Study guide for chapters 1 thru 5
- 1. Study Guide for Chapters 1 thru 5 Chapter 1 Comparison of Financial and Managerial Accounting Definitions Manufacturing cost, direct material, manufacturing overhead, period cost, just-in-time, total quality management, activity-based-costing, value chain, enterprise resource planning, cost of goods purchased, cost of goods manufactured. Determine the cot of goods manufactured. Chapter 2 Job Accounting Systems Definitions Job order cost system, process cost system Calculating predetermined overhead rate Basic operation job costing system Variances in overhead Chapter 3 Process Cost Accounting Similarities and differences between job and process cost system Equivalent Units Weight-Average Methods Computer unit production costs Chapter 4 Activity–Based-Costing Comparison ABC to Traditional Definition; Activities, Cost Drivers, Being able to show the difference between traditional and ABC Benefits of ABC
- 2. Limitations of ABC When to switch to ABC? Just-In-Time Elements Benefits Chapter 5 Cost-Volume-Profit Relationships Cost behavior analysis Variable Cost Fixed Costs Relevant Range Mixed Costs High-low Method Importance of identifying variable and fixed costs Cost-volume-profit analysis Contribution margin per unit Contribution margin ratio Break-even analysis Margin of safety Target net income
- 3. Terminal Course Objectives: 1. Given relevant information in a job costing environment, prepare the entries following the cost flow from material purchases to cost of goods sold including the close out of over or under applied overhead and explain the importance of the application rate assumption. 2. Given the relevant data, calculate the value of goods transferred out and the WIP inventory in a process environment. 3. Given historical data regarding costs at different volume levels and given additional information regarding step costs influencing the relevant range, analyze the cost structure of the company and calculate total and per unit costs at given volume levels. 4. Given the cost structure of an organization and the selling price, calculate breakeven units and dollars and the volume necessary to determine a pre and after tax profit goal. Using the data, analyze the changing risk and reward of changes in the cost structure, sales price, and volume. 5. Analyze the purposes of the creation of the master budget in terms of reports typically generated, the planning and feedback process, the concept of goal congruence, and issues regarding resources available such as equipment, hourly labor or professional staff, and cash. 6. Given relevant data regarding the master plan, calculate a master plan with particular attention to the application base of fixed overhead and given different actual volume achieved, calculate a flexible budget, calculate volume and operational variances, and using a standard cost methodology, calculate four-way variances from the plan, and assess reasons for variances and define analytical steps to investigate the reasons. 7. Given relevant data as to GAAP costs and direct (variable) cost, prepare Income Statements on both bases and account for the difference caused by changes in inventory and evaluate which method to use for make or buy decisions, quality of earnings issue, and others. 8. Given relevant data as to cash flows and investments and given a discount rate, calculate the NPV and IRR, and choose between competing projects.