Accounting 202 Final Exam Study Guide

Exam Guidelines for Accounting Two Zero Two

General Information

  • Final Exam:
    • 60 multiple-choice questions.
    • Two hours to complete.
    • Subject matter is not exhaustive; guide your studies efficiently.

Key Concepts

  • Opportunity and Sunk Costs:
    • Understand the difference.
    • Opportunity cost is relevant; sunk cost is not.
  • Prime vs. Conversion Costs:
    • Review these early in the book.
  • Contribution Margin Model (Chapter 5):
    • Spend time understanding this model.
  • IRR (Internal Rate of Return):
    • There will be a question on IRR.
  • Liquidity Measures (Chapter 16):
    • Current Ratio: Know this well.
  • Three Aspects of a Product Cost (Chapters 1 & 2):
    • Basic understanding needed.
  • Assumptions in the Relevant Range:
    • Three assumptions:
      • Price remains the same.
      • Variable cost per unit remains the same.
      • Total fixed costs remain the same.
  • Activity-Based Costing:
    • Know what activity measures are.
  • Cost of Goods Manufactured vs. Cost of Goods Sold:
    • Identify and measure the difference.
  • Inventory:
    • Understand inventory calculations.
    • Analogy to cash balance: Beginning balance + money in - money out = ending balance.
  • Journal Entries:
    • Direct vs. Indirect Costs:
      • Direct costs go to Work in Process.
      • Indirect costs go to Manufacturing Overhead.
    • Review journal entries from Chapter 4.
  • Operating Leverage:
    • Calculate operating leverage.
  • Payback Period:
    • Be able to calculate payback period (Chapter 14).

Chapter-Specific Guidance

Chapter 2
  • Product Cost Aspects:
    • Direct materials, direct labor, manufacturing overhead.
  • Predetermined Overhead Rate:
    • How overhead is applied to a job.
    • Computing Predetermined Overhead Rates (Panel 41).
    • Formula: Predetermined Overhead Rate=Estimated Total Manufacturing Overhead CostEstimated Total Amount of the Allocation Base\text{Predetermined Overhead Rate} = \frac{\text{Estimated Total Manufacturing Overhead Cost}}{\text{Estimated Total Amount of the Allocation Base}}
    • Apply the predetermined overhead rate to determine overhead applied to a job.
Chapter 3
  • Under and Over Applied Overhead (Panel 63):
    • Applying overhead during the work period using estimates.
    • Comparison of actual costs to allocated costs at the end of the period.
    • Clearance to Cost of Goods Sold.
    • Exhibit 3-11: Summary of predetermined overhead rate, application, and comparison to actual costs.
    • Disposition:
      • Under-applied: Increase Cost of Goods Sold.
      • Over-applied: Decrease Cost of Goods Sold.
Chapter 4
  • Process Costing:
    • Equivalent Units Calculation.
    • Quantify work done.
      • 100% credit for completed units.
      • Partial credit for in-process units.
    • Calculation for Materials and Conversion (labor and overhead).
    • Example on Page 79.
    • Equivalent Units of Production: Includes completed units and equivalent units in work in process.
Chapter 5
  • Contribution Margin Approach (Panel 95):
    • Variable Expense Ratio.
    • Contribution Margin Ratio (similar to gross margin percentage).
    • Calculate Breakeven and Target Profit.
    • Operating Leverage Calculation.
  • Breakeven Analysis (Panel 96):
    • Number of units to sell to break even.
    • Contribution margin covers fixed costs.
    • Benchmark: Contribution margin = Fixed costs.
  • Target Profit Analysis:
    • Cover fixed costs and target profit with contribution margin.
Chapter 7
  • Activity-Based Costing:
    • Cost Pools.
    • Two-Stage Allocation.
    • Terms: Cost Drivers, Cost Pools.
    • First Stage Allocation (Panel 136): Allocate costs by percentage into different cost pools.
    • Second Stage Allocation: Apply rates to cost objects.
    • Calculate activity rate and allocate costs to a cost object.
Chapter 8
  • Master Budgeting:
    • Collection Schedule (Panel 152).
    • Accounts Receivable Calculation.
    • Calculate total cash collections.
Chapter 9
  • Planning and Flexible Budgets (Panel 165):
    • Variance Analysis Schedule.
    • Exhibit 9-8: Graphic describing budget process.
    • Activity Variances.
    • Spending Variances.
    • Flexible budget built using original rates and actual activity.
    • Calculate flexible budget value for line items.
Chapter 10
  • Variance Analysis (Panel 178):
    • Spending Variance.
    • Price Variance vs. Quantity Variance.
    • Materials, Labor, and Overhead.
    • Rate variances and efficiency/quantity variances.
Chapter 14
  • Capital Budgeting:
    • Payback calculation.
      *Time value of money questions (1 on the final)
Chapter 16
  • Financial Statement Analysis:
    • Liquidity Ratios.
      • Working Capital.
      • Current Ratio.
    • Operating Cycle (Panel 301).
      • Accounts Receivable Turnover: Receivables Turnover=SalesAverage Receivables\text{Receivables Turnover} = \frac{\text{Sales}}{\text{Average Receivables}}
        • Days to collect: 365Receivables Turnover\frac{365}{\text{Receivables Turnover}}
      • Inventory Turnover: Inventory Turnover=Cost of Goods SoldAverage Inventory\text{Inventory Turnover} = \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}}
        • Days in inventory : 365Inventory Turnover \frac{365}{\text{Inventory Turnover }}
      • Operating Cycle=Days to collect+Days in inventory\text{Operating Cycle} = \text{Days to collect} + \text{Days in inventory}