ManagerialAccountingStudyGuide

1、Managerial Accounting Study GuideDisclaimer: This guide does not include all the material that will be covered on theexam. However, the listed items will direct your attention to the main ideas that willbe the source for multiple-choice questions. Some of the multiple choice questionsmay take the fo

2、rm of small calculation problems.Chapter 1:1. Managerial accounting reports provide decision-making information for internal users.The reports need not follow GAAP, and the reports often focus on the future.2. The controller is the top management accountant in a company.3. Under Total Quality Manage

3、ment, a business strives to improve performance inconjunction with goal setting.Chapter 2:1. Manufacturing or product costs have three components: direct materials, direct labor,and manufacturing overhead. Know what it included in each component.2. Direct costs are costs that can be traced convenien

4、tly and economically to a costobject. Indirect costsare not traced directly to a certain cost object.3. Selling and general/administration costs are nonmanufacturing or period costs that arereported on the Income Statement. These costs are used to generate revenues during thecurrent period.4. A manu

5、facturer has three inventory accounts: Raw Materials, Work-inProcess, andFinished Goods. These inventory accounts are assets that are reported on the BalanceSheet.5. A cost object is any product, service, or department which receives allocated costs todetermine its cost.6. Sunk costs are past costs

6、that are not relevant for present decision-making purposes.7. The cost of goods manufacturing is the cost of the items that are completed andtransferred to Finished Goods during a period.8. Review the cost of goods manufactured formula on page 65 and the cost of goodsformula on page 63.Chapter 3:1.

7、There are two basic product-costing systems: job order costing and process costing.2. A job order costing system is used by a manufacturer who produces unique or special-order products.3. Process costing system is used by a manufacturer in a continuous flow or assembly lineenvironment.4. Product cos

8、ts flow from Raw Materials to Work-in-Process to Finished Goods to Costof Goods Sold.5. Direct material costs, direct labor costs, and manufacturing overhead costs are added toa Work-in-Process account during production.6. A job order cost card is used in a job order costing system to record the dir

9、ect materials,direct labor, and overhead costs associated with a specific job. The product unit cost isthe total job cost divided by the number of units produced.7. Overhead is allocated or assigned or applied to jobs using an estimated overheadallocation rate.8. Most companies prepare an estimated

10、allocation rate. This estimated overheadallocation rate is called the predetermined overhead rate. It is usually calculated for ayear s time period.9. Predetermined Overhead Rate = Estimated Factory Overhead/Estimated AllocationBase.10. The selected allocation base should be associated with the over

11、head costs. Commonallocation bases are direct labor hours, direct labor costs, and machine hours.11. Usually, the amount of applied overhead will not equal the actual overhead at the endof the year since the applied overhead is based on estimates.12. If the applied overhead is greater than the actua

12、l overhead, the difference is calledoverapplied overhead. If the actual overhead is larger, the difference is calledunderapplied overhead.18. A just-in-time (JIT) manufacturing system works to reducethe inventory levels of a manufacturer.Chapter 4:1. Cost allocation is the process of assigning indir

13、ect costs.2. A cost pool is the total of costs that is allocated by an allocation base (activity driver).The individual costs in a cost pool should be similar or homogeneous.3. An allocation rate is calculated by dividing the budgeted cost pool by the estimatedactivity driver rate (allocation base).

14、 The allocated cost is determined by multiplying theactual usage of the allocation base by the allocation rate.4. Traditional cost allocation systems have used one or two cost pools that have usedproduction volume allocation bases.5. Since the traditional cost allocation systems have used few pools

15、and production bases,product prices are often not accurate.6. Activity-based costing uses many cost pools with different allocation bases. The costpool rate is the pool costs divided by the cost driver (activity or allocation base).7. When an activity-based costing system is implemented, the accurac

16、y of costing isimproved. Usually, the costs of high volume products decrease while the costs of lowvolume products increase.Chapter 5:1. A process costing system doesnotuse job cost cards.2. In a process cost system, the product costs flow through multiple departments3. Direct materials, direct labo

17、r, and overhead costs for each department are accumulatedin that department“-ins-PWrorckess account.4. Costs flow from one department- in-sPWroocrekss account to the nextdepartment sW-oinrk-Process account. These costs are called transferred-in costs.5. Conversion costs include direct labor and manu

18、facturing overhead costs.6. A process costing system uses equivalent units to calculate an average unit cost.7. Equivalent units measure production in terms of whole units. Know how to calculateequivalent units.8. A production cost report provides information summarizing the units for whichdepartmen

19、ts are accountable and the costs charged to the departments. In particular, itreconciles the units and the costs and calculates cost per equivalent unit.Chapter 6:1. Variable costsare costs that change in total with the level of business activity. Thevariable cost per unit remains constant.2. Fixed

20、costs are costs that do not change in total with the level of business activity.However, the fixed cost per unit varies inversely with changes in the level of businessactivity.3. Mixed costs contain both fixed and variable cost components.4. The high-low method can be used to estimate the variable a

21、nd fixed costs in a mixedcost.5. Full costing (absorption costing) is required by GAAP. Direct labor, direct materials,variable manufacturing overhead, and fixed manufacturing overhead are included in thecost of inventory.6. Variable costing is used internally for decision-making purposes. Direct la

22、bor, directmaterials, and variable manufacturing overhead are included in the inventory costs.7. The treatment of fixed manufacturing overhead is the only difference between full andvariable costing. Fixed manufacturing overhead is an expense on the income statement inthe period incurred under varia

23、ble costing.8. When the units produced equals the units sold, the net income under full costingequals the net income under variable costing.9. When the units produced are greater than the units sold, the net income under fullcosting is greater than the net income under variable costing.10. When the

24、units produced are less than the units sold, the net income under fullcosting is less than the net income under variable costing.11. A variable costing income statement reports the contribution margin. A full costingincome statement reports the gross margin.12. The full costing method can be used by

25、 managers to manipulate performance results.Chapter 7:1. The break-even point is the number of units that must be sold or amount of salesrevenue that must generated to have no profit or no loss. In other words, the net incomeis zero.2. The profit equation is: Profit = Sales less Total Variable Costs

26、 less Total Fixed Costs.3. The margin of safety is the difference between the expected sales and the break-evensales.4. The contribution margin per unit is equal to the sales price per unit less the variablecosts per unit.5. The breakeven in units is equal to the Total Fixed Costs divided by the con

27、tributionmargin in units. Know how to calculate the breakeven point.6. The required number of units that must be sold in order to achieve a specified profitlevel (operating income) is equal to the sum of the Total Fixed Costs plus the OperatingIncome (Profit Level) divided by the contribution margin

28、 in units. Know how tocalculate the sales in units to achieve a desired profit level.7. An increase in fixed costs or variable costs will increase the break-even point. Anincrease in sales price will decrease the break-even point.8. Operating leverage refers to the cost structure of the business. A

29、business with highpercentage of fixed costs is considered to have a high operating leverage.Chapter 8:1. Decision making is based on incremental analysis which investigates incrementalrevenues and incremental costs. Incremental costs are often called differential costs orrelevant costs.2. Incrementa

30、l analysisinvestigates the differences in revenues and costs for differentdecision alternatives.3. Sunk costs are not relevant in the decision-making process. Avoidable costs arerelevant costs in the decision-making process.4. Opportunity costs are the benefits that are lost when one alternative is

31、chosen overanother alternative.5. Common costs are costs that are not directly traceable to a product line or department.Instead, these costs are allocated to the individual product lines or departments. If oneproduct line or department is dropped, the common costs are allocated to the remainingprod

32、uct lines or departments.6. A product line should be dropped only when the total net income of a business willincrease if the product line is eliminated. Usually the product line should be retained ifcontribution margin is greater than the avoidable costs (cost savings).7. Products should be process

33、ed further when the incremental revenue from theadditional processing is greater than the additional costs of the additional processing.The joint costs are sunk costs in an additional processing decision.8. When there is a resource constraint, a business should strive for the highestcontribution mar

34、gin per unit of the constraint.9. A supplier or vendor is paid for the cost of production plus a fixed amount (orpercentage of cost) under a cost-plus contract.Chapter 9:1. A budget is a formal document that outlines a financial plan for achieving goals. Abusiness is not required to prepare budgets.

35、2. Budgets are used to increase communication and coordination and to evaluateperformance.3. When budgets are prepared using zero-based budgeting, all budgeted amounts arejustified for each budget period.4. The master budget is a collection budgets such the sales budget, the production budget,and th

36、e direct materials budget.5. The sales or revenue budget is the first budget prepared in the master budget sequence.6. For a manufacturer, the production budget is the second budget prepared. Productionin units is equal to the budgeted sales in units plus the desired ending inventory in unitsless th

37、e beginning inventory in units. Know how to calculate a production budget.7. After the production budget is prepared, direct materials and direct labor budgets areprepared. Know how to calculate direct materials purchases and direct laborrequirements.8. Cash collections (receipts) and cash payments

38、(disbursements) budgets provideinformation for determining the cash balance, the amount of excess cash for investment,and the amount of cash available for capital acquisitions. Know how to calculate cashreceipts from sales and cash disbursements for purchases.9. A budget variance is the difference b

39、etween the budgeted and actual amount.Chapter 10:1. A decentralized business gives decision-making authority to the mangers of itssubunits.2. Two advantages of decentralization are better information at the manager level andquicker response time at the manager level. Additionally, decentralization m

40、otivates andtrains managers.3. Two disadvantages of decentralization are a duplication of activities at the differentsubunits and a lack of goal congruence.4. Under responsibility accounting, managers are responsible for the revenues and coststhat are under their control. A manager should be account

41、able for only controllable costs.5. The subunits of a business often are referred to as responsibility centers. Threecommon responsibility centers are cost centers, profit centers, and investment centers.6. A manager of a cost center is responsible for controlling costs in that subunit. Amanager of

42、a profit center is responsible for generating revenues and controlling costs. Amanager of an investment center is responsible for investing assets, generating revenues,and controlling costs.7. The return on investment (ROI) is used to evaluate the performance of investmentcenters. ROI is a better th

43、an income as a performance measure for aninvestment centerbecause it compares the amount of income to the amount of investment.8. However, ROI evaluation can lead to underinvestment when managers reject projectsthat have returns greater than the required return but that will lower the ROI. Evaluatio

44、nin terms of profit can lead to overinvestment.9. ROI is income divided by total assets (invested capital). Know how to calculate ROI.10. ROI can be separated into a sales margin component and capital (investment)turnover component.11. Sales margin is income divided by sales. Know how to calculate p

45、rofit margin.12. Capital (Investment) turnover is sales divided by total assets (invested capital).Know how to calculate the capital turnover.13. Residual income is the net operating income less the required profit.Know how to calculate residual income.14. The balanced scorecard is another method to

46、 evaluate performance. The balancedscorecard considers financial, customer, internal process and growth measures.15. Flexible budgets can be adjusted for various activity or production levels16. Managers use the principle of management by exception to investigate the differencebetween projected resu

47、lts and actual results. Under management by exception, minordifferences are not investigated.Chapter 11:1. Standards are costs that a business sets as goals. Standards can be set for directmaterials, direct labor, and manufacturing overhead.2. Attainable standards are goals that can be reached with

48、reasonable effort. Attainablestandards are not set on perfect performance.3. A budgeted cost can be calculated by multiplying the standard cost by the number ofbudgeted units.4. Generally, manufacturers set standards for price and quantity for direct materials andfor rate and efficiency for direct l

49、abor.5. Cost variances are the difference between the standard cost and the actual cost.6. If the actual cost is greater than the standard cost, the variance is unfavorable. If theactual cost is less than the standard cost, the variance is favorable.7. A volume variance results from an actual produc

50、tion that is different from theestimated production level.8. Different departments have responsibility for the different variances. For example, thePurchasing Department usually would be responsible for the direct materials pricevariance.Chapter 12:1. Capital expenditures decisions also are called c

51、apital budgeting decisions or capitalinvestment decisions. These decisions involve the acquisition of long-term assets.2. Both the net present value method and the internal rate of return method use the timevalue of money in the evaluation of capital investments.3. The net present value method is th

52、e sum of the present values of the cash inflows andcash outflows from an investment.4. A positive net present value indicates that the rate of return is greater than the requiredrate of required.11 / 125. The internal rate of return is the rate of return that results in a net present value of zero.6

53、. If the internal rate of return is greater than the required rate of return (the cost ofcapital), the investment should be accepted.7. The payback period is the length of time needed to recover the cost of an investment.Know how to calculate the payback period8. The payback method does not use the

54、time value of money and does not consider cashflows after the payback date.Chapter 14:1. Financial statement analysis provides information for decision-making. Theinformation can be used to control operations, to assess the appearance of the company toinvestors or creditors, and to assess the financ

55、ial condition of vendors, customers, andbusiness partners.2. The Balance Sheet reports assets, liabilities, and ownersThe equity.IncomeStatement reports revenues and expenses. The Statement of Cash Flows reports cashinflows and outflows from operating, investing, and financing activities.3. Horizonta