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Acc. Final
Managerial Accounting FInal
| Question | Answer |
|---|---|
| What is a responsibility Center? | Departments or divisions can be classified according to their level of financial responsibility. |
| What is Cost Center? | primary responsibility is for controlling costs in the delivery of the product or service. Typical examples of cost centers would be service departments like maintenance and human resources. |
| What is a Revenue Center? | Revenue Center – primary responsibility is for generating revenue A sales department of an organization would be the principal type of this center. |
| What is a Profit Center? | Profit Center - responsible for generating revenues and controlling costs (ergo - profit) but less responsible for investment of assets and long-term strategic investment and financing decisions A particular retail store of a chain retailer . |
| What is an Investment Center? | Investment Center - all of the above plus the long-term financing and investment decisions Divisions and other large subunits are usually considered investment center. |
| What is a standard Cost? | A standard cost is just a budgeted cost (expected cost) per unit of production or service. For a manufactured product, the budgeted cost of materials, labor, and manufacturing overhead required to produce one unit of product would be its standard cost. |
| Why would you adopt a standard costing system? | Standard Costs improve planning and control. A standard cost system compares actual amounts with standard amounts to determine variances from the standard. |
| What happens to variable cost as volume increases? | Increases. |
| What happens to fixed cost as volume increases? | No change |
| What happens to variable cost per unit as volume increases? | No change |
| What happens to fixed cost per unit as volume increases? | Decreases. |
| What is non-value added cost? | Time and/or money spent on an activity or task that adds to the total cost, but does not enhance the customer's judgment of the value of a good or service. |
| Examples of non-value added cost? | in manufacturing when equipment breaks down, it can delay production. To complete obligations, the company may need to expedite the production process, taking on extra costs such as overtime pay for workers or possibly temporary employees to keep prod |
| Responsibility Centers in order of least important to most. | Cost Center, Revenue Center, Profit Center, and Investment Center. |
| Break Even Formula and Target Cost Formula | = Fixed Costs/Cont.Margin Per unit =(Fixed costs+target Profit)/Cont.Margin Per unit. |
| What are types of costs of quality? | prevention costs, appraisal costs, internal failure costs, and external failure costs |
| What is a prevention cost? | . Prevention costs are the costs of those activities undertaken before production to promote quality. Examples are engineering of the products to avoid breakdowns, requirements for suppliers and parts, and training of employees |
| What is an Appraisal Cost? | Appraisal activities primarily are those focusing on inspection and testing of finished products |
| What is an Internal Failure Cost? | Internal failure costs are scrapping and rework of defective products before they leave the company |
| What is an External Failure Cost? | costs are those that occur after sale to customers: breakdowns, customer returns, recalls, etc. External failure costs are the most damaging because those frequently result in economic damages due to legal liability for product failures and lost sales |
| What is a Segment Margin? | amount of profit or loss produced by one component of a business.Knowing the segment margins for each division of the company that generates both expenses and revenues provides a more accurate picture of where the company strengths and weaknesses are. |
| Segment Margin Formula | Segment Margin = Segment Revenues – Variable Costs – Avoidable Fixed Costs |
| Difference of Cost of Goods sold and Costs of good manufactured. | Beginning Inventory + Net Purchases – Ending Inventory = Cost of Goods Sold Beginning Work in Process + Manufacturing Costs Added (direct materials, direct labor, manufacturing overhead) – Ending Work in Process |
| What is a Prime Cost? | Prime Costs consist of direct materials and direct labor. These are the inputs that are directly traced into the physical product. Note that the third manufacturing cost, manufacturing overhead, is not included in this classification. |
| What are Conversion Costs? | The manufacturing costs that are necessary to convert raw materials into finished goods: direct labor and manufacturing overhead. Note that the direct materials that are included as a physical part of the product are not included in this classification. |
| What is a Period Cost? | The nonproductcosts in organization selling and admin expenses,int. expense, inv. expenses, etc.)these are all non-manufacturing costs. These costs aren't inventoried into products and are simply expensed in the accounting period where they are incurred. |
| What are the Two methods to evaluate Investment Centers? | Return on Investment(ROI) and Residual Income |
| What is ROI? | Net Income/Invested Assets = Net Income/Net Sales x Net Sales/Invested Assets |
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