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ACG 2071 Exam 3
Exam 3
44
Accounting
04/22/2009

Additional Accounting Flashcards

 


 

Cards

Term
Which is better Top down or bottom up budgeting?
Definition
Bottom Up, it doesnt change
Term
Disadvantage of Bottom Up
Definition
Longer, expensive, people can lowball
Term
Order for preparing a budget
Definition
Sales, Production (done in units not $), Materials/Labor, and Capital Aquistions
Term
Production Formula
Definition
Sales + desired ending inv. - begining inv.
Term
Is depreciation a cash expense?
Definition
No, so dont involve it in a cash budget
Term
Difference in Ideal and Attainable standards
Definition
Ideal - Perfection
Attainable - Practical (Includes mistakes, maintance, etc)
Attainable is better.
Term
Ideal Standards always have....
Definition
variances
Term
Master Budget is a
Definition
Static Budget
Term
Flexible budget has ....
Definition
Changes in production
Term
Difference in Master and Flex budget is
Definition
Variances
Term
Labor Rate Variance
Definition
(Standard Price - Actual Price)x(Actual Quantity)
Term
Labor Effiecncy Variance
Definition
(Standard Quantity - Actual Quantity)x(Standard Price)
Term
Materials Price Var
Definition
(Standard Prce - Actual Price)x(Actual Qantity)
Term
Materials Quanity Variance
Definition
(Standard Quantity - Actual Quantity)x(Standard Price)

Rem - Stand Quant is how much is produced but at standard rates
Term
Control Variance
Definition
Actual Overhead - Flexible Budget

Same with Fixed and Variable Overhead
Term
Variable OH Volume Variance
Definition
Flexible Budget VOH and Applied VOH always be the same with Variable
Term
Actual VOH
Definition
ACTUAL Hours x Actual Rate
Term
Flexible Budget VOH
Definition
Actual # Units Produced x Standard hours per unit x Standard Rate
Term
Applied VOH
Definition
Same as Flexible Budget in Variable
Term
OH Volume Variance
Definition
Flexible Budget - Overhead Applied
Term
Decentralized Advantages
Definition
- Better and Faster Info/Decision Making
- Managers learn more andmove up faster
- Managers more motivated
Term
Decentalized Disadvantages
Definition
-Lack of Goal Congruence
-duplication of duties (multiple departments)
Term
Four Types of Responsibility Centers
Definition
Cost Centers, Revenue Centers, Profit Centers, Investment Centers
Term
Cost Centers
Definition
manager controls only cost
No revenue
ex. manufactoring plant
Term
Revenue Center
Definition
Manager only controls over revenue
ex. sales office, call center
Term
Profit center
Definition
Manager controls revenue and costs
ex. department store
Term
Investment Center
Definition
Manager controls profits and investing profits
-Long term goals, investment
ex. Regional VP of Walgreens
Term
How do u measure a Cost Center and Profit Center?
Definition
Cost - How they keep cost down, compare actual cost and should have cost

Profit - Relative performance evaluation aka Compare profitability to similiar center
Term
How do u measure Investment Center
Definition
How well they are investing assets

ROI = Return on Investment
Term
Return on Investment (ROI)
Definition
Income / Invested
Term
Total Assets for invested capital
Definition
= Total Assets - Non bearing interest bearing current liabilities
Term
Net Income =
Definition
(EBIT)(1 - TaxRate)

If adding back interest dont forget to tax that as well
Term
ROI broken down equals
Definition
(Income/Sales)x(Sales/Invested Capital)
Term
What increase ROI?
Definition
High Price, Less Costs, Get Rid of nonproductive assets (ex. excessive inv.)
Term
Depreciation drives the ROI _______ and why? And its effects?
Definition
Up, b.c. depreciation lowers value of assets. Can cause managers to not upgrade equipment, so they under invest.
Term
Why arent managers measured on profit
Definition
theyd over invest
Term
RESIDUAL INCOME =
Definition
= Income - min acceptable income

Term
EVA
Definition
Economical Value Added
Rem use RI but no interest
Term
R&D should be _______.
Definition
amortized over time. RI goes up over time til it will benefit.
Term
Balanced Scorecard is what?
Definition
Final way to evaluate investment centers,
Term
4 Dimensions of Balance Scorecard and explain each
Definition
Financial - how it looks on paper

Internal Buis. Proc - Efficiency including Innovation, Operating, Post Sales Service

Learning and Growth - How employees doing, improving?

Customers - Happy?
Term
Keys to having a succesful scorecard?
Definition
Good Iniatives (what needs to b done to achieve goals)
Responsible - People fulfill theres
Funding - Need to have money
Management Support - Workers suport there managers.
Term
Transfer Pricing is
Definition
Prices in between departments
Term
Highest and lowest pricing in transfer pricing are?
Definition
Ceiling Price - Market Price
Floor Price - Variable Price

Usually cut out selling costs