ACTG Final

Average sale period

365 days / inventory turnover

what does a debt to equity ratio of .59 for ex. mean

59% of the company is funded by debt

expense on an income sheet

Accumalated Depreciation

whether the product is generating enough revenue to cover its Fixed expenses

Contribution Margin measures

labor costs that can be easily traced to individual units of product

Direct Labor

false lenders take less rick

t/f the lender is taking more risk then investors b/c they have more control over the business

direct labor + overhead

Conversion Cost

product costs and period costs

Cost Classifications

prepaid expenses and unearned revenues until THEY HAVE BEEN USED on balance sheet until recognized

Deferrals

Costs that can be specifically identified with a particular product or activity.

Direct Costs

Materials that become an integral part of a finished product and whose costs can be traced to it.

Direct Materials

Net Sales - COGS

Gross Profit Formula

increase

If the contribution margin per unit decreases, the break-even point will

costs that have both a fixed and a variable component Electricity for ex.

Mixed Costs

past, present, or future cash outflow

Outlay Cost

Direct Materials + Direct Labor

Prime Cost

costs that are a necessary and integral part of producing the finished product (everything buy selling and administrative expenses) always gets capatilized

Product Costs

Net Income/ net Sales

Profit Margin Formula

fixed costs for manufacturing

Property taxes, insurance, equipment leases

level of activity where fixed costs remain fixed (vertical line in step costs)

Relevant Range

fixed costs for services

Rent, straight-line depreciation, administrative salaries, and insurance

costs that increase in a step manner (chunks) rather than gradually looks like a staircase

Step Costs

(a)fixed cost + (a) variable cost

Total Cost Formula

The liability created by receiving revenue in advance. Represent a customers advanced payment

Unearned Revenue

compares a large company w/ a smaller company

Vertical Analysis of Income Statement

decrease

When sales price INCREASE and all other variables are held constant, the break-even point will

current assets - current liabilities

Working Capital formula

expenses incurred but not yet paid in cash or recorded

accured expenses

A revenue that has been earned but for which the cash has NOT yet been collected.

accured revenue

Entries made at the end of an accounting period to ensure that the revenue recognition and expense recognition principles are followed.

adjusted entries

liability

an asset can never become a

false

asset must be tangible

total fixed costs divided by the total number of units produced, which results in a per-unit cost FC/Q

average fixed cost (AFC)

revenue per unit - Variable Costs per unit

contribution margin formula

Merchandising, manufacturing, and service organizations must.....

control costs to remain profitable

sacrifice of resources

cost

how a cost reacts to changes in the level of activity

cost behavior

using cost and revenue behaviors to predict profit predicts impacts of changes want to make decision to maximize profit

cost volume profit analysis

any revenue above VC will contribute to

covering fc and earning a profit

When fixed costs decrease and all other variables remain unchanged, the break-even point will

decrease

example of product cost

direct material direct labor selling costs

net income/ average share outstanding

earnings per share formula

ratio that concerns how well the business manages it's key assets

efficiency

Manufacturing Overhead Costs are

estimated based on past experiences

charged against revenue in accounting period

expired cost

expensed cost

expired cost is charges against revenue in an accounting period

opportunity cost does not appear in

financial statements b/c it did not happen

Costs that do not vary with the quantity of output produced

fixed costs

contracts selling old equipment can be changed but not w/ volume

fixed costs can be controlled by

an additional client/cost (fixed)

fixed costs do't change w/

what cost would vary for a car that is driving across the county

gas b/c you have to keep paying more as you go further

desired profit + fixed costs that number/ per unit contribution margin

how much money must they earn to reach their target income?

When sales price DECREAE and all other variables are held constant, the break-even point will

increase

When variable costs increase and all other variables remain unchanged, the break-even point will

increase

supervisor salaries

indirect costs examples

manufacturing overhead examples

indirect costs, materials, etc.

additional debt of the business relative to equity results in greater

leverage

short term=

liquidity

business that uses parts, components, or raw materials to produce finished goods

manufacturing organization

things that influence straight line vs accelerated depreciation...

none

When fixed costs increase and all other variables remain unchanged, the contribution margin will ________.

not change

ex of variable costs

number of hours business is open number of hotel rooms occupied

paying the monthly payment to pay off the car

operating cost does not include (how it depreciates)

gross profit - operating expenses

operating profit formula

whatever must be given up to obtain some item

opportunity cost

all NON direct costs

overhead

broad category of fixed costs that includes interest, rent, taxes, and executive salaries isn't worth while to trace to the product (like glue/air they are not a direct cost)

overhead definition

costs that are taken directly to the income statement as expenses in the period in which they are INCURRED or accrued EVERYTHING THAT IS NOT PRODUCT COST

period cost

selling and administrative expense

period cost example

the amount paid to suppliers for products that are purchased MERCHANDISE anything to do w/ production process

product cost

ratios that concern how well a company produces returns from its operations

profitability

helps asses companies performances

ratio analysis

3 kinds of inventory

raw materials work in process finished goods

measures company's effectiveness in collecting accounts receivable

receivable turnover ratio

example of fixed costs for merchandising

rent, insurance, manager salaries

stockholders equity previous earnings from previous periods

retained earnings

divide denominator by 2

return on/ turnover means to

what does accrued revenue match up with

revenue recognition principal

3 types of business

service, merchandising, manufacturing

relevant range is for

so managers can predict revenue or cost levels

long term=

solvency

false

t/f if a company experiences an increase in the market value of equipment then this change will be reflected in equity

add up all the costs of production THE FIXED COSTS (not variable costs)

to find product cost

AVC average variable cost

total variable costs divided by the total number of units produced, which results in a per-unit cost VC/Q

cost that changes as output changes

variable cost definition

DIRECT labor

which is not overheard

equity investors

who takes the most risk