1. The three major objectives of budgeting are (1) to establish specific goals for future o perations, (2) to
direct and coordinate plans to achieve the goals, and (3) to periodically compare actual results with
PERFORMANCE EVALUATION USING VARIANCES
FROM STANDARD COSTS
1. Standard costs assist management in co ntrolling costs and in motivating employees to focus on
3. Reporting by the principle of exceptions is the reporting of only
CAPITAL INVESTMENT ANALYSIS
1. The principal objections to the use of the average rate of return method are its fail ure to consider the
expected cash flows from the proposals and the timing of these flows.
4. The cash payback perio
DIFFERENTIAL ANALYSIS AND
1. a. Differential revenue is the amount of increase or decrease in revenue e xpected from a particular
course of action compared with an alternative.
b. Differential cost is the amount of i
PERFORMANCE EVALUATION FOR
1. In the cost center, the department manager is responsible for and has authority over costs only. In a
profit center, the managers responsibility and authority extend to costs a
COST BEHAVIOR AND
2. a. Variable costs
b. Variable costs
c. Variable costs
3. a. Total fixed costs remain the same as the level of activity increases.
b. Unit fixed costs decrease as the level of activity
JOB ORDER COSTING
2. a. Job order cost system and process cost system.
b. The job order cost system provides a separate record of each quantity of product that passes
through the factory.
c. Process cost systems accumulate costs for
MANAGERIAL ACCOUNTING CONCEPTS
3. a. The role of the controller is to provide financial and accounting advice and assistance to
b. The controller has a staff responsibility.
4. The five basic phases of the
FINANCIAL STATEMENT ANALYSIS
2. Comparative statements provide information as to changes between dates or periods. Trends
indicated by comparisons may be far more significant than the data for a single date or period.
STATEMENT OF CASH FLOWS
1. It is costly to accumulate the data needed.
2. It focuses on the differences between net income and cash flows from operating activ ities, and the
data needed are generally more readily available and less
INVESTMENTS AND FAIR VALUE ACCOUNTING
2. The accrued interest represents interest earned by the seller; thus, the cash paid for the bond must
include a payment for the accrued interest. The accrued interest, represented by interest
LONG TERM LIABILITIES: BONDS AND NOTES
1. (1) To pay the face (maturity) amount of the bonds at a specified date. (2) To pay per iodic interest at
a specified percentage of the face amount.
3. Less than face amount. Because comparab
CORPORATIONS: ORGANIZATION, STOCK
TRANSACTIONS, AND DIVIDENDS
1. Each stockholders liability for corporation debts is limited to the amount invested in the corporation. A
corporation is responsible for its own obligations; therefore