Read the summary and the most important questions on Accounting II

• Chapter 14: Cost flow

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• Explain the differences between financial accounting  & managerial accounting

  Financial accounting:
  

  1. External users
  2. Financial statements > quarterly and annually
  3. General purpose
  4. Content of report is generally accounting principles
  5. Verification process > audited by CPA

  
  
  
  Managerial accounting
  

  1. Internal users > officers and managers
     
  2. Internal reports > as frequently as needed
     
  3. Special purpose for specific decisions
     
  4. Contents of report is evaluated based on relevance to decisions.
     
  5. Verification process > no independent audits

• Name + explain the different company types

  • Manufacturing companies > produces and sell those goods 
    
  • Service companies > has no physical product but provides a service
  • Retailing companies > sell pre-produced goods

• Name + explain the 3 components of manufacturing costs

  1. Direct material costs: Costs of all (raw) materials that are directly used in the manufacturing 
     
  2. Direct labor: labour that is directly correlated to the manufacturing process within the factory
  3. Manufacturing overhead costs: All cost other than direct material or direct labor cost

• Where will product cost be allocated

  Product cost will be allocated on the balance sheet as Inventory (asset)

• How are Period Cost recorded and where

  Period Costs are recorded directly on the Income statement as Expenses

• What is the manufacturer COGS formula?

  Beg. Finished goods inventory + COGS (manufactured) - End. Finished goods inventory = COGS for a manufacturer

• Chapter 18: Cost volume profit

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• Name + explain the elements of cost behaviour

  • Variable costs: Cost depend on the level of production
    
  • Direct materials
  • Direct labour
  • Indirect materials
  • Mixed costs: combination of variable and fixed costs
    
  • Maintenance
  • Utilities
  • Fixed costs: Cost stay constant regarding of the level of production 
    
  • Rent
  • Depreciation

• What is true about Fixed cost

  The more units you sell the lower your unit costs are because fixed cost per unit varies inversely with activity level.

• How to calculate contribution margin ratio

  Contribution margin ratio = unit contribution margin / unit selling price x 100 —> "will give you a percentage"

• How to calculate margin of safety

  Margin of safety in dollars = actual sales revenue - break-even sales revenue
  
  
  Margin of safety in units = actual sales units - break-even sales units
  
  
  
  Margin of safety in ratio = margin of safety in dollars / actual sales —> "will give a %"