Exam 3 Review PDF

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Exam 3 Review Budgets and Variances -

Budget: C = a + bx o Static Budget = budget for expected production (beginning of the year) o Flexible Budget = budget for actual production (end of the year)

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Variances: o Flexible Budget Variance: actual costs – flexible budget

Steps for computing flexible budget variance: 1. Determine the activity measure 2. Determine the cost function parameters: C = a + bx o Given in problem (a, b), or o Use static budget data [like account analysis] (often given x, C, Var/Fixed) 3. Compute the flexible budget: set X to actual activity and compute C 4. Compute the variance: actual cost – flexible budget 5. Determine if it’s favorable (actual < budget) or unfavorable (actual > budget)

Financial Accounting Balance Sheet Equation: Assets = Liabilities + Paid-In Capital + Retained Earnings -

Effect of a variety of transactions on the Balance Sheet

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Effect of adjustments on the Balance Sheet

Statement of Cashflows: -

Operating section

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Investing section

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Financing section

AR, BB

AR +100

+ sales on account

RE +100

- collections of AR

AR -30

AR, CB

CASH +30

Inventory. BB + purchases -CGS

PP Exp, BB +prepayments -expenses PP Exp, CB

Equip, BB +purchases -sales -depreciation Equip, CB AP, BB +purchases on acct. - payments AP, CB Wages Payable, BB + wage expense - wages paid Wages Payable, CB RE, BB +revenues - expenses -dividends RE,CB...