Revenue budget variance - - - CORRECT ANSWER difference between actual
revenues and static budget revenues, and has two components : sales price variance
and revenue sales quantity variance
budget variances - CORRECT ANSWER Differences between actual results and
sales budget expectations
Profit variance equation - CORRECT ANSWER subtract your projected gross profit
from your actual gross profit
Direct Costs - CORRECT ANSWER Costs unique and exclusive to a department.
GENERATE REVENUE
steps in a capital investment financial analysis - CORRECT ANSWER -estimate the
project's cash flows
-assess the project's riskiness
-estimate the project cost of capital (discount rate)
-measure the financial impact
Payback - CORRECT ANSWER a capital investment analysis method that measures
the length of time it takes to recover, in net cash inflows, the cost of the initial
investment
NPV - CORRECT ANSWER Net Present Value - the difference between the present
value of cash inflows and the present value of cash outflows.
Assume that the cost driver for Housekeeping Services is the amount of space
occupied. User departments in total occupy 200,000 square feet of space.
Direct cost allocation method - CORRECT ANSWER the costs of each support
department are allocated directly to, and only to, the patient services departments.
Step-down allocation method - CORRECT ANSWER allocates support-department
costs to other support departments and to operating departments in a sequential
manner that partially recognizes the mutual services provided among all support
departments
What is the most used Cost Allocation Method? - CORRECT ANSWER Step-down
method is used more because it recognizes at least some of those interest support
department relationships. So, it's a fairer in efficient way of doing the allocation.
, Reciprocal allocation method - CORRECT ANSWER allocates support-department
costs to operating departments by fully recognizing the mutual services provided among
all support departments
variable costs - CORRECT ANSWER costs that vary directly with the level of
production.
Examples of variable expenses - CORRECT ANSWER utility bill, groceries, gasoline,
phone bill
Contribution Margin - CORRECT ANSWER The amount remaining from sales
revenues after all variable expenses have been deducted.
Revenue-Variable Expenses
Full-cost pricing - CORRECT ANSWER Pricing method that uses all relevant variable
costs in setting a product's price and allocates those fixed costs not directly attributed to
the production of the priced item.
Breakeven Volume Calculation - CORRECT ANSWER Break-Even point (units) =
Fixed Costs ÷ (Sales price per unit - Variable costs per unit
Basic sources of capital - CORRECT ANSWER Working Capital, Equity Capital, Debt
Capital
Factors that impact interest rates - CORRECT ANSWER -Time to maturity
-Default risk of debt issuer
-Inflation rate
-Liquidity of debt
-Protective provisions of security issuer
Debt Contracts - CORRECT ANSWER are agreements by the borrowers to pay the
lenders fixed dollar amounts at periodic intervals.
Also called (Bond indenture, Loan agreement, Promissory note)
bond interest rate - CORRECT ANSWER -Both the interest rate an issuer pays its
bondholders and the timing of payments are set when a bond is issued
-Interest on a bond accrues daily and is paid in semiannual installments over the life of
the bond
Cost of Debt Capital - CORRECT ANSWER The required rate of return on investment
of the lenders of a company.
callable bonds - CORRECT ANSWER bonds that the issuing company can redeem
(buy back) at a stated dollar amount prior to maturity
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