in this question]? EU = AAk + JJk = FFk units Step 5: Cost per EU Cost per EU = (Cost in BWIP + Cost added during period) / EU of production Robin: is it $WWWW incurred + $XXXX BWIP costs / FFk units --- *2.10 - Cost per EU for conversion costs* Weighted-Average Method: Cost per EU =(Cost in BWIP + Costs added during the period) / (100% of UCTO + % Complete of UEWIP) --- *2.11 - Cost per EU for materials* *REALLY GOOD QUESTION* *Good question* This is the one where you're given the units in EWIP, the $ total for EWIP, the % C for DM, the $ C for DL + OH, and the cost per EU for DL + OH, and you're ask to calculate for the cost per EU for DM It's a really trippy question and no other one like it is asked throughout Ch. 2 so know it well. --- *2.12 - Cost of UCTO* UBWIP + USTI = UCTO + UEWIP Calculate for UCTO first THen multiply it by EUP to get the conversion cost assigned to UCTO during March --- *2.13* Cost to be accounted for = costs accounted for = BWIP + USTI = UCTO + UEWIP Calculate for either side of the equation *BUT ONLY COUNT HALF OF IT FOR COSTS ACCOUNTED FOR* Either do BWIP + STI or do CTO + EWIP, but not both --- *2.14 - Cost assigned to UTO to the next dept?* Find number units in UCTO Then calculate for cost per EU Cost per EU = Cost BWIP + Cost added dur period, divided by 100% of ucto and % complete of uewip --- *2.15 - EU for materials for month int he first processing dept?* Equivalent units = units completed and transferred out + Units in ending work-in-process inventory (and for weighted average method, just the percentage complete) --- *2.16 - EU Materials* *STILL DON"T UNDERSTAND HOW TO SOLVE FOR THIS ONE* UBWIP + US = UCTO + UEWIP 20,000 + 70,000 = 90,000 = 80,000 completed + X X = 10,000 EU for materials = 80,000 units completed (and transferred out???) + 10,000 EU If you read the table carefully, the % completed is relative to Labor and Overhead, NOT materials. So I guess you need to take 100% of EWIP. *The logic behind this question still confuses me.* "All materials are added to the beginning of the manufacturing process" =90k EU for materials [correct] --- *2.17 - cost of bwip would be* In this question,e verything is stated in terms of costs, nots units SO it's BWIP + STO = CTO + EWIP calculate for bwip and it's fine, it'll be in $'s not units --- *FIN*

Quiz 4

*EVERYTHING IN NOI IS BASED ON UNITS SOLD. THE REVENUE IS BASED ON UNITS SOLD. THE DM DL OH IS BASED ON UNITS SOLD. THE SGA COSTS ARE BASED ON UNITS SOLD. DON'T MIX UP WITH UNITS PRODUCED WHEN CALCULATING NOI.* Not sure if this is useful: Dollar sales for co to break even =(Traceable fixed expenses + common fixed expenses) / Overall CM Ratio Dollar sales for a segment to break even =(Segment traceable fixed expenses) / Segment CM Ratio --- *4.1 - Accuracy* ABC > Dept'l > Plantwide rate --- *4.2 - Whatsa Batch Level Activity?* Example: Process POs to make an order for a standard product --- *4.3 - Activity Rate for Fab Dept* Fabrication: Wages and Salaries: 60% x $X = $XXX Depreciation: 20% x $Y = $XXX Occupancy: 10% x $Z = $XXX SUM = $YYY $YYY spent in Fabrication total / AAA machine-hours in Fab (given) =$B.BB per machine hour [correct] --- *4.4* --- *4.5* --- *4.6 - Making Bouquets* --- *4.7 - Wall Mirrors* --- *4.8* --- *4.9* --- *4.10 - Case of the Canceled Cake* ***Trippy question because we include VCs and FCs*** X guests x $0.XX/guest = $67.68 X tiers x $X.XX per tier = XXX1 Cost of purchased decorations = $xx 1 order-related cost per order x $x.xx per order = $x.xx =SUM: $xxxx [CORRECT] --- *4.11 - NOI* Sales (VCs) (FCs) (SGA) =NOI here Make sure for ALL of these, we use units SOLD VCs are based on units sold Sales are based on units sold FCs are based on units sold FOH is based on units sold VMOH is based on units sold SGA is based on units sold It just wouldn't do to subtract cost of units produces from units sold revenue... it'd be a mess. --- *4.12 - NOI under absorption vs under variable costing* *If NOI AC > NOI VC* *EI > BI* *Units Produced > Units Sold* *^Note how everything here is alphabetical except for EI > BI* Becuase we know NOI AC < NOI VC, to restate it, we know EI < BI Units Produced < Units Sold What's the difference? Difference in unit product cost = 22-17 = 5 dollars per unit We know that NOI VC - NOI AC = difference of $2700 $2700 diff in NOI / the $5 diff in unit production cost = 540 units If NOI AC < NOI VC EI < BI So EI must be < BI by those 540 units Add 540 to get EI. Tada. --- *4.13* CM per unit = Sales - VCs, divided by number of units SOLD BUT HERE, we're finding VCs piece by piece With NOI, we ONLY multiplied per-unit costs by units SOLD Here, though, is different. We find TVCs. Meaning production costs like DM, DL, VOH should be multiplied by units PRODUCED. Whereas SGA should be mult. by units SOLD (Sales - (USGA x units sold) - (UDM x units produced) - (UDL x units produced) - (UVMOH x units produced)) / Units sold *GOOD QUESTION^* --- *4.14* Total CM margin under variable costing approach = Sales - VCs, all divided by sales? For this q, though, we had to do: Sales P per unit - DL/unit - DM/unit - VMOH/unit - VSGA/unit, all times the units sold *If the costs are already stated per-unit, it can be assumed it's already per unit for whatever type of unit it needs--either units sold for SGA or units produced for DM, DL, VMOH. So no need to multiply by units produced and divided again by units sold. It already is find the way it is? Also. This is CONTRIBUTION MARGIN. We want TVCS. meaning ALL the VCs, meaning product costs should be for units produced, and SGA should be for units sold, whereas for NOI we had to convert to units sold only.* --- *4.15 What is absorption costing NOI in Y1?* Easiest way to Solve it: Units produced > units sold So EI > BI and NOI AC > NOI VC, so we'd need to add to NOI VC to get to NOI AC, our answer But how much do we add? (XXX units produced - YYY units sold = difference of ZZZ units) FMOH per unit = AAA dollars FMOH / XXX units PRODUCED = $J.JJ per unit produced FMOH VVV units difference x $J.J FMOH per unit produced = $QQQQ NOI VC of $NNN + QQQQ = $LLLLL NOI AC [correct] --- *4.16 - Period Cost under VC* VC Product costs = DM, DL, VMOH only Period costs VC = FMOH, FSGA, VSGA FOH Per units VSA x units sold FSGA =Period costs under variable costing *STOP GETTING PRODUCT AND PERIOD COSTS MIXED UP* --- *4.17 - Absorption Costing NOI* VC Noi = $XX,XXX last year If EI decreased last year by 1500 units, then BI > EI, or EI < BI Therefore NOI AC < NOI VC Units P < Units Sold FMOH per unit = $A per unit $A x 1500 units = JJJJ FMOH If we add JJJJ to NOI VC, should get us NOI AC --- *FIN* ---

Homework 7

*Formulas* *Throughput Time = PIMQ* *Manufacturing Cycle Efficiency = P / PIMQ* *Delivery Cycle Time = WPIMQ* Imagine your delivery is being completed by a wimpy kid. Perhaps Peter Parker, aka Spiderman. "*W*ith *P*izza. *I*n a *M*ask*?* (Question mark)" RI (More of a Quiz 7 thing) = NOI - (AOA x MinROR) --- *7.1.1* TT = PIMQ MCE = P/PIMQ DCT = WPIMQ MCE is written as a % --- *All the 7.2 questions are "What is ROI"? but you have to know how to calculate NOI and AOA properly* *7.2.1 - ROI = Margin x Turnover* ROI = Margin x Turnover Margin = NOI/Sales Turnover = Sales/AOA = Sales/Average operating assets Margin is written as a % ROI is also written as a % Turnover, however, is usually written as a dollar value Examples:: Margin 94,000 / 994,000 = NOI [given] / sales [given] = same @ 8.45% [correct] Turnover: $2.485 = $2.49 rounded [correct] = sales / average operating assets = $994,000 / $400,000 ROI: 0.20998 = 21% [correct] = 0.845 × $2.49 = margin x turnover --- Skip skip skip --- *7.2.6* Q: At beg. of yr, obsolete inventory carried on the books at a cost of $20,000 is scrapped and written off as a loss Margin: 6.44% [correct] = (old NOI of 84,000 - $20,000 loss) / $994,000 sales revenue = 64,000 / 994000 = 0.064386 Turnover: $2.10 [correct] = Revenue / Average Asset Inventory = $994,000 / (494,000 - 20,000 loss) = 2.097 or 2.10 ROI: 13.52% = 0.13534 [correct] = Margin × Turnover = 0.0644 × $2.10 --- *7.2.7* Q: at the beginning of the year, the company uses $178,000 of cash (received on A/R) to repurchase and retire some of its common stock Changes: Revenue, oddly, does NOT change. The reason being is, whether it's in the form of cash or A/R, REVENUE itself does NOT change. Only cash vs. A/R changes. I think A/R decreases by $178,000 Margin: 8.45% [correct], hasn't changed Turnover: $3.15 [correct] ~ $3.1455 = Revenues / Average asset inventory = $994,000 / (494,000 old average asset inventory - 178,000) = 994k / 316k ROI: 26.62% [correct] = 0.266175 per dollar = 0.0845 × $3.15 = margin × turnover

Quiz 1

*IF ANY QUESTION PROVIDE YOU WITH TWO DIFFERENT LEVELS OF ACTIVITIES, SUCH AS SALES FROM TWO DIFFERENT MONTHS OR TWO DIFFERENT PERIODS, THE KEY WORD IS -DIFFERENT LEVELS- OF PRODUCTION, YOU ARE PROBABLY USING THE HI-LO METHOD* *(Hi activity level's $ - Lo activity level's '$) / (High activity level units - Low activity level units) will calculate unit variable cost, but that's not enough* *If you then plug in the unit variable cost into either the high or the low, you can then calculate for fixed costs* --- *1.1* Using cash means using cash. NO A/P. NO A/R. NO Depreciation. These items do NOT use cash. --- *1.2 - If activity level increases, how will it affect VCs? FCs? UVCs? UFCs? Unit costs?* VC per unit will stay the same, by definition. So will TFC. I answered that total cost per unit will decrease, and the reason why is, even though VC per unit remains the same, FC per unit will decrease, and that will lower cost per unit --- *1.3 - Differential Cost* Purely definitional Cost of one choice vs. cost of other --- *1.4 - Opportunity Cost* purely definitional Cost forgone--such as if you choose to go to college at age 18 as opposed to start joining the workforce immediately, one of the opportunity costs is the wages foregone if you had chosen to start flipping burgers --- *1.5 - Conversion Costs* Conversion costs = DL + OH very straightforward question --- *1.6 - What is MOH if you are given TMC, DL, and Prime costs?* TMC = DM + DL + MOH TMC = Prime Costs + MOH Pretty straightforward question --- *1.7 - Best Estimate of Total Monthly Fixed Cost* *HIGH LOW METHOD QUESTIONS. DON'T FORGET THESE. ANY QUESTION THAT GIVES YOU TWO DIFFERENT LEVELS OF INFORMATION, YOU SHOULD BE USING HIGH LOW METHOD* Add up all the costs for the high level of activity together Then add all of the costs for the low level of activity together Do the high-low method. *Hi-Low Method for calculating Unit Variable Costs* *(High activity level's $ - Low activity level's $) / (High activity level - Low activity level) Here, the numerator is populated by (costs of sales + SGA expenses), while the denominator is populated by sales volume (units) TO calculate for fixed costs, you need to plug in what you get --- *1.8 - Best Estimate of the Total Variable Manufacturing Cost Per Unit is?* Step 1: Use the hi-low method to calculate unit variable cost Step 2: Plug it into the high or the low; don't actually calculate for FCs, you only want VCs *Robin: Question: But how does this equation actually work out if the high and the low methods are fundamentally different from each other? For some reason, with this quesiton, if you plug it into either the high or the low, I Think you get the same Vcs, but realistically, that shouldn't be the case????* --- *1.9 - The best estimate of the total monthly fixed cost* Step 1: calculate for unit VC using hi low method Step 2: Calculate for FC by plugging in TVC into either the high or the low equation, then solving for X = Fixed cost --- *1.10 - Company P would expect to incur total factory OH costs of* --- *1.11 - Dividing costs into fixed and variable parts, and finding unit variable cost and then recalculating for the new TC given a change in units sold* --- *1.12* - For this question it's also hi low method but you're given data for a bunch of months, and you have to find which one has the lowest and highest level of activity and compare them --- *1.13 - What are the Period Costs?* In this question, they don't specify whether it is variable or absorption costing, but they calculated how one would if it were absorption costing; in the textbook too it's defined this way (just for Ch 1) IF THE QUESTION DOES NOT SPECIFY WHETHER VARIABLE OR ABSORPTION COSTING METHOD IS USE TO CALCULATE FOR PRODUCT AND PERIOD COSTS, CALCULATE IT THE SAME WAY AS IF YOU WERE USING ABSORPTION COSTING: *ABSORPTION COSTING / Unspecified PRODUCT AND PERIOD COSTS* *Product costs:* DM DL VMOH FMOH *Period Costs:* SGA, both fixed and variable Here, we have Admin wages and salaries, sales staff slaries, corporate HQ's bldg rent, marketing (which is a selling cost) --- *1.14 - What is the best estimate of the company's variable selling and administrative costs?* Do the high-low method, but only include selling and admin costs in the numerator Don't include COGS in Selling and admin costs, just include selling and admin costs. Costs of the goods that were sold is not the actual selling costs, remember that --- *1.15 - Gross margin * Gross margin = Sales - COGs --- *1.16 - Gross margin* Gross margin = units sold x (unit price - unit COGS) --- *1.17 - What is the total amount of costs listed above that are not direct costs of the Brentwood store?" This question is really simple, and they really straightforwardly explain to you which costs are Brentwood so, duh, everything else are not direct costs of Brentwood. Make sure you count costs that aren't just not specific to Brentwood, but costs that affect Brentwood and all the other stores. aka common costs to all the stores --- *1.18 - What is differential cost?* The difference in costs between two alternatives What is the question actually asking you? They only care about the difference in cost between buuying the 230 machine instead of the 330 machine. So just find the difference in cost Cost of MOdel 330 machine - cost of 230 machine Also, *sunk costs are never relevant; ignore all sunk costs when making such decisions* --- *FIN*

Homework 9

*STUFF TO NOT FORGET* *Project profitability index = Net present value / Investment required* *NPV = PV of future cash flows - initial investment [but also add back any money you get back at the end of all this mess]* SROR = AINOI / II = annual incremental net operating income / initial investment *IMPORTANT: To calculate AINOI, we DO include depreciation expense* IROR = Investment required / Annual net cash inflow *FIROR = Factor of the internal rate of return = IReq / ANCI, actually* *You have to calculate Factor of IROR = Investment required / Annual net cash inflow, then find the year --> Find the FIROR and then go up ^* *YOU MUST MUST MUST CALCULATE FIROR AND USE THE NPV TABLE OR ELSE YOUR ANSWER WILL BE WRONG* --- *9.1.1 - Payback Period* Payback period = PP = II / CIPP = initial investment / cash inflow per period PP is a very straightforward formula, usually no need to check out the NPV tables, etc. Make sure you *don't include depreciation because depreciation DOES NOT INVOLVE CASH*. So, duh. --- *9.1.2 - NPV* *NPV = PV of cash flows - initial investment* >>Don't forget the *initial investment* >>Take note of the PV of the cash flows. If the cash inflow per period differs, you'll have to one-time table each year or period one by one. If it's same, then use the annuity table. >>*Don't forget to add back any money that's given back to you at the end* (e.g., landlord returns your deposit, or you sell back the cars you bought)--and don't forget to discount it using the one-time table --- *9.1.3 - Internal Rate of Return* IROR = Investment required / Annual net cash inflow *FIROR = Factor of the internal rate of return = IReq / ANCI, actually* *You have to calculate Factor of IROR = Investment required / Annual net cash inflow, then find the year --> Find the FIROR and then go up ^* *YOU MUST MUST MUST CALCULATE FIROR AND USE THE NPV TABLE OR ELSE YOUR ANSWER WILL BE WRONG* --- *9.1.4 - Project Profitability Index (PPI)* PPI = NPV / IR "You need to use a *net* full of *presents* to capture *investors required*" Very straightforward formula as well, but make sure you calculate NPV properly *Question: If you receive any money back at the end, do you subtract it from investment required? For example, say you sold your old machine before buying a new one, would you decrease IR by the price you sold the old machine for? How about if you manage to get your deposit back at the end?* --- *9.1.5 - Simple Rate of Return* SROR = AINOI / II = annual incremental net operating income / initial investment *IMPORTANT: To calculate AINOI, we DO include depreciation expense* --- *9.1.6a - Desirable features* Things you want to be longer/higher: >>Payback period >>NPV >>Internal rate of return >>Project profitability index >>SImple rate of return --- *9.1.6b - Rate of Return* If the rate of return, which is = IROR = IR/ANCI is < 100%, it means the annual net cash inflow won't even cover the initial investment required. Therefore, the project should be rejected. THis question mentions ROR but not IROR specifically so not sure how applicable my explanation is^ --- *9.2.1 - 9.2.3: NPV questions* You should be able to solve these, no problem

Quiz 6

*Variances* --- *Stuff to Know* *FLEXIBLE BUDGET: budgeted fixed costs + (actual quantities x budgeted prices)* AQ, SP *PLANNING BUDGET: budgeted fixed costs + (budgeted quantities x budgeted prices)* SQ, SP --- *6.1 - Budgeted OH == ?* Add up all the VMOH--this is the VMOH if it had been under the original 7800 MH. Divided TVMOH / 7800 original MH, then multiply by 7900 MH. Variable costs are constant on a per-unit basis. Then add to FMOH, which included supervision, utilities, depreciation --- *6.2 - Spending Variance for Catering Supplies* Spending variance is a variance within what you spend, so the stuff IN the parentheses must be Price AQ(AP-SP) = AQAP AQSP We are given the SPs in the cost formula, and we must plug in the AQ's and SQ's. The SP's are already provided by the formula. AQAP: [OMITTED] Actually spent on catering supplies [GIVEN] Less: AQSP: 210 per month + 96 per job x 17 actual jobs, + 20 per meal x 164 actual meal =5,122 = [OMITTED] --- *6.3 - Spending Variance for Admin Exp* AQ(AP-SP) AQAP - AQSP Solved in pretty much same way as last question --- *6.4 - Plane Operating Costs in the Flexible Budget* *FLEXIBLE BUDGET: budgeted fixed costs + (actual quantities x budgeted prices)* AQ, SP *PLANNING BUDGET: budgeted fixed costs + (budgeted quantities x budgeted prices)* SQ, SP This question isn't asking for variance, it's asking about the plane operating costs for the flexible budget SO you can straight-up plug in the actual quantities into the formula, which will provide you with the standard prices. $41,380 operating costs per month + ($2,282 x A actual flights) + ($14 x B actual passengers) --- *6.5 - Activity Variance for Personnel Expenses* Activity refers to quantities, so SP(AQ-SQ) SP*AQ - SP*SQ It's Unfavorable because actual cost > budgeted cost --- *6.6 - Activity Variance* make sure to double-check what the question is asking you. There's a lot of data in the table, but we're only looking at DL for this question. Ignore all else. Activity variance = SP(AQ-SQ) SPAQ - SPSQ *Hey. For questions like this, because the fixed part of the question will remain the same regardless of whether you're on the left or the right side of the equation (whether you're in SPAQ or SPSQ), you can ignore it and save yourself the time. I mean, 500 FCs - 500 FCs = 0's out, you know?* --- *6.7* Revenue variance = AQ(AP-SP) Since they're asking about revenue, you care more about P than about Q. Also, for *Revenue variance - more is better. If Actual Revenue > Budgeted Revenue, WHOOHOO. It's a favorable variance. You're getting more than you were hoping for.* --- *6.8 - Activity Variance for personnel expenses* Make sure you only look at Personnel department AQ(AP-SP) --- *6.9 - Activity Variance for DL* SP(AQ-SQ) or SR(AH-SH) --- *6.10 - Great Price, But We Use Too MucH DM* A favorable price variance but an unfavorable qty variance? Tsk. Probably someone bought crappier materials from China. So it's cheaper per unit, but it might just break on you and you might end up using more than you used to. :( --- *6.11 - Labor Efficiency Variance Resulting from Use of Poor Quality Materials Should be Charge to* Whoever bought that garbage --- *6.12 - Labor Efficiency Variance - The Toothpick Motor Question* SP(AQ-SQ) SR(AH-SH) You have to convert between DLH and units of FGs =$X SR per DLH(Y actual DLH - (Z SH per toothpick motor x J actual toothpick motors) =$X SR (Y AH - ZJ SH) --- *6.13 - How Many Units Did the Co Produce during the month?* Info you're given: Std DL Rate or SR Actual DLH or AH Labor efficiency variance as well as it's Favorable DLH allowed per unit produced Labor eff variance = SP(AQ-SQ) =SR(AH-SH) You know these items: SR AH SR(AH-SH) Once you calculate for Budgeted DLH, you can divide it by DLH allowed per unit produced to get your answer We know that budgeted DLH is 5X, with X being the actual units produced [I think it's actual units produced] --- *6.14 - VOH Rate Variance* AH(AR-SR) AQAP - AQSP In this question, you have all data you need except AR, and you can calculate that by doing Actual TVOH / Actual MH --- *6.15 - Fastgro Fertilizer - Materials Price Variance* AQ(AP-SP) We're converting between lbs DM and sacks/bags here We know AQAP of DM is $32,300 AQ(SP) == ? We know actual qty is 85,000 lbs [given] And SP is... $8 per bag / 20 lbs per bag = $0.40 SP per bag AQAP - AQSP Do the math. --- *6.16 - Dental Floss Wigs - VOH Rate Variance* VOH Rate variance = AH(AR-SR) AHAR - AHSR *Note that VOH is based on DLH* --- *6.17 - VOH Rate Variance* AQ(AR-SR) VOH is based on machine hours; it's not explicitly stated in the question but it's stated in the table as the header "Budgeted VOH cost per MH" --- *FIN* --- *I've omitted a lot of calculations and answers in this question because I don't want students to have easy access to solutions*

Homework 2

FORMULAS YOU CAN'T AFFORD TO FORGET EUP = 100% UCTO + % Complete EWIP Cost Per EU = (Cost BWIP + Cost Added During Period) / EUP Cost of EWIP = % Complete EWIP x Cost Per EU This isn't an official formula but it works for 2.1.3 Cost per EU may differ per department, such as mixing, materials, and conversion, by the way Predetermined OH Rate = Est OH / Est Allocation Base *Actual MOH costs vs Estimated MOH Costs* *Estimated MOH Cost = AQ x SR* --- *2.1.1 - EUoP under the WEIGHTED AVERAGE METHOD* *EUoP = 100% UCTO + % Complete EWIP* --- *2.1.2 - Cost per EU* *Cost Per EU = Cost BWIP + Cost added during period / EUoP* =(CBWIP + CADP) / (100% UCTO + %C EWIP) --- *2.1.3 - Cost of EWIP* Cost of EWIP = % Complete EWIP x Cost Per EU Cost per EU may differ per department, such as mixing, materials, and conversion, by the way --- *2.1.4 - Cost of UTO* Cost of UTO = 100% UTO x Cost Per EU Cost per EU may differ per department, such as mixing, materials, and conversion, by the way --- *2.1.5 - Cost reconciliation report for a dept* Casing and Curing Dept Cost Reconciliation Costs to be accounted for: Cost of BWIP inventory Costs added to production during period =TC to be accounted for Costs accounted for as follows: Cost of units completed and transferred out Cost of EWIP inventory =TC accounted for --- *2.2.1 - Predetermined Overhead Rate* PDOHR = Estimated OH / Estimated allocation base Usually answer is written as a percentage --- *2.2.2 - Over and Underapplied MOH* Actual MOH costs vs Estimated MOH Costs Estimated MOH Cost = AQ x SR* SR = predetermined OH rate = Est MOH / Est Allocation Base --- *2.2.3 - Schedule of COGM for the Year* Gitano Products Schedule of COGM Direct materials: Beginning RM: $24,000 (given) Add: Purchases of RM: $140,000 (given) =Total raw materials available: $164,000 Less: Ending raw materials inventory: $11,000 (given) =Raw materials used in production: $153,000 Direct labor: $81,000 (given) Manufacturing OH applied to WIP: $214,200 applied [this isn't actual OH!] =Total manufacturing costs: $448,200 [153k RM + 81k DM + 214.2K MOH] Add: BWIP inventory: $49,000 =Blank space: 497,200 Less: EWIP inventory: $38,000 =Cost of goods manufactured: $459,200 [correct] COG M = DM Used (which equals BI + P - EI DM) + DL + MOH *applied* to WIP + BWIP - EWIP --- *2.2.4 - COGS* COGS = BFGI + COGM - EFGI --- *2.2.5 - WIP inventory* For some reason, DM + DL + OH = EWIP inventory here