ACCT 2302 Fundamentals of Accounting II Spring 2011 Lecture 8 Professor Jeff Yu.

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Transcript of ACCT 2302 Fundamentals of Accounting II Spring 2011 Lecture 8 Professor Jeff Yu.
ACCT 2302
Fundamentals of Accounting II
Spring 2011
Lecture 8
Professor Jeff Yu
Expected profit (NOI) may change due to: a change in fixed expenses a change in CM per unit (=price  VC/unit) a change in sales volume:
once the breakeven point has been reached, NOI will increase by CM per unit for each additional unit sold.
Two approaches to predict profit using CVP analysis:1)Income Statement approach2)Incremental approach: ΔNOI = ΔCM – ΔFE
Review: CVP Analysis
Review
Margin of Safety (units, sales, percentage)
Degree of Operating Leverage
Sales Mix and Breakeven Analysis
Monday, February 21: class time & in the classroom.
The exam will cover lectures 1 through 8 and chapters 2, 3, 5, and 6.
Please plan to arrive 10 minutes earlier. The exam will start when everyone in the room has an exam packet and will stop promptly after 100 minutes or the end of the class, whichever comes earlier.
Please spread out as much as possible when you get seated. I may ask you to change seats if I determine that you sit too close to the other student. Your cooperation will expedite the exam handout process so that all students will have more time to work on the exam.
This is a closedbook exam and you may not use any cheat sheet. I may choose not to answer your question during the exam, to be fair.
You will need a nonprogrammable calculator. Please bring one!
Midterm Exam Information
Type of questions Multiple Choice Questions (6%)
No partial credit
Problems (94%)Show your work with legible and carefully labeled computations so that I can assign partial credit. If I cannot understand your computations, I will not assign partial credit.
Similar to practice problems in the lecture notes and HW problems.
Practice exam questions (based on past years’ exam) posted on the class website for your information only. (warning: this year’s exam questions may be different!)
• Carefully study lecture notes• Rework problems in the lecture notes• Rework HW and quiz problems• Work on practice exam questions on the class website• If you need more practice, use the review problem at the end of
each chapter in the textbook. • Don’t look at the solutions before you have made at least one
serious attempt to solve each problem.
• Come to TA’s or my office hours to clarify difficult materials. TA office hours this Thursday 2:30pm4pm Additional office hours? There will be no office hour on Monday, Feb 21 (to be fair with
section 1 students)
Studying for the exam
• I will post the exam solutions on the class website
• I will try my best to post your exam grades on Blackboard ASAP. Please understand that it takes a lot of time to assign partial credits and I will be working extremely hard to ensure that I grade your exam consistently and fairly.
• I will return the graded test to you ASAP. Grade disputes procedure is written in detail on the syllabus.
After the exam
Decision
Making
Formulating longand shortterm plans
(Planning)
Formulating longand shortterm plans
(Planning)
Measuring performance
(Controlling)
Measuring performance
(Controlling)
Implementing plans (Directing and
Motivating)
Implementing plans (Directing and
Motivating)
Comparing actual to planned
performance (Controlling)
Comparing actual to planned
performance (Controlling)
Begin
Review: what do managers do and how MA can help
MA provides information that help managers make decisions throughout the planning and control cycle.
Review: Managerial vs. Financial Accounting
Financial Accounting
Managerial Accounting
Users
Time Focus
Emphasis Verifiability and Precision
Subject The whole Organization
Requirement Follow GAAP
Review: cost behavior
__________ per unit does NOT change when activity level changes.
Total ____________ does NOT change when activity level changes.
________________ increases when activity level increases.
________________ decreases when activity level increases.
________________ is the range of activity within which the assumptions about cost behavior are valid.
Review: cost classification for decision making
______________ are costs that differ between two (or more) alternatives.
______________ is the value of the next best alternative foregone as the result of making a decision.
______________ is a cost that has already been incurred and cannot be changed by any decision made now or in the future.
______________ is not a differential cost and should be ignored when making decisions.
DirectMaterial
DirectLabor
ManufacturingOverhead
Manufacturing Costs = ________ Costs
Marketing/ Selling Costs
Administrative Costs
Nonmanufacturing Costs = _______ Costs
Review: cost terms under Absorption Costing
Review: Manufacturing Cost Flows
Raw Material Purchases
Direct Labor
Balance Sheet Costs Inventories
Income StatementExpenses
ManufacturingOverhead
Goods Sold
How to show product cost flows using Taccounts?
Review: Joborder costing vs. Process costing
A firm making builttoorder products typically use ___________ costing.
A firm massproducing a single product typically use _________ costing.
Under joborder costing, product costs are accumulated by _______ to get the average product cost for each unit.
Under process costing, product costs are accumulated by _______ to get the average product cost for each unit.
Service companies typically use ______________ costing.
Both joborder costing and process costing are _______ costing systems.
Manufacturing overhead is applied (allocated) to individual jobs (workinprocess) based on a ___________ rate (POHR).
Review: MOH Application in joborder costing
POHR = Estimated total MOH cost / __________ total activity level
Applied MOH = POHR * ________ activity level
_______ MOH  Applied MOH
At the ________ of the period, calculate:
________ the period, calculate:
At the _______ of the period, calculate:
to determine whether MOH was underapplied or overapplied.
Review: JobOrder Costing
1. If Applied MOH>Actual MOH, then MOH is ________ for the period.
If Applied MOH<Actual MOH, then MOH is __________ for the period.
2. What is the journal entry to apply MOH to jobs during the period?
3. What is the adjusting journal entry to close the overapplied (underapplied) MOH to CGS at the end of the period?
Review: Product Cost Flow in Joborder Costing
FinishedGoods
FinishedGoods
Cost of GoodsSold
Cost of GoodsSold
Direct LaborDirect Labor
Applied MOH
Applied MOH
Direct MaterialsDirect
Materials
WorkinProcess (JOB)
Review: Cost Behavior
True Variable Cost (a=0, b>0)Total cost: Y=bX, increases with XAverage cost: Y/X=b, constant
Fixed Cost (a>0, b=0)Total cost: Y=a, constantAverage cost: Y/X=a/X, decreases with X
Mixed Cost (a>0, b>0)Total cost: Y=a+bX, increases with XAverage cost: Y/X=a/X + b, decreases with activity level X.
(1) Select the highest & the lowest activity levels: Xh, Xl
(2) Fit a line through the two data points: (Xh, Yh), (Xl, Yl)
Yh =a + bXh b=(Yh  Yl)/(Xh  Xl)
Yl =a + bXl a= ?
The slope of the line: b = Variable Cost per unit
The intercept of the line: a = Total Fixed Cost
Review: Cost Function & Highlow Method
Cost Function: Y = a + bX
Used primarily forexternal reporting
Used primarily for Managerial Decision making
Review: The Contribution Format Income Statement
Review: The Contribution Margin Method
per Unit CM
Expenses Fixedin UnitsPoint even Break
Ratio CM
Expenses FixedDollars Salesin Point even Break
Per Unit CM
ProfitTarget Expenses FixedProfitTarget attain tosales Units
Sales – Variable Expenses – Fixed Expenses = NOI
Price * X VC/unit * X $$$ $0
Review: The Equation Method
B.E.P in sales dollars = B.E.P. in Units * Price
Let B.E.P. in units = X