Exam 3! (good luck)
Flashcards for Exam 4
1. Managerial Accounting vs. Financial Accounting
Q: What is the difference between managerial accounting and financial accounting?
A: Managerial accounting focuses on internal decision-making with detailed, frequent data, while financial accounting provides standardized reports for external users.
2. Total Cost and Volume of Activity
Q: How do fixed, variable, and mixed costs behave with changes in activity level?
A:
Fixed Costs: Total remains constant; per unit decreases as activity increases.
Variable Costs: Total increases with activity; per unit remains constant.
Mixed Costs: Combination of fixed and variable behaviors.
3. Contribution Margin vs. Gross Profit
Q: What is the difference between contribution margin and gross profit?
A: Contribution margin is sales minus variable costs, used for internal decisions. Gross profit is sales minus cost of goods sold, used in financial accounting.
Q: What is the formula for contribution margin ratio?
A:
CM Ratio
=
Contribution Margin
Sales Revenue
CM Ratio=
Sales Revenue
Contribution Margin
4. Break-Even Analysis
Q: What are the formulas for break-even point?
A:
In Units:
Break-Even Units
=
Fixed Costs
CM Per Unit
Break-Even Units=
CM Per Unit
Fixed Costs
In Sales Dollars:
Break-Even Sales
=
Fixed Costs
CM Ratio
Break-Even Sales=
CM Ratio
Fixed Costs
5. Product Costs
Q: What are the components of product costs?
A:
Direct Materials: Raw materials used in production.
Direct Labor: Wages for workers directly involved in manufacturing.
Factory Overhead: Indirect costs like utilities and equipment depreciation.
6. Period Costs
Q: What are period costs?
A: Non-manufacturing costs, such as selling, administrative, or office expenses. They are not tied to production.
7. Flow of Manufacturing Costs
Q: What is the flow of manufacturing costs?
A:
Direct Materials, Direct Labor, and Factory Overhead → Work in Process
Work in Process → Finished Goods
Finished Goods → Cost of Goods Sold
8. Inventory Sub-Classifications
Q: What are the types of inventory sub-classifications?
A:
Direct Materials: For both partially completed and completed units.
Work-in-Process: Includes materials, labor, and overhead for unfinished units.
Finished Goods: Completed, ready-for-sale inventory.
9. Absorption vs. Variable Costing
Q: How does absorption costing differ from variable costing?
A:
Absorption Costing: Includes all fixed and variable costs in product costs.
Variable Costing: Includes only variable costs in product costs; fixed costs are treated as period expenses.
10. Relevant Costs
Q: Define relevant costs, differential costs, and sunk costs.
A:
Relevant Costs: Costs that affect a decision.
Differential Costs: Costs that differ between alternatives.
Sunk Costs: Costs already incurred and not recoverable.
11. Special Pricing Decisions
Q: What is a key consideration for special pricing decisions?
A: Ensure the price covers variable costs and contributes to fixed costs.
12. Make-or-Buy Decision
Q: What factors are considered in a make-or-buy decision?
A: Compare in-house production costs with outsourcing costs, considering opportunity costs and quality.
13. Continue or Discontinue a Segment
Q: What should be evaluated when deciding to continue or discontinue a segment?
A: Focus on the contribution margin and avoidable fixed costs.
14. Short-Term Allocation of Resources
Q: How do you allocate limited resources in the short term?
A: Maximize contribution margin per unit of constrained resource (e.g., labor hours or machine time).
Flashcard Tips
Use Colors: Use a different color for each category (costs, decision-making, etc.).
Double-Sided Flashcards:
Front: Question or Concept Name
Back: Definition, Formula, or Key Explanation
Mix-Up Order: Shuffle cards regularly to test memory and improve retention.
Would you like more examples or clarifications for any topic? Let me know!