WGU UFC1 Wild Managerial Accounting – Complete
Study Set
Avoiding Pitfalls on Managerial Accounting Exams: Some concepts are easily
misunderstood and therefore difficult to address correctly on exams, so:
Right Ans - Read the last sentence first. Management accounting questions
often provide a lot of data, but not all of that information is needed to answer
the question. Test item writers refer to that data as distractors. If you start at
the top and read down, you read a lot of unneeded data. Read the last sentence
first. That strategy gets you to what the question is truly asking. Then you can
read the rest of the question — and pull out only the data you need to answer
the question.
Budgets that Go into Creating a Master Budget
A master budget is a plan created to manage a company's manufacturing and
sales activity to meet profit and cash flow goals. Creating a master budget
requires careful coordination of several smaller budgets covering all parts of
the organization; that way, the master budget is realistic but not complacent.
Right Ans - The master budget contains the following elements:
•Sales budget
•Production budget
•Direct materials budget
•Direct labor budget
•Manufacturing overhead budget
•Selling and administrative budget
•Capital acquisitions budget
•Cash budget
•Budgeted financial statements
Key Costs Related to Managerial Accounting Right Ans - In accounting, a
cost measures how much you pay/sacrifice for something. Managerial
accounting must give managers accurate cost information relevant to their
management decisions.
Direct cost: Right Ans - Cost that you can trace to a specific product
,Indirect cost: Right Ans - Cost that you can't easily trace to a specific
product
Materials: Right Ans - Physical things you need to make products
Labor: Right Ans - Work needed to make products
Overhead: Right Ans - Indirect materials, indirect labor, and other
miscellaneous costs needed to make products
Variable costs: Right Ans - Costs that change in direct proportion with
activity level
Fixed costs: Right Ans - Costs that don't change with activity level
Mixed costs: Right Ans - Combination of fixed and variable costs
Contribution margin: Right Ans - Sales less variable costs
Product costs: Right Ans - Costs needed to make goods; considered part of
inventory until sold
Period costs: Right Ans - Costs not needed to make goods; recorded as
expenses when incurred
Work-in-process cost: Right Ans - How much you paid for goods that are
started but not yet completed
Finished goods cost: Right Ans - How much you paid for goods completed
but not yet sold
Cost of goods manufactured: Right Ans - The cost of the goods completed
during a period
Cost of goods sold: Right Ans - The cost of making goods that you sold
Controllable costs: Right Ans - Costs that you can change
Noncontrollable costs: Right Ans - Costs that you can't change
,Conversion costs: Right Ans - Direct labor and overhead
Incremental costs: Right Ans - Costs that change depending on which
alternative you choose; also known as relevant costs and marginal costs
Irrelevant costs: Right Ans - Costs that don't change depending on which
alternative you choose
Opportunity costs: Right Ans - Costs of income lost because you chose a
different alternative
Sunk costs: Right Ans - Costs you've already paid or committed to paying
Historical cost: Right Ans - How much you originally paid for something
Cost per unit: Right Ans - Cost of a single unit of product
Expense: Right Ans - Costs deducted from revenues on the income
statement
Cost driver: Right Ans - Factor thought to affect costs
Process cost: Right Ans - Cost of similar goods made in large quantities on
an assembly line
Job order cost: Right Ans - Cost of a batch of specially made goods
Absorption cost: Cost that includes fixed and variable product costs Right
Ans - Absorption cost: Cost that includes fixed and variable product costs
Cost of Goods Manufactured and Sold Statement Formulas: Right Ans -
Prime Cost = Direct Materials Cost + Direct Labor Cost
Total Factory Cost or Manufacturing Cost = Direct Materials + Direct Labor
Cost + Factory Overhead
Conversion Cost = Direct Labor Cost + Factory Overhead Cost
, Cost of Goods Manufactured (COGM) = Total Factory Cost + Opening Work in
Process Inventory - Ending Work in Process Inventory
Or
Cost of Goods manufactured = Direct materials cost + Direct labor cost +
Factory overhead cost + Opening work in process inventory - Ending work in
process inventory
Cost of goods sold (COGS) = Cost of goods manufactured + Opening finished
goods inventory - Ending finished goods inventory
Or
Cost of goods sold = Direct materials cost + Direct labor cost + Factory
overhead cost + Opening work in process inventory - Ending work in process
inventory + Opening finished goods inventory - Ending finished goods
inventory
Number of units manufactured = Units sold + Ending Finished Goods units -
Opening finished goods units
Per unit cost of goods manufactured = Cost of goods manufactured / Units
manufactured
Materials used or consumed = Opening inventory or materials + Net
purchases of materials - Ending inventory of materials
Income statement formulas: Right Ans - Gross profit = Net sales - Cost of
goods sold
Operating profit = Gross profit - Operating expenses
Operating or commercial expenses = Selling or marketing expenses + General
or administrative expenses
Per unit gross profit = Gross profit / No. of units sold
Per unit net profit = Net profit / No. of units sold
Percentage of GP to sales = (Gross profit / Net sales) × 100
Percentage of net profit to sales = (Net profit / Net sales) × 100
Study Set
Avoiding Pitfalls on Managerial Accounting Exams: Some concepts are easily
misunderstood and therefore difficult to address correctly on exams, so:
Right Ans - Read the last sentence first. Management accounting questions
often provide a lot of data, but not all of that information is needed to answer
the question. Test item writers refer to that data as distractors. If you start at
the top and read down, you read a lot of unneeded data. Read the last sentence
first. That strategy gets you to what the question is truly asking. Then you can
read the rest of the question — and pull out only the data you need to answer
the question.
Budgets that Go into Creating a Master Budget
A master budget is a plan created to manage a company's manufacturing and
sales activity to meet profit and cash flow goals. Creating a master budget
requires careful coordination of several smaller budgets covering all parts of
the organization; that way, the master budget is realistic but not complacent.
Right Ans - The master budget contains the following elements:
•Sales budget
•Production budget
•Direct materials budget
•Direct labor budget
•Manufacturing overhead budget
•Selling and administrative budget
•Capital acquisitions budget
•Cash budget
•Budgeted financial statements
Key Costs Related to Managerial Accounting Right Ans - In accounting, a
cost measures how much you pay/sacrifice for something. Managerial
accounting must give managers accurate cost information relevant to their
management decisions.
Direct cost: Right Ans - Cost that you can trace to a specific product
,Indirect cost: Right Ans - Cost that you can't easily trace to a specific
product
Materials: Right Ans - Physical things you need to make products
Labor: Right Ans - Work needed to make products
Overhead: Right Ans - Indirect materials, indirect labor, and other
miscellaneous costs needed to make products
Variable costs: Right Ans - Costs that change in direct proportion with
activity level
Fixed costs: Right Ans - Costs that don't change with activity level
Mixed costs: Right Ans - Combination of fixed and variable costs
Contribution margin: Right Ans - Sales less variable costs
Product costs: Right Ans - Costs needed to make goods; considered part of
inventory until sold
Period costs: Right Ans - Costs not needed to make goods; recorded as
expenses when incurred
Work-in-process cost: Right Ans - How much you paid for goods that are
started but not yet completed
Finished goods cost: Right Ans - How much you paid for goods completed
but not yet sold
Cost of goods manufactured: Right Ans - The cost of the goods completed
during a period
Cost of goods sold: Right Ans - The cost of making goods that you sold
Controllable costs: Right Ans - Costs that you can change
Noncontrollable costs: Right Ans - Costs that you can't change
,Conversion costs: Right Ans - Direct labor and overhead
Incremental costs: Right Ans - Costs that change depending on which
alternative you choose; also known as relevant costs and marginal costs
Irrelevant costs: Right Ans - Costs that don't change depending on which
alternative you choose
Opportunity costs: Right Ans - Costs of income lost because you chose a
different alternative
Sunk costs: Right Ans - Costs you've already paid or committed to paying
Historical cost: Right Ans - How much you originally paid for something
Cost per unit: Right Ans - Cost of a single unit of product
Expense: Right Ans - Costs deducted from revenues on the income
statement
Cost driver: Right Ans - Factor thought to affect costs
Process cost: Right Ans - Cost of similar goods made in large quantities on
an assembly line
Job order cost: Right Ans - Cost of a batch of specially made goods
Absorption cost: Cost that includes fixed and variable product costs Right
Ans - Absorption cost: Cost that includes fixed and variable product costs
Cost of Goods Manufactured and Sold Statement Formulas: Right Ans -
Prime Cost = Direct Materials Cost + Direct Labor Cost
Total Factory Cost or Manufacturing Cost = Direct Materials + Direct Labor
Cost + Factory Overhead
Conversion Cost = Direct Labor Cost + Factory Overhead Cost
, Cost of Goods Manufactured (COGM) = Total Factory Cost + Opening Work in
Process Inventory - Ending Work in Process Inventory
Or
Cost of Goods manufactured = Direct materials cost + Direct labor cost +
Factory overhead cost + Opening work in process inventory - Ending work in
process inventory
Cost of goods sold (COGS) = Cost of goods manufactured + Opening finished
goods inventory - Ending finished goods inventory
Or
Cost of goods sold = Direct materials cost + Direct labor cost + Factory
overhead cost + Opening work in process inventory - Ending work in process
inventory + Opening finished goods inventory - Ending finished goods
inventory
Number of units manufactured = Units sold + Ending Finished Goods units -
Opening finished goods units
Per unit cost of goods manufactured = Cost of goods manufactured / Units
manufactured
Materials used or consumed = Opening inventory or materials + Net
purchases of materials - Ending inventory of materials
Income statement formulas: Right Ans - Gross profit = Net sales - Cost of
goods sold
Operating profit = Gross profit - Operating expenses
Operating or commercial expenses = Selling or marketing expenses + General
or administrative expenses
Per unit gross profit = Gross profit / No. of units sold
Per unit net profit = Net profit / No. of units sold
Percentage of GP to sales = (Gross profit / Net sales) × 100
Percentage of net profit to sales = (Net profit / Net sales) × 100
