ACCTG 505 – Topics for MidTerm Examination

(Chapters 1, 2, 3, 4, 5, 10, 11, and 17. Sample exam is available on course Web site: faculty.washington.edu/widdison – current courses – Acctg 505.)

Chapter 1.Introduction

  1. Role of management accountant.
  1. Key themes in management accounting: customer focus, success factors, value-chain and supply-chain analysis, continuous improvement.

Chapters 2 and 10.Cost Concepts and Terminology

  1. Cost assignment – direct (traced) vs. indirect (allocated) costs.
  1. Cost behavior issues (Chapter 2 and Chapter 10 content)

3.Chapter 10 content:

(a)Cost estimation methods.

  • industrial engineering studies
  • conference method
  • account analysis method
  • high – low method
  • regression analysis

(b)Non-linear costs.

  1. Cost driver
  1. Caution in using unit costs for analysis – total better.
  2. Product vs. period cost.

6.Manufacturing costsDM, DL, Man. OH

7.Manufacturing inventories and cost flow. (However, schedule of Cost of Goods Manufactured will not be tested.)

Chapter 3.Cost-Volume-Profit Analysis

  1. Underlying assumptions
  1. Role of contribution margin
  1. Computation of break-even in units, sales dollars.

Computations may be done using either equation or formula approach.

Graphs – CVP graph, profit-volume graph – how to read.

  1. Target income Before- or after-tax target?
  1. Indifference point – at what volume level is there no difference between options under consideration.
  1. Operating leverage – degree to which reliance on fixed costs. (Concept only; no computations.)
  1. Multi-product computations – break-even units/sales dollars.
  1. Difference between contribution margin & gross margin

Chapter 4Job Order Cost Tracking

  1. Cost tracking continuum – job order to process costing. When use which method.
  2. Normal costing and job order: DM & DL trace; OH -- allocate
  1. Indirect materials and indirect labor costs recorded in FOH Control account.
  1. Daily materials and labor activity recorded on job cost sheets; overhead applied recorded on job cost sheet when job finished. Summary entries made to WIP at end of month.
  1. Total cost of completed job credited out of WIP when job finished.
  1. Adjustment for under-or over-applied overhead done periodically in inventory accounts. Methods – adjusted allocation (to each job), proration, or only COGS – depending on materiality.

Review the example activity included with class notes for chapter. Be prepared to do journal entries.

Chapter 5 Activity Based Costing

  1. Cost allocation system – determine work done, collect overhead dollars for each activity in cost pool for that activity.
  1. Determine cost driver for each cost pool – calculate an allocation ratio using total estimated dollars in cost pool to total estimated drivers to be used.
  1. Apply overhead in each cost pool to cost objects based on relative number of driver units each cost object consumed.
  1. Difficulties? Advantages?

5.Application within value chain?

Chapter 11Decision Analysis

1Relevant vs. irrelevant costs

  1. Decision models
  • special-order, one-time customer – minimum acceptable price – sum of incremental variable and fixed.
  • make-or-buy decision (out- or insourcing?)
  • opportunity cost concepts associated with above as well as opportunity cost approach to analysis – see class notes
  1. Constraints – management of scarce resources – product mix decisions and premium to be paid for additional quantity of resource.
  1. Analysis for equipment replacement.
  1. Qualitative factors in decision-making

product/service quality, customer satisfaction, employee morale, protection of intellectual property rights, etc.

Chapter 21Capital Budgeting Basics

1.What and why?

2.Cash flows – what included?

3.Analytical methods – mechanics, advantages, and disadvantages.

Discounted cash flows methods – NPV and IRR

Payback method

Accrual accounting rate of return method

Chapter 17Process Costing

  1. WIP account for each separate manufacturing process through which physical units flow.
  1. Process costing report – the 5 steps
  1. Physical units involved
  2. Compute equivalent units
  3. Total costs to be accounted for
  4. Cost per equivalent unit
  5. Assign unit costs to units transferred to next stage and to ending inventory.
  1. Equivalent units computation

weighted average method – assumes all work done last month on beginning inventory units was done this month – know conditions under which it can be used

  1. Divide total dollars by weighted average equivalent units
  1. Study examples in class handout materials – both the process costing reports and the related journal entries.
  1. Transferred –in costs – what they are and how deal with them.

Note: Although content from Chapters 6 and 7 was presented prior to the midterm, testing of those chapters is deferred to the final exam.

Acctg 505 – Midterm Exam Topic List1