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ACG Final Exam Graded A+ 2024
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ACG Final Exam Graded A+ 2024
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ACG Final Exam Graded A+ 2024ON TEST* Make vs. Buy Decision - ANS-We must decide whether to make something
ourselves or outsource it
Write Make vs. Buy
- Write down all the relevant costs and pick the one that is cheaper
- Avoidable fixed costs and and opportunity costs go in make
4 Common Methods used to Evaluate Capital Investment Options: - ANS-*1. Payback
Period $
2. Simple Rate of Return also called Accounting Rate of Return (ARR)*
For 1 & 2 ignore the time value of money (TVM)
3. Net Present Value (NPR) $
4. Internal Rate of Return (IRR) $
For 3 & 4 consider time value of money (TVM)
$ focus on cash flows
4 Cost Behavior Patterns: - ANS-1. Variable Costs
2. Fixed Costs
- Committed Fixed Costs: Fixed Costs that the company cannot change in short run
- Discretionary Fixed Costs: Fixed costs that management has the ability to change or
influence in the short run
3. Mixed Costs: Contains a variable and fixed element
4. Step Costs: Costs that remain constant for a small range of activity but then jump to a
different fixed level
4 Q's, 2 conceptual: Allocating Manufacturing OH - ANS-This estimate is called pre-
determined overhead application rate
Pre-determined OH Rate = Budgeted OH Cost / Budgeted Activity Used
4 Quality Costs - ANS-Prevention, Appraisal, Internal Failure, External Failure
Prevention: costs incurred to avoid producing poor-quality goods or providing poor-
quality services.
oSpend more time and money on R&D and design
o Train employees
o Evaluate potential suppliers
Appraisal: costs incurred to detect poor-quality goods or services.
o Inspecting materials
o Inspecting products throughout production
,o Testing products
Internal Failure: costs incurred on defective units before delivery to customers.
o Reworking defective products
o Scrapping defective products
External Failure: costs incurred because defective goods or services are not detected
until after delivery is made to customers.
o Recalls
o Warranties
o Lost profits from lost customers
A little difficult ...
Optimal Use of Limited Resources Decision - ANS-We must decide which products to
make based on contribution margin
If there are constraints, compute CM/constraint (constraint usually = time)
PHOTO
Step 1:
Get CM for each item
What they sell for - VC
PROD. A and prod B
now for prod. a do cm/constraint
prob b. com/constraint
A/P ... comes from?
*Budgeted A/P for as of June 1st* <- June 1st is really May 31st - ANS-Comes from
*Purchases*
Cash Disbursements are 70% and 30%
May (.30)(Purchases) + 0 for April
A/R Balance ... comes from?
*Budgeted A/R balance as of May 31st?* - ANS-Comes from *Credit Sales*
Cash Collections are
Current Month = 60%
1 Month Later = 25%
, 2 Months Later = 10%
May (25% + 10% = 35%)(Credit Sales) + April (10%)(Credit Sales) + 0
As CM and SP increase ... what happens to break-even? - ANS-Decrease
As VC or FC increase ... what happens to break-even? - ANS-BE increases
Break down the *master budget variance* into the revenue/spending variance (also
called flexible budget variance) and the activity variance (also called volume variance) -
ANS-Read right to left
Budgeting Formula: - ANS-What goes out + Ending Inventory - Beginning Inventory =
What you need
Capital Budgeting - ANS-Process of planning an organization's investment in long-term
assets, also referred to as *capital assets*
Capital Turnover (ROI) Formula: - ANS-Sales/Assets
Cash Disbursements ... comes from?
*What are budgeted cash disbursements for May?* - ANS-Comes from *Purchases*
- Consider any cash spent in current period
- Consider any credit owed from previous period
Cash Disbursements are 70% and 30%
May (.70)(Purchases # for May) + April (.30)(Purchases # for April)
COGS available for sale formula? - ANS-Beginning Inventory + Purchased
(Tariff/Freight-In)
COGS formula? - ANS-COGS available for sale - EI
COGS is what cost - ANS-Product Costs
Company has determined that their fixed expenses for this month are $250,000, their
CM per unit is $8, and their valuable cost per unit is $2. If their anticipated sales this
month are 50,000 units at their selling price, the firms *margin of safety* as a percent
is... - ANS-BE IN $$ = FC + Op. Inc. / CM ratio
STEP 1:
BE = $250,000 + 0 / .80 = $312,500
STEP 2:
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