ac102_rev07-09 - Revised September 2007 EXAM REVIEW UNIT...

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Revised September 2007 Page 1 EXAM REVIEW UNIT III - CHAPTERS 7, 8, & 9 Study Suggestions Review your class notes, homework exercises and problems. Review Summary, Review Problem and Glossary at the end of each chapter. Use your Study Guide, especially Multiple Choice and True & False questions Review the resource materials and practice quizzes and exams available on the Textbook Website : http://highered.mcgraw-hill.com/sites/0073048836/informationcenterview0/ Additional review materials are available online at sites such as: http://www.cliffsnotes.com/WileyCDA/Section/id-305261.html Key Terms and Concepts to Know Chapter 7 – Profit Planning Major benefits of budgeting and how and why budgets are used. Sequence in which the budgets are prepared. Prepare a Sales Budget and Schedule of Expected Cash Collections. Prepare a Production Budget. Prepare a Direct Materials Budget and a Schedule of Expected Cash Disbursements. Prepare a Cash Budget. Direct labor, variable and fixed overhead, selling and administrative expense budgets Responsibility accounting Zero-based budgeting Chapter 8 – Flexible Budgets and Performance Analysis Difference between a flexible budget and a static budget Flexible budget “flexes” due to changes in activity. Prepare a flexible budget that includes both variable and fixed costs Comparing actual activity to a static/planning or flexible budget and why the flexible budget is better for comparison. Activity variances are the differences between the static/planning budget and the flexible budget and are caused by the difference between planned and actual activity levels.
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Revised September 2007 Page 2 Revenue and spending variances (sometimes called flexible budget variances) are the differences between the flexible budget and the actual results and are caused by differences in the revenue per unit, cost per unit and/or the amount of cost incurred. Revenue and spending variances are calculated based on the actual activity level. Revenue and variable costs will be different in the static/planning budget and the flexible budget because both are affected in total by the level of activity. Fixed costs will be the same in the static/planning budget and the flexible budget because fixed costs are unaffected in total by changes in the activity level. Therefore activity variances for fixed costs are always zero. Chapter 9 – Standard Costs The nature of standards: what they are, how they are developed, why they are important and the different types of standards used The nature of variances: what they are, how they arise, how they are calculated and why they are important. Prepare journal entries to record actual and standard costs and the related
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ac102_rev07-09 - Revised September 2007 EXAM REVIEW UNIT...

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