Managerial Accounting FINAL

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Last updated 1:22 AM on 4/26/26
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49 Terms

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Liquidity
Short term ability to pay debts
Solvency
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Direct cost
Easily traceable to a cost object
Indirect cost
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Product costs
Direct materials + Direct labor + Manufacturing overhead
Period costs
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Direct materials flow
Raw materials → WIP → Finished goods
Direct labor
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Variable cost total
Increases with units
Variable cost per unit
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Fixed cost total
Constant
Fixed cost per unit
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Contribution margin
Sales − Variable costs
Net income
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Contribution margin ratio
Contribution margin ÷ Sales
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Break even units
Fixed costs ÷ CM per unit
Break even sales
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Target profit units
(Fixed costs + Target profit) ÷ CM per unit
Target profit sales
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Payback period
Investment ÷ Annual cash inflow
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Net present value
PV inflows − PV outflows
NPV decision rule
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Internal rate of return
Discount rate where NPV = 0
IRR decision rule
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Accounting rate of return
Average income ÷ Average investment
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Time value of money
Cash today is worth more than future cash
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Overhead rate
Total OH ÷ Total driver units
Applied overhead
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Traditional allocation
One cost pool and one driver
ABC allocation
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Activity rate
Total cost ÷ Total activity
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Static budget
SP × SQ
Flexible budget
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Volume variance
(SQ − AQ) × SP
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Price variance
(AP − SP) × AQ
Quantity variance
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Relevant information
Future oriented and differs between options
Sunk cost
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Replacement decision
Replace if new cost < keep cost
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Capital investment
Long term asset decision
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Differential revenue
Change in revenue between alternatives
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Cost distortion
Caused by poor cost driver selection
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Inventory accounts
Raw materials
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Cost of goods manufactured
Beginning WIP + Manufacturing costs − Ending WIP
Cost of goods sold
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Job order costing
Unique and traceable jobs
Process costing
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Equivalent units
Units completed + (Ending WIP × % complete)
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Cost per equivalent unit
Total cost ÷ Equivalent units
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High low variable cost
(Cost high − Cost low) ÷ (Units high − Units low)
High low fixed cost
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Margin of safety
Actual sales − Break even sales
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Relevant range
Range where cost assumptions hold
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Operating leverage
Contribution margin ÷ Net income
High operating leverage
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ROI
Net income ÷ Assets
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ROE
Net income ÷ Equity
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DuPont ROE
Profit margin × Asset turnover × Equity multiplier
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Profit margin
Net income ÷ Sales
Asset turnover
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Ways to increase ROE
Increase sales
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Current ratio
Current assets ÷ Current liabilities
Quick ratio
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Working capital
Current assets − Current liabilities
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Horizontal analysis
(New − Old) ÷ Old
Vertical analysis income statement
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Transfer pricing methods
Market
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Transfer price with excess capacity
Minimum = variable cost
Transfer price without excess capacity
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Decentralization
Improves decision making through delegation
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Budgeting benefits
Planning
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Master budget
Comprehensive overall budget
Flexible budget
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Contribution margin income statement
Sales − VC = CM − FC = Net income