Manigerial Accounting Final

Purpose For a Budget

A budget helps plan, coordinate, and communicate future financial goals

What is the First Budget Prepared?

In the operating budget process, the Sales Budget is prepared first.

Production Formula

Sales units + Ending inventory - Beginning inventory

Flexible Budget Purpose

Adjusts for changes in activity level and allows comparison to actual results.

Sales budget is a

operating budget, not a financial budget

Merchandising Company Equivalent

Merchandise Purchases Budget replaces the production budget.

Quantitative Forecasting Method

Regression Analysis is a quantitative forecasting method.

Big Data in Sales Forecasting

Big Data = Large, complex data sets

Investment Center

Manager is responsible for revenues, costs, and efficient use of assets.Example: A division manager (Answer 1: B)

Profit Center:

Responsible for both revenues and expenses.Example: Amusement park games department (Answer 2: A)

Revenue Center:

Only responsible for generating revenue.

Example: Regional sales department for Xerox (Answer 3: D

Cost Center:

Only responsible for controlling costs. Example: Accounting department manager at Adidas

Performance Report:

Compares actual revenue/expenses with budgeted amounts.

Management by Exception

Managers focus only on significant variances. (Answer 6: D)

Return on Investment (ROI) Formula

Operating Income/ total assets

ROI —

If selling/admin expenses decrease, ROI increases.

Sales Margin Formula

Operating Income/ Sales

Residual Income (RI) formula

Operating Income−(Total Assets×Required Rate of Return)

Capital Turnover formula

Sales/Total Assets

Transfer Price

The price charged between divisions for internal sales.

Setting Transfer Prices:

Minimum = Variable costs.

Unfavorable Flexible Budget Variance:

Means actual variable expenses were higher than expected

Learning and Growth Perspective

Example: Employee satisfaction

Internal Business Perspective

Example: Number of manufacturing defects

Customer Perspective:

Example: Market share percentage

Financial Perspective:

Examples: Cash flows from operations, gross margin growth

Best Chart for Operating Income Over Time?

Line chart

Data Visualization purpose

Communicate quantitative info visually

Column Charts do…..

Compare values across categories

Fixed Overhead variance

Budget and Volume Variances

Variable Overhead Variances

Rate and Efficiency Variances

Direct Materials Variances

Price and usage Variances

Direct Labor Variances

Rate and Volume Variances

Cost Driver=

MH

When deciding whether or not to adopt standoff cost and preform Variances analysis, management should…

Examine the costs and benefits