Question 1

Managerial Accounting

Accepted Answer

Users: INTERNAL ONLY
ex. managers
Report example: sustainability reports, budgets 
NO required set of rules

Question 2

Financial Accounting

Accepted Answer

Users: EXTERNAL
ex. debt investors, equity investors
Required set of rules: GAAP (generally accepted accounting principles)

Question 3

Income Statement= Profit and Loss statement 
Single step?

Accepted Answer

revenues/sales-expenses=net income or loss

Question 4

Income Statement= Profit and Loss statement 
Multi step?

Accepted Answer

Revenues/sales-cost of goods sold= gross profit THEN gross profit-operating expenses=net income or loss

Question 5

Period (non inventoriable) costs

Accepted Answer

Outside the factory: at headquarters 
ex. marketing, accounting, utilities at HQ, selling +admin costs
Expensed immediately on the income statement

Question 6

Period costs are never found on the

Accepted Answer

Balance Sheet

Question 7

Period costs are

Accepted Answer

Expensed immediately on the income statement

Question 8

What's on the Balance Sheet

Accepted Answer

inventory, assets, liabilities and stockholders equity

Question 9

Product (inventoriable) costs

Accepted Answer

Inside the factory
Included in the inventory on the balance sheet

Question 10

Product cost inventory accounts ladder

Accepted Answer

Raw materials after purchase, work in progress during production, finished goods until sold to an outside party

Question 11

Total Product cost formula

Accepted Answer

Direct Materials (raw materials) + Direct labor (touch labor and hourly wages of employees on factory line)+ manufacturing overhead (indirect materials (glue nails and staples) indirect labor (supervisor salary at FACTORY, property taxes, utilities, rent)

Question 12

Relevant (avoidable) costs

Accepted Answer

differ among alternatives, FUTURE costs, ex. direct materials and labor, MOH outside purchase price ex.

Question 13

Irrelevant Cost (unavoidable/sunk)

Accepted Answer

same among alternatives, PAST costs, ex. fixed costs, rent, salary, ceo

Question 14

Opportunity Cost

Accepted Answer

*always relevant 
Potential benefits missed when one alternative is chosen over another

Question 15

Action plan for make vs. buy decisions step one

Accepted Answer

Organize costs as relevant (avoidable)/irrelevant (unavoidable/sunk)

Question 16

Action plan for make vs. buy decisions step two

Accepted Answer

Consider only qualitative factors (ex. quality, timing issues)

Question 17

Action plan for make vs. buy decisions step three

Accepted Answer

Consider any opportunity costs

Question 18

Capital Budgeting Decisions

Accepted Answer

1. plant expansion
2. equipment purchases/selection/replacement
3. new product line 
4. sustainability initiatives

Question 19

Cash Outflows

Accepted Answer

Initial Investment, outlays for repairs and maintenance, working capital expansion (money set aside for project to pay bills)

Question 20

Working Capital formula

Accepted Answer

WC= current assets-current liabilities

Question 21

Cash Inflows

Accepted Answer

Increased revenues or decreased expenses, salvage value )at the end of the useful life), Working capital release (at the end of project the money set aside is released)

Question 22

Cost Volume Profit (CVP)

Accepted Answer

how changes in sales quantity affects net income

Question 23

Contribution Margin Income Statement Formula

Accepted Answer

Sales-variable costs = contribution margin 
THEN 
Contribution margin-fixed costs= net income

Question 24

Contribution Margin per Unit

Accepted Answer

sales price per unit - variable cost per unit= contribution margin per unit 
* prioritize products with a higher CM over products with a lower CM*

Question 25

Contribution margin measures the portion of sales revenue that exceeds BLANK, indicating how much is available to cover BLANK and generate profit.

Accepted Answer

variable costs, fixed costs

Question 26

Contribution Margin percentage

Accepted Answer

Contribution Margin/Sales *you can calculate this in total or per unit*

Question 27

Breakeven Point

Accepted Answer

Level of sales where the contribution margin = fixed costs

Question 28

Breakeven formula to find the number of units to make $0 net income

Accepted Answer

Total Fixed Costs + 0 / CM per unit = Number of units needed to make $0 net income

Question 29

Breakeven formula to find number of sales dollars needed to break even

Accepted Answer

Total fixed costs + 0 / CM % = # of sales dollars to break even

Question 30

Margin of safety

Accepted Answer

The amount of actual or expected units sold minus the # of units needed to break even (its the DIFFERENCE)

Question 31

Margin of safety example

Accepted Answer

Expect to sell 7,000 units 
Need 6,400 units to break even
Margin of safety is 600 (the cushion)

Question 32

Target Profit

Accepted Answer

Sales needed to achieve Target Profit Formula, level of sales where all costs are covered AND the company earns an expected target net income

Question 33

Target Profit Formula to find number of units it takes to break even and make target profit

Accepted Answer

Total fixed costs + Target Profit / CM per unit= # of units to BE and earn target profit

Question 34

Target profit formula to find number of sales dollars it takes to break even and make target profit

Accepted Answer

Total Fixed costs+ Target Profit/ CM%= # of sales dollars to BE and earn target profit

Term	Definition
Managerial Accounting	Users: INTERNAL ONLY ex. managers Report example: sustainability reports, budgets NO required set of rules
Financial Accounting	Users: EXTERNAL ex. debt investors, equity investors Required set of rules: GAAP (generally accepted accounting principles)
Income Statement= Profit and Loss statement Single step?	revenues/sales-expenses=net income or loss
Income Statement= Profit and Loss statement Multi step?	Revenues/sales-cost of goods sold= gross profit THEN gross profit-operating expenses=net income or loss
Period (non inventoriable) costs	Outside the factory: at headquarters ex. marketing, accounting, utilities at HQ, selling +admin costs Expensed immediately on the income statement
Period costs are never found on the	Balance Sheet
Period costs are	Expensed immediately on the income statement
What's on the Balance Sheet	inventory, assets, liabilities and stockholders equity
Product (inventoriable) costs	Inside the factory Included in the inventory on the balance sheet
Product cost inventory accounts ladder	Raw materials after purchase, work in progress during production, finished goods until sold to an outside party
Once a product is sold, total product costs are transferred to the cost of goods sold account on the income statement
Total Product cost formula	Direct Materials (raw materials) + Direct labor (touch labor and hourly wages of employees on factory line)+ manufacturing overhead (indirect materials (glue nails and staples) indirect labor (supervisor salary at FACTORY, property taxes, utilities, rent)
Learn Variable Costs and Fixed costs chart...
Relevant (avoidable) costs	differ among alternatives, FUTURE costs, ex. direct materials and labor, MOH outside purchase price ex.
Irrelevant Cost (unavoidable/sunk)	same among alternatives, PAST costs, ex. fixed costs, rent, salary, ceo
Opportunity Cost	*always relevant Potential benefits missed when one alternative is chosen over another
Action plan for make vs. buy decisions step one	Organize costs as relevant (avoidable)/irrelevant (unavoidable/sunk)
Action plan for make vs. buy decisions step two	Consider only qualitative factors (ex. quality, timing issues)
Action plan for make vs. buy decisions step three	Consider any opportunity costs
Capital Budgeting Decisions	1. plant expansion 2. equipment purchases/selection/replacement 3. new product line 4. sustainability initiatives
Cash Outflows	Initial Investment, outlays for repairs and maintenance, working capital expansion (money set aside for project to pay bills)
Working Capital formula	WC= current assets-current liabilities
Cash Inflows	Increased revenues or decreased expenses, salvage value )at the end of the useful life), Working capital release (at the end of project the money set aside is released)
Cost Volume Profit (CVP)	how changes in sales quantity affects net income
Contribution Margin Income Statement Formula	Sales-variable costs = contribution margin THEN Contribution margin-fixed costs= net income
Contribution Margin per Unit	sales price per unit - variable cost per unit= contribution margin per unit * prioritize products with a higher CM over products with a lower CM*
Contribution margin measures the portion of sales revenue that exceeds BLANK, indicating how much is available to cover BLANK and generate profit.	variable costs, fixed costs
Contribution Margin percentage	Contribution Margin/Sales you can calculate this in total or per unit
Breakeven Point	Level of sales where the contribution margin = fixed costs
Breakeven formula to find the number of units to make $0 net income	Total Fixed Costs + 0 / CM per unit = Number of units needed to make $0 net income
Breakeven formula to find number of sales dollars needed to break even	Total fixed costs + 0 / CM % = # of sales dollars to break even
Margin of safety	The amount of actual or expected units sold minus the # of units needed to break even (its the DIFFERENCE)
Margin of safety example	Expect to sell 7,000 units Need 6,400 units to break even Margin of safety is 600 (the cushion)
Target Profit	Sales needed to achieve Target Profit Formula, level of sales where all costs are covered AND the company earns an expected target net income
Target Profit Formula to find number of units it takes to break even and make target profit	Total fixed costs + Target Profit / CM per unit= # of units to BE and earn target profit
Target profit formula to find number of sales dollars it takes to break even and make target profit	Total Fixed costs+ Target Profit/ CM%= # of sales dollars to BE and earn target profit

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