ac102_rev10-12 - Revised July 2008 EXAM REVIEW ACCOUNTING...

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Revised July 2008 Page 1 of 18 EXAM REVIEW ACCOUNTING 102 - UNIT IV CHAPTERS 10, 11, 12 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 : Additional review materials are available online at sites such as: Chapter 10 - Decentralization Distinguish between a traceable fixed cost and a common fixed cost . Understand segments of a business. Distinguish between centralized and decentralized organizations. Distinguish between a cost center, profit center, and investment center. Know how to calculate ROI and residual income : Margin = Net operating income/Sales Turnover = Sales/Average operating assets ROI = Margin X Turnover OR Net operating income/Average operating assets Minimum required income = Required Rate of Return * Average operating assets Residual Income = Net Income minus Minimum required income Understand the strengths and weaknesses of the ROI and residual income methods of measuring performance. Chapter 11 – Relevant Costs for Decision Making Relevance refers to whether a revenue or cost will change as the result of the decision made. Relevant revenues or costs always change as the result of the decision. An avoidable cost is always a relevant cost. Differential revenues or costs are the differences in revenues or costs between the alternatives. Incremental revenues or costs are the additional costs or revenues that may be incurred. A sunk cost is any cost that has already been incurred and that cannot be changed by any decision made now or in the future.
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Revised July 2008 2 Sunk costs and future costs that do not differ between the alternatives are never included in the decision-making. An opportunity cost represents those economic benefits that are forgone as a result of pursuing some course of action. Know how to analyze whether to keep or replace old equipment . Know how to determine the most profitable allocation of a constrained or scarce resource. Know how to analyze make or buy decisions. Know how to analyze whether a special order should be accepted or rejected. Know how to analyze a decision to drop a segment or to drop a product line. Chapter 12 – Capital Budgeting Decisions Understand the concept of the time value of money, i.e., present value of $1 and present value of an annuity of $1. Determine the typical cash inflows and cash outflows that are associated with an
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This note was uploaded on 06/01/2011 for the course ACCOUNTING 102 taught by Professor All during the Spring '11 term at Harper.

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ac102_rev10-12 - Revised July 2008 EXAM REVIEW ACCOUNTING...

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