Acc312 Exam 1

Process of identifying, measuring, analyzing, interpreting, and communicating information in pursuit of an organizations goals

Any Sacrifice made to achieve a goal

the cost incurred when a resource is used up for the purpose of generating revenue

The total expenses incurred to create a product, including direct materials, labor, and overhead costs

Expenses that are not directly tied to the production of goods or services, such as rent and administrative salaries. They are incurred over a specific time period and are not included in the cost of goods sold. Basically, all costs that are not product costs

Examples: R&D, Admin, Selling, Salaries of Sales/Corporate, Commissions,

the amount of revenue left after deducting just the costs that have been classified as cost of sales or COGS

Profit remaining after deducting both COGS and period costs

material that is consumed in the manufacturing process, is physically incorporated in the finished product, and can be traced to products relatively easily

salaries, wages, and fringe benefits for people who work directly on the manufactured products

health insurance, pension, SS, other non salary benefits

Costs not directly tied to production of a specific product, like rent and utilities for the factory. Considered indirect costs in manufacturing

Examples: Indirect Material, Indirect Labor, Other Manufacturing or Production Costs, Overtime, Idletime, depreciation, taxes, insurance, utiltiies, rent,

direct materials + direct labor

Costs incurred to convert raw materials into finished goods, including direct labor and overhead costs. Excludes direct materials.

Raw/Beginning Materials

WIP

Finished Goods

Materials, WIP, Finished Goods

Beginning Materials + Materials Purchased = Materials Available - Ending Materials = Materials Used

Beginning WIP + Materials Used + Direct Labor + Manufacturing Overhead = WIP Available - Ending WIP = COG Manufactured

Beginning FG + COG Manufactured = Goods Available for Sale - Ending FG = COGS

Revenue - COGS = Gross Profit - OPEX = Pre Tax Income - Tax = Net Income

Costs that change based on level of activity. They fluctuate as the quantity of output changes

Total Variable Costs change in Direct Proportion to Changes in Levels of Activity

Remain the Same as Activity Increases

Costs that remain unchanged based on the level of activity

Remain the same as level of output varies

Decreases with output getting higher

benefit that is sacrificed when choosing one alternative over another

costs that have already been incurred, nothing can be done about them, they are not important to any decision

The difference in cost between two alternative courses of action. It helps in decision-making by comparing the costs of different options.

The additional cost incurred when producing one more unit of a good or service.

Total Costs/Total Units

Account Analysis

Visual Fit

High-Low Method

Least-Squares + Multiple Regression

Closely examining ledger, an analyst will estimate cost amounts

BEST WHEN HISTORICAL PATTERNS MAY NOT CONTINUE

Plotting of a Graph

Helpful for semi-variable costs

BEST FOR QUICK AND SIMPLE ESTIMATES

Semi Variable Approximation by using a high and low point

Y2-Y1/X2-X1 = Variable Cost

BEST FOR QUICK AND SIMPLE ESTIMATES

B + Ax = Y

CALLED FOR WHEN PATTERNS ARE COMPLEX AND WE EXPECT HISTORICAL RELATIONS TO CONTINUE

CVP analysis examines how changes in sales volume, costs, and prices affect a company's profit. It helps in making decisions to maximize profitability.

The level of sales at which total revenue equals total costs, resulting in neither profit nor loss. It helps determine the minimum sales needed to cover all expenses.

Total Sales Revenue - Total Variable Expenses

The amount of revenue available to contribute to covering fixed expenses after all variable expenses have been covered

Relevant, Timely, and Accurate

Must Affect the Future and Differ Among Alternatives

Sales - Variable Costs = Contribution Margin - Fixed Expenses = Income - Tax = Net Income

Fixed Expenses/CM per Unit

Fixed Expense/CMR

CM per Unit/Selling Price per Unit

FE + Income/CM per Unit

FE + Income/ CMR

Fe + (Income/1-Tax Rate)/CM per Unit

Fe + (Income/1-Tax Rate)/CMR

You Likely Say Yes

You Accept it with any Benefit because you assume that if you dont you will lose that demand

UNLESS THEY SAY OTHERWISE

Never incorporate Fixed Costs UNLESS the question says they are unavoidable

Difference between the budgeted sales revenue and the break-even sales revenue

1. Clarify the decision problem

2. Specify the Criterion

3. Identify the Alternatives

4. Develop a Decision Model

5. Collect Data

6. Select an Alternative

7. Evaluate decision effectiveness

Where management expects the firm to operate

Decision Making

Planning

Directing Operations

Controlling

Timing

Assignment

Behavior

Product Cost vs. Period Cost

Direct or Indirect?

Manufacturing Inventory and Cost Flows

Prime Costs and Conversion Costs

How does the cost behave?

VC or FC

Relevant Change

A cost with both a fixed and a variable component.