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Advanced  Cost  Accounting  Midterm  Review  Sheet  

 
The  exam  covers  chapters  1,  2,  3,  and  14.  The  review  slides  have  been  posted  on  
TED  by  _______.  The  study  material  in  there  is  very  important  (and  the  practice  
multiple  choice  questions  from  the  review  slides  may  resurface,  too).  Additionally,  
below  is  a  summary  of  some  key  information  that  I  think  you  should  know  for  the  
midterm  (this  is  NOT  a  complete  list  of  what  you  need  to  know  for  the  exam):  
 
Chapter  1:  Know  the  basics:    
 
• What  is  strategy  (the  definition)?  “A  plan  for  using  resources  to  achieve  
sustainable  goals  within  a  competitive  environment.”  
• What  are  the  two  basic  kinds  of  strategies?  Cost  leadership  and  
differentiation.  
• Understand  what  a  critical  success  factor  is.  
 
 
Chapter  2:    
 
• Know  what  SWOT  analysis  means  (strengths,  weaknesses,  opportunities,  and  
threats).    
• Understand  the  idea  behind  value  chain  analysis  (analysis  of  what  processes  
involved  in  bringing  a  product  to  market  add  value).  
• Know  what  balanced  scorecard  (BSC)  is,  and  know  the  four  areas  where  CSFs  
are  grouped  (financial,  customer,  internal,  learning).    
• Know  the  five  key  benefits  of  the  BSC:    
1. It  provides  a  means  for  implementing  strategy.    
2. It  provides  a  means  for  achieving  a  desired  change  in  strategy.    
3. It  aligns  managers’  activities  with  the  strategy.  
4. It  coordinates  efforts  within  the  firm  to  achieve  critical  success  factors.  
5. It  can  be  used  to  determine  management  compensation.  
 
 
Chapter  3:    
 
• Know  the  general  inventory  formula  (Beginning  Inventory  +  Transfers  in  =  
Ending  inventory  +  Transfers  out)  
• Know  how  the  inventory  formula  applies  to  different  inventory  
accounts  during  a  period  (for  example,  beginning  direct  materials  inventory  
+  direct  materials  purchases  =  ending  direct  materials  inventory  +  direct  
materials  used).  Be  prepared  to  solve  for  one  unknown  when  given  three  
known  variables.  
 
 

    • Know  the  journal  entries  for  disposing  of  variances  while  either  debiting   or  crediting  COGS.e.  For  example.  and  a  credit  to  A/P  (accounts  payable)  for  the   total  amount  owed  for  the  purchase.  flexible  budget.  uses  actual  sales  volume  but   budgeted  sales  price/unit  budgeted  variable  cost/unit  and  budgeted  fixed   cost).  including  for  variances.  You  should  be  able   to  calculate  all  the  variances  and  know  whether  they  are  favorable  or   unfavorable.   prepared  at  the  end  of  the  accounting  period.  a  debit  to  purchase  price  variance  for  the  extra   amount  paid  above  standard.  and  how  this  relates  to  the  variances.       Know  the  breakdown  of  budget  variances.  direct  materials  purchased   on  credit  at  a  higher  than  standard  price/unit  will  be  recorded  with  a  debit  to   DM  inventory  for  the  standard  cost  of  the  materials  (standard  cost/unit   times  number  of  units).Chapter  14:  The  professor  mentioned  during  the  review  lecture  that  this  chapter   will  make  up  around  half  of  the  exam.  PIEVO  includes  the  components  of  variances  for  financial  measures:   Price/Inflation  variances.  quantity)  variances.       There's  another  topic  that  I  recommend  briefly  reviewing  if  you  have  time.e.  and  Other   variances  (such  as  product  mix).   • Make  sure  that  you  fully  understand  Exhibit  14.   .  and  be  able  to  use  these  formulas  to   calculate  variances.  and  key  properties  of  a  flexible  budget  (i.         Cost  variances  in  general  can  be  broken  down  into  total  fixed  cost  variance  and  total   variable  cost  variance.4  on  page  597  of  the   textbook  (this  exhibit  also  shows  up  in  the  midterm  review  lecture  slides).       For  example.  Exchange  rate  variances.  That  is   the  basic  categorization  of  variances.  the  total  flexible  budget   variance  is  equal  to  the  actual  operating  income  minus  the  flexible  budget  operating   income.   • Know  the  formulas  for  price  variance  (AQ*[AP-­‐SP])  and  quantity  or  usage   (efficiency)  variance  (SP*[AQ-­‐SQ]).   Both  the  direct  materials  variance  and  the  direct  labor  variance  can  be  subdivided   into  price  and  usage  (i.       • Know  what  a  flexible  budget  is.  and  variances  of  different  types.  and  the  total  variable  cost  variance  can  in  turn  be  broken   down  into  a  direct  materials  variance.  Volume  variances.  and   master  budget.     • Know  the  correct  journal  entries  to  make  at  each  step  of  the  accounting   process.  and  its  role  in  budgets.  direct  labor  variance.   Understand  the  relationships  between  the  actual.  and  overhead  variance.     • Understand  what  a  standard  cost  is.  For  example.  The  variances  emphasized  in  chapter  14  are  Price   variances  and  Volume  (or  quantity)  variances.