Accounting 2 Final

What is a cash flow statement?

Shows cash in and out

What are cash equivalents?

Short-term, easily converted to cash

Purpose of internal control?

Protect assets, prevent fraud

Fraud triangle?

Pressure, Opportunity, Rationalization

3 product costs?

DM, DL, Overhead

Product costs total?

Cost of goods sold

Period costs?

Not tied to production

Example of Direct Materials?

Raw materials (wood, fabric)

Example of Direct Labor?

Workers making product

Example of Overhead?

Rent, utilities

Indirect costs?

Not directly traceable

Variable cost?

Changes with units

Fixed cost?

Stays same total

Mixed cost?

Both fixed + variable

Variable cost characteristic?

Same per unit

Fixed cost characteristic?

Same total

CM formula?

Sales − Variable costs

CM per unit?

Price − Variable cost

CM covers?

Fixed costs → then profit

Break-even formula?

Fixed ÷ CM per unit

High-Low Method Purpose

Find variable + fixed costs

Budget?

Plan for future

Cash budget?

Expected cash in/out

Not included in cash budget?

Depreciationv

Balanced scorecard?

Financial + non-financial performance

Flexible budget formula?

Fixed + (Variable × Units)

Standard costs?

Expected costs

Management by exception?

Focus on big variances

Decision Making 5 steps?

Define → Alternatives → Info → Choose → Review

Incremental analysis?

Compare differences

Incremental cost?

Extra cost

Relevant cost?

Affects decision

Avoidable cost?

Can be eliminated

Opportunity cost?

Lost benefit

Out-of-pocket cost?

Future cash payment

Sunk cost?

Past cost (ignore)

Qualitative factors?

Non-numbers (morale, quality)

Outsourcing?

Buy instead of make

Price setter?

Controls price

Price taker?

No control

Cost center?

Controls costs

Profit center?

Revenue + costs

Investment center?

Revenue, costs, assets

Controllable cost?

Manager controls

Uncontrollable cost?

Cannot control

Profit margin?

Income ÷ Sales

Investment turnover?

Sales ÷ Assets

ROI

Income ÷ Assets

Residual income?

Income − (Target × Assets)

Responsibility report?

Budget vs actual + variances

Department contribution?

Covers overhead + profit