Ch.17
1. The building blocks of financial statement analysis include: Liquidity and Efficiency, Solvency, Profitability, Market Prospects.
2. The ability to meet short-term obligations and to efficiently generate revenues is called: Liquidity and Efficiency
3. The ability to generate future revenues and meet long-term obligations is referred to as: Solvency
4. The ability to provide financial rewards sufficient to attract and retain financing is called: Profitability
5. The ability to generate positive market expectations is called: Market Prospects
6. Standards for comparisons in financial statement analysis include: Intra-company, Competitor, Industry, Guidelines
7. The comparison of a company's financial condition and
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Ajax Company accumulated the following account information for the year:
Using the above information, total factory overhead costs would be: All expenses added
42. A financial report that summarizes the amounts and types of costs that were incurred in the manufacturing process during the period is a: Manufacturing statement.
43. A unit of a business that not only incurs costs, but also generates revenues, is called a: Profit center
44. Expenses that are easily traced and assigned to a specific department because they are incurred for the sole benefit of that department are called: An escapeable expense or direct expenses
45. Expenses that are not easily associated with a specific department, and which are incurred for the benefit of more than one department, are: Indirect expenses
46. A difficult problem in calculating the total costs and expenses of a department is: Assigning indirect expenses to the department
47. A company has two departments, A and B, that incur delivery expenses. The delivery expenses that should be charged to Dept. A and Dept. B, respectively, are:
48. Costs that the manager has the power to determine or at least strongly influence are called: Controllable costs
49. A report that specifies the expected and actual costs under the control of a manager is a: Responsibility Accounting Report
50. The most useful evaluation of a manager's cost performance is based on: Cost performance
51. A responsibility accounting
a service department’s costs have been allocated, costs are not reallocated back to it under
They are interested in the company’s ability to pay obligations when they become due, especially during the operating cycle.
6. Managing resources: This to manage the budget such as staff budgeted monthly hours and all other expenses that may be required to run the
Blanco Company estimates that its variable manufacturing overhead (all requiring cash expenditures) is $32 per direct labor hour. The total fixed manufacturing overhead of $1,881,120 per month includes depreciation on the factory building of $120,000 per month and depreciation on the factory equipment of $30,000 per month for total depreciation of $150,000 per month. (Thus, the cash spent for fixed manufacturing overhead is $1,731,120 ($1,881,120 – $120,000 – $30,000) per month.) Cash disbursements for manufacturing overhead occur in the same month in which the company incurs the cost. Be sure to show the calculation of the average predetermined overhead rate for the quarter as a whole only—total budgeted manufacturing overhead cost
Registering cost of centered budgetary destinations. Choosing the cost of different budgetary objectives is a fundamental framework that can incite achievement of needed cash related target. Cost check should be adequately versatile to alter future money related fluctuations and Companies' helper changes. Finding out
issues: First, the procedure currently being used to assign common expenses may not be correctly presenting the underlying use of the common resources by two different
3. Under the new activity-based costing (ABC) system, compute the indirect cost allocation rates for each of the three activities:
Direct costs are expenditures that an organization can directly attribute to the cost objects, i.e. product manufactured or activities of a department. Direct costs comprise of the following:
The “financial statements are formal reports providing information on a company's financial position, cash inflows and outflows, and the results of operations” (Hermanson, p.22). There are four main components that make up a financial statement. The four parts are, balance sheet, income statements, cash flow and, statement of owner’s equity. The balance sheets role is to define the company’s assets liabilities and revenue of the business. The income statement shows the income within the company. Cash flow reviews the position of the company by cash payments and receipts. Lastly, the statement of owner’s equity shows the amount of earnings, stock and other capitals of people in the company. (Hermanson, p.34-35).
Indirect Costs are those you can’t clue to anniversary job, but you can clue to anniversary department, annual or artefact band you are producing. Computation of the Gross Allowance and Addition Allowance are two of a lot of important numbers you charge to actuate for planning, barometer and managing your business.
Check book system with authorization system for the release of indirect material were followed. This helps in reducing the overhead expenses. The respective team is responsible for this control. Also, the teams were given freedom to purchase indirect materials from suppliers through negotiation which help in controlling expenses. Teams got the expense report charged to their department which helps in monitoring the cost.
C. Fixed costs- management accounting, the appropriate period, fixed costs, a function that is defined as a business process change costs not does. For example, in spite of a seller to rent and utility bills to pay. Marketing, split between variable and fixed costs, it is important to know how.
There are different costs that respond to the different activities like variable costs are directly associated with the products sold. The cost behavior patterns of selling, general, administrative, and other operating expenses are determined, and these expenses are budgeted accordingly. For example, sales commissions will be a function of the forecast of either sales dollars or units. The historical pattern of some expenses will be affected by changes in strategy that management may plan for the budget period. In a participative budgeting system, the manager of each department or cost responsibility center will submit the anticipated cost of the department 's planned activities, along with descriptions of the activities and explanations of significant differences from past experience. After review by higher levels of management, and perhaps negotiation, a final budget will be established. Because of the necessity to recognize cost behavior patterns for planning and control purposes, overhead costs will be classified as variable or fixed.
The expenses incurred on those items which are not directly chargeable to production are known as indirect costs. For example, salaries of timekeepers, storekeepers and foremen. Also certain expenses incurred for running the administration are the indirect costs. All of these cannot be conveniently allocated to production and hence are called indirect costs.