March 25, 2011
Book Value of Old Equipment
The book value of equipment is not a relevant consideration in deciding whether to
replace the equipment. WHY? Because it is a past , not a future cost.
Depreciation is the period
April 8, 2011
Flexible Budgets and Variance Analysis
Static Budget is prepared for only one level of a given type of activity
All actual results are compared with the original budgeted amounts, even if sales volume
is more or less than originall
Current Liabilities and Payroll
The three main characteristics of liabilities are:
They occur because of a past transaction or event.
They create a present obligation for future payment of cash or services.
They are an unavo
Accounting and the Business Environment
1. Accounting is the information system that measures business activities, processes the
information into reports, and communicates the results to decision makers. Accounting is the
Completing the Accounting Cycle
1. The financial statements are prepared from the adjusted trial balance.
2. The income statement reports revenues and expenses and calculates net income or net loss for
the time period.
3. The st
1. A corporation is a business organized under state law that is a separate legal entity.
Characteristics of a corporation are the following(students are required to list three):
Is a separa
1. A partnership agreement is the contract between partners that specifies such items as the name,
location, and nature of the business; the name, capital contribution, and duties of each partner;
and the method of
Accounting Information Systems
1. An accounting information system (AIS) is a system that collects, records, stores, and
processes accounting data to produce information that is useful for decision makers.
2. An effective accoun
March 28, 2011
The absorption approach is a costing approach that considers all factory overhead (both
variable and fixed) to be product (inventoriable) costs.
Factory overhead become an expense in the
Example In-Class Equations
Roger deposited 13,000 into his bank. The bank pays 2.3% interest, compounded annually. How much interest on interest will he earn over the next 15 years.
ROI or Residual Income?
Why do some companies prefer residual income (or eva) to ROI?
Under ROI, the message is go forth and maximize your rate of return, a percetange.
Under RI, the message is go forth and maximize residual income an absolute amount.
March 21, 2011
Setting the price of a new or refined product
Setting the price of products sold under private labels
Responding to a new price of a competitor
Pricing bids in both sealed and open bidding situations
March 23, 2011
CHAPTER 6 (BEGIN)
Opportunity, Outlay, and Differential Costs
Differential Cost (revenue) is the difference in total cost (revenue) between two
Incremental cost includes all of the costs of the other alternative plu
March 9, 2011
Accuracy and Relevance
In the best of all possible worlds, information used for decision making would be
perfectly relevant and accurate.
The degree to which information is relevant or
April 22, 2011
Developing Performance Measures
Good Performance measures will
1. relate to the goals of the organization.
2. Balance long-term and short-term concerns.
3. Reflect the mamagement of key actions and activities.
4. Be affected by actions of m
April 13, 2011
Ideal Standards are expressions of the most efficient performance possible under the
best conceivable conditions, using existing specifications and equipment.
No provision is made for waste, spoilage, machine breakdowns, and the like.
Managers use comparisons among actual results, master budgets, and flexible budgets to
evaluate organizational performance.
Isolating the Causes of Variances
Effectiveness is the degree to which a goal objective on target is met.
Efficiency is the degree
TEST 2 REVIEW
April 1, 2011
1 End of year date for ABC Corp