Exam 3 Study Guide

Exam 3 Study Guide – Chapters 20, 21, 22, 23 – Barton ACCY 202
Please note that this study guide is not a substitute for reading the chapters in the textbook. It is intended to highlight important information.
Chapter 20
∙Benefits of budgeting and effects on human behavior
∙Timing of budgets – see pages 851-852
∙Types of budgets
o Operating – Sales, Merchandise Purchases or Production/Manufacturing, Selling Expense, General and Administrative Expense
o Capital Expenditures budget (may or may not be prepared)
o Financial budgets – Cash, Budgeted Income Statement, Budgeted Balance Sheet ∙What affects a merchandise purchases budget? See page 855.
∙How to calculate inventory to be purchased. See page 855.
∙Remember that this chapter is talking about static budgets, so only one sales scenario.
∙Problem: Know how to prepare a cash budget. See practice problems. 7 multiple choice questions.
Chapter 21
∙What is a performance report and what is it for? See page 897.
∙What is a standard cost and what is it used for? You’ll want to read “Section 2—Standard Costs” starting on page 901 and be comfortable with definitions given.
∙What is a flexible budget? See page 898.
∙What is a direct materials price variance/quantity variance? (And know how to calculate.) What is a direct labor rate/efficiency variance? (And know how to calculate.) ∙What might cause a direct materials quantity or price variance and who might be responsible for each?
∙Definitions of overhead variances from pages 907-910. No calculations.
∙Problem: As stated above, know how to calculate direct materials and direct labor variances. Remember you must indicate whether all variances are favorable or
unfavorable.) See practice problems. 7 multiple choice questions.
Chapter 22
∙What is a responsibility accounting system?
∙Difference between a cost center/profit center/investment center
∙Difference between direct costs/indirect costs
∙Difference between controllable/uncontrollable costs
∙Formula for calculating return on investment (ROI)
∙Formula for calculating residual income
∙Problem: Know how to prepare the departmental income statement, including allocating indirect costs. See practice problems. 7 multiple choice questions. Chapter 23
∙What are:
o Sunk costs?
o Incremental costs?
o Opportunity costs?
o Out-of-pocket costs?
∙Know how to make a decision such as scrap vs. rework or make vs. buy, etc. by choosing the alternative that would most maximize net income. You would need to be able to
identify revenues on each alternative (if any) and incremental costs/opportunity costs
on each alternative (if any).
∙Problem: None. 4 multiple choice questions.。