Managerial Accounting ch 13-15 Exam verified solutions and explanations

Managerial Accounting ch 13-15 Exam verified solutions and explanations Financial statement analysis - Correct Answers: applies analytical tools to general-purpose financial statements and related data for business making decisions. internal users of accounting information - Correct Answers: those involved in strategically managing and operating the company. these include managers, officers, internal auditors, consultants, budget directors, and market researchers. external users of accounting information. - Correct Answers: are not directly involved in running the company. these include shareholders, lenders, directors, customers, suppliers, regulators, lawyers, brokers, and the press. common goal of internal and external users - Correct Answers: evaluating (1) past and current performance, (2) current financial position, (3) future performance and risk. general purpose financial statements - Correct Answers: income statement balance sheet statement of stockholders equity statement of cash flows notes to the financial statements financial reporting - Correct Answers: refers to the communication of financial information useful for making investment, credit, and other business decisions. standards for comparisons - Correct Answers: intracompany competitor industry guidelines intra company - Correct Answers: the company under analysis can provide standards for comparisons based on its own prior performance and relations between its financial items. competitor - Correct Answers: one or more direct competitors of the company being analyzed can provide standards for comparisons. industry - Correct Answers: industry statistics can provide standards for comparisons guidelines - Correct Answers: general standards of comparisons can develop from experience. tools of financial statement analysis - Correct Answers: horizontal analysis vertical analysis ratio analysis horizontal analysis - Correct Answers: comparison of a companys financial condition and performance across time. vertical analysis - Correct Answers: comparison of a companys financial condition and performance to a base amount ratio analysis - Correct Answers: measurement of key relations between financial statement items. dollar change = - Correct Answers: analysis period amount - base period amount percent change = - Correct Answers: ((analysis period amount - base period amount) / base period amount) * 100 trend analysis - Correct Answers: is a form of horizontal analysis that can reveal patterns in data across successive periods. trend percent = - Correct Answers: (analysis period amount / base period amount) * 100 common size percent = - Correct Answers: (analysis amount / base amount) * 100 common sized percent base amount for balance sheet - Correct Answers: total assets common size percent base amount for income statement - Correct Answers: revenues building blocks of analysis - Correct Answers: liquidity and efficiency solvency profitability market prospects liquidity - Correct Answers: refers to the availability of resources to meet short-term cash requirements. ( 7 ratios) efficiency - Correct Answers: refers to how productive a company is in using its assets. (7 ratios) solvency - Correct Answers: refers to a compnays long run financial viability and its ability to cover long term obligations (4 ratios) profitability - Correct Answers: refers to a companys ability to use its assets efficiently to produce profits. (5 ratios) market prospects - Correct Answers: ability to generate positive market expectations. (2 ratios) working capital=? what does it measure - Correct Answers: current assets - current liabilities measures liquidity and efficiency current ratio =? what does it measure? - Correct Answers: current assets / current liabilities mesures liquidity and efficiency acid-test ratio=? what does it measure? - Correct Answers: (cash+short-term investments+current receivables) / current liabilities measures liquidity and efficiency accounts receivable turnover=? what does it measure? - Correct Answers: net sales / average accounts receivable measures liquidity and efficiency inventory turnover=? what does it measure? - Correct Answers: cost of goods sold/ average inventory measures liquidity and efficiency days sales uncollected=? what does it measure? - Correct Answers: (accounts receivable / net sales) * 365 measures liquidity and efficiency days sales in inventory=? what does ti measure? - Correct Answers: (ending inventory / cost of goods sold? * 365 measures liquidity and efficiency total asset turnover=? what does it measure - Correct Answers: net sales / average total assets measures liquidity and efficiency debt to equity ratio=? what does it measure? - Correct Answers: total liabilities/ total equity measure solvency times interest earned=? what does it measure? - Correct Answers: income before interest expense ind income taxes / interest expense measure solvency profit margin=? what does it measure? - Correct Answers: net income / net sales measure profitability return on total assets=? what does it measure? - Correct Answers: net income / average total assets or profit margin * total asset turnover or (net income / net sales) * ( net sales / average total assets) = net income / average total assets measures profitability return on common stockholders equity=? what does it measure? - Correct Answers: ( net income - preferred dividends) / average common stockholders equity measures profitability price earning ratio=? what does it measure? - Correct Answers: market price per common share / earnings per share measures market prospects dividend yield =? what does it measure? - Correct Answers: annual cash dividends per share / market price per share measures market prospects managerial accounting - Correct Answers: provides financial and nonfinancial information to an organizations managers and other decision makers inside the organization financial accounting - Correct Answers: provides general purpose financial information to those who are outside the organization users of managerial accounting - Correct Answers: internal: managers, employees, and decision makers inside the organization purpose of information in managerial accounting - Correct Answers: help managers make planning and control decisions flexibility of reporting in managerial acct - Correct Answers: relatively flexible ( no GAAP constraints) timeliness of information in managerial acct - Correct Answers: available quickly without the need to wait for an audit time dimension in managerial acct - Correct Answers: the future; many projections and estimates, with some historical information focus of information in managerial acct - Correct Answers: an organizations projects, processes, and divisions nature of information in managerial acct - Correct Answers: mostly monetary; but also some nonmonetary information fraud - Correct Answers: involves the use of ones job for personal gain through the deliberate misuse of the employers assets. three factors of fraud - Correct Answers: opportunity, financial pressure, and rationalization ethics - Correct Answers: beliefs that distinguish right from wrong the institute of management accountants (IMA) statement of ethical professional practice - Correct Answers: requires that management accountants be competent, maintain confidentiality, act with integrity, and communicate information in a fair and credible manner total quality management - Correct Answers: focuses on quality improvement and applies this standard to all aspects of business activities. just in time manufacturing - Correct Answers: is a system that acquires inventory and produces only when needed. value chain - Correct Answers: refers to the series of activities that add value to a company's products or services fixed cost - Correct Answers: does not change with changes in the volume of activity. variable costs - Correct Answers: change in proportion to activity changes direct cost - Correct Answers: are traceable to a single cost object. ex material and labor cost for production indirect cost - Correct Answers: cannot be traced to a single cost object. ex. maintenance expenditure benefiting two or more departments product cost - Correct Answers: those production cost necessary to create a product and consist of: direct materials, direct labor, and factory overhead. period costs - Correct Answers: non-production costs and are usually more associated with activities linked to time period than with completed products. ex. salaries of sales staff, wages of maintenance workers, advertising expense, and depreciation on office equipment. period cost flow where? - Correct Answers: directly to income statement product cost flow where? - Correct Answers: flow to inventory and then either to balance sheet or income statement depending on when inventory is sold direct materials - Correct Answers: are tangible components of a finished good direct labor - Correct Answers: refers to the efforts of employees who physically convert materials to finished product factory overhead - Correct Answers: consists of all manufacturing costs that are not direct material or direct labor prime cost - Correct Answers: expenditures directly associated with the manufacture of finished goods. direct materials and direct labor conversion cost - Correct Answers: expenditure incurred in the process of converting raw materials incurred in the process of converting raw materials to finished goods. direct labor and factory overhead. merchandisers - Correct Answers: buy finished goods and sell finished goods manufacturers - Correct Answers: buy raw materials and produce then sell finished goods service provider - Correct Answers: does not provide a product to customer; no inventory merchandiser balance sheet - Correct Answers: cash receivables merchandise inventory Manufacturer balance sheet - Correct Answers: cash receivables inventories ( raw materials, goods in process, and finished goods.) raw materials inventory - Correct Answers: refers to the goods a company acquires to use in making products. ( can be direct or indirect) goods in process inventory or works in process inventory - Correct Answers: consists of products in the process of being manufactured but not yet complete. finished goods inventory - Correct Answers: consists of completed products ready for sale. merchandiser COGS=? - Correct Answers: begging inventory + cost of goods purchased - ending inventory manufacturer COGS=? - Correct Answers: begging finished goods inventory + cost of goods manufactured - ending inventory cost of goods manufactured =? - Correct Answers: direct materials used + direct labor +Factory overhead = total manufacturing costs +begging works in process -ending works in process =COST OF GOODS MANUFACTURED raw materials inventory turnover=? - Correct Answers: raw materials used / average materials inventory job costing - Correct Answers: used for production of large, unique, or high costing items built to order rather than mass produced many cost can be directly traced to each job. job cost sheet - Correct Answers: is a separate record maintained for each job. tracking direct materials, direct labor, and overhead for that job. materials requisition - Correct Answers: communicates the need for materials to complete a job materials ledger cards - Correct Answers: perpetual records that are updated each time materials are purchased and each time materials are issued for use in production. voucher - Correct Answers: shows amount approved for payment of an overhead or other cost clock card - Correct Answers: shows only total time an employee works each day labor time ticket - Correct Answers: show amount of time an employee works on a job. predetermined overhead rate=? - Correct Answers: estimated overhead costs / estimated activity base applied overhead - Correct Answers: the estimate of overhead using the predetermined over rate actual overhead - Correct Answers: all other factory cost beside direct materials and direct labor. what the overhead actually is journal entry for underapplied overhead - Correct Answers: cost of goods sold factory overhead factory overhead is a debit journal entry for over applied overhead - Correct Answers: factory over head cost of goods sold factory overhead is a credit perpetual inventory system - Correct Answers: continually updates accounting records