Accounting & Cost Analysis Flashcards

Flashcards covering key accounting concepts, cost analysis, and methods like the accounting equation, Schedule of Cost of Goods Manufactured, High-Low Method, Contribution Margin, Break-Even Point, Margin of Safety, and CVP analysis.

What is the basic accounting equation?

Assets = Liabilities + Equity

What are the components of the expanded accounting equation related to Net Income?

Assets = Liabilities + Equity (including Net Income, which is Revenues - Expenses)

What is the purpose of computing cost of goods sold for a manufacturer and for a merchandiser?

To understand the direct costs associated with the goods produced or purchased for sale during a period.

What is the purpose of the Schedule of Cost of Goods Manufactured?

It summarizes the types and amounts of costs incurred in a company’s manufacturing process.

What are the components that make up Total Manufacturing Costs?

Direct Materials Used + Direct Labor + Factory Overhead

How is Cost of Goods Manufactured calculated?

Total Manufacturing Costs + Beginning Work in Process – Ending Work in Process

What methods are used to determine cost estimates?

Scatter diagram, high-low, and regression methods.

Using the high-low method, what two costs are computed using two levels of volume?

The variable cost per unit and the total fixed cost.

What does the contribution margin reveal about a company’s cost structure?

It reveals the amount of revenue remaining to cover fixed costs and contribute to profit after variable costs are deducted.

What is the objective of the Formula Method and the Contribution Margin Income Statement Method?

To compute the break-even point for a single product company.

What is the key difference discussed between a Traditional Income Statement and an Income Statement for Contribution Margin?

The Contribution Margin Income Statement separates costs into variable and fixed components, while the Traditional Income Statement separates them by function (e.g., cost of goods sold, selling, administrative).

How is the Margin of Safety in dollars computed?

Actual Sales – Break-Even Sales

What is Cost-Volume-Profit (CVP) analysis used for?

To describe several applications of how costs and volume affect profit.

What is computed when a company aims for a 'Target Income'?

The sales volume (in units or dollars) required to achieve that specific income level.