Exam Review Guide Sheet for Managerial Accounting Course

This is a review guide sheet to help you organize your studies as you prepare for the exam.  Note that this is only a guideline to highlight some of the important concepts / objectives we have covered so far.  Be warned, however, that you are responsible for all the material we have covered to date, both in class and in the text.  So, make sure to re-read the chapters, review all of your notes from pre-recorded lectures and live sessions, review/re-do examples, and activities from class, homework assignments, etc.

Make sure to bring a pencil, non-programmable calculator, and your photo ID.

You should know all the key terms and definitions. In addition, here is an overview of some of the main concepts / objectives we focused on from each chapter:

Managerial Accounting (MA), Part A (MA Modules 1-5):

• Understand cost classifications for different purposes (product vs. period; fixed vs. variable; manufacturing vs. non-manufacturing; direct vs. indirect)
• What are the three major types of product costs in a manufacturing company?
• Define the following: a) direct materials (DM), b) indirect materials, c) direct labor (DL), d) indirect labor, and e) factory overhead (OH).
• Explain the difference between a product cost and a period cost
• Distinguish between a) a variable cost (VC), b) a fixed cost, c) a mixed cost
• Explain the difference between a direct cost and an indirect cost
• Explain the difference between a manufacturing cost and a non-manufacturing cost
• Understand the general flow of manufacturing costs through the three inventory accounts (RM, WIP, FG) on the balance sheet and COGS on the income statement
• Prepare a schedule of COGM
• Explain how balance sheets and income statements differ for manufacturing, merchandising, and service firms

• What is job order costing?  How does it compare to process costing?
• Describe and record the flow of materials costs in job order costing
• Describe and record the flow of labor costs in job order costing
• Describe and record the flow of factory overhead costs in job order costing
• Explain the process used to compute a predetermined overhead rate.
• Compute a predetermined OH rate and apply overhead costs to jobs using a predetermined OH rate.
• Compute the total cost and the unit product cost of a job using a plantwide predetermined OH rate.
• Explain why some production costs (i.e. OH) must be assigned to products through an allocation process.
• Why do companies use predetermined OH rates rather than actual OH costs to apply overhead to jobs?
• What factors should be considered in selecting an allocation base to be used in computing a predetermined OH rate?
• Describe and record the flow of COGM and COGS.
• Would you expect the amount of applied OH for a period to equal the actual OH costs of the period?  Why or why not?
• Determine adjustments for overapplied and underapplied factory overhead costs

• What is process costing?  How does it compare to job order costing?  What are similarities?  What are differences?
• What is the weighted average method?
• How are equivalent units of production calculated under the weighted average method?  How are they used in process costing?
• How is the cost per equivalent unit of production calculated under the weighted average method?
• How are costs assigned to units and departments under the weighted average method?
• Describe and record the flow of materials costs in process costing
• Describe and record the flow of labor costs in process costing
• Describe and record the flow of factory overhead costs in process costing
• Describe and record the transfer of costs across departments in process costing
• Describe and record the transfer of costs to finished goods and COGS in process costing

• Describe different types of cost behavior in relation to production and sales volume
• Estimate costs using scatter diagrams, high-low method, regression method
• Compute contribution margin (CM) and its measures and interpret what it reveals about a firm
• Explain how changes in activity affect the contribution margin (CM) and net operating income
• What is the 'break-even' point (BEP)?  Operating leverage?  Margin of safety?
• Calculate the BEP in units and in sales dollars for a single product firm
• Calculate the # of units and sales dollars needed to hit a target income level
• Calculate the margin of safety in units and in sales dollars for a single product firm
• Calculate the degree of operating leverage and interpret what it reveals about a firm
• How will the break-even point change if 1) selling price per unit changes? 2) fixed costs change? 3) variable cost per unit change?  Sales volume (# units) changes?
• How will net income change if 1) selling price per unit changes? 2) fixed costs change? 3) variable cost per unit change?  Sales volume (# units) changes?
• What is a firm’s sales mix?  What is the weighted average contribution margin (WACM)?  How do you calculate break even for a multiproduct firm?

Suggestions for studying:  

• Study lecture notes, power points slides, i>clicker questions, re-read the text, re-read through Compass modules, watch walk through videos posted
• Rework all lecture examples, Friday discussion activities, Friday homework problems, Connect homework problems, i>clicker questions, textbook examples and problem sets.  Try to work through them withoutusing the solutions, and then go back and check your answers.
• Don’t try to memorize specific questions.
• Come to office hours if you need additional help.