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CIMA - P1 > 3. The Modern Environment > Flashcards

3. The Modern Environment Flashcards

1
Q

What are the three significant developments that have lead to a change in performance and accounting systems?

A
  1. Globalisation
  2. Technology
  3. Fast changing consumer tastes
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2
Q

What are the principle changes resulting in global developments?

A
  • Shorter production life cycles

- Greater competitive pressures

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3
Q

What is the cost of quality?

A

The difference between the actual cost of producing, selling and supporting products or services and the equivalent costs if there were no failures during production or usage.

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4
Q

What are the four types of quality cost?

A
  1. Prevention (Conformance)
  2. Appraisal (Conformance)
  3. Internal Failure (Non-Conformance)
  4. External Failure (Non-Conformance)
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5
Q

What are prevention costs?

A

Costs incurred prior to or during production in order to prevent substandard or defective products or services from being produced

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6
Q

What are appraisal costs?

A

Costs incurred in order to ensure that outputs produced meet required quality standards

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7
Q

What are internal failure costs?

A

Costs arising from inadequate quality which are identified before transfer of ownership from supplier to purchaser

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8
Q

What are external failure costs?

A

Costs arising from inadequate quality which are discovered after transfer of ownership from supplier to purchaser

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9
Q

What are costs of conformance?

A

Costs of achieving specified quality standards

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10
Q

What are costs of non conformance?

A

The cost of failure to deliver the required standard of quality

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11
Q

What is the Just In Time philosophy?

A

Processes should be geared up to providing exactly what the customer wants, exactly when they want it.

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12
Q

What are the two steps of JIT?

A
  1. JIT purchasing - resources should be acquired just as you need to use them
  2. JIT production - finished goods should roll off the production line just as the customer arrives to purchase them
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13
Q

Is JIT a push or pull system?

A

Pull - responds to demand

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14
Q

What are the 7 characteristics of a successful JIT purchasing system?

A
  1. Stable communication
  2. Small number of suppliers
  3. Nearby suppliers
  4. Long-term relationships
  5. Working with suppliers for quality
  6. Not being hung up by single sourcing
  7. Buying from small firms
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15
Q

What are the 6 characteristics of a successful JIT production system?

A
  1. Reduced production run set up times
  2. Reduced cycle (lead) times
  3. Flexible staff
  4. Efficient quality control
  5. Customer order driven production
  6. Reduced inventory levels
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16
Q

What is the impact of JIT on accounting techniques?

A

Zero inventories therefore no need for separate ledger accounts, zero variances for price and usage

17
Q

What is throughput accounting?

A

Dealing with bottlenecks or constraints, the less efficient elements within an organisation that limit workflow

18
Q

What is the benefit of eliminating a bottleneck?

A

The business gets more goods through the production process to the consumer, leading to increased sales and lower inventories

19
Q

What is the throughput a measure of?

A

How fast revenue is being earned compared to how fasts costs are being incurred

20
Q

What is the throughput contribution?

A

Sales revenue less only direct materials

21
Q

What is the throughput conversion cost?

A

All operating costs except for direct materials

22
Q

What is the theory of constraints?

A

A procedure based on identifying bottlenecks, maximising their use, subordinating other facilities to the demand of the bottleneck facilities, alleviating bottlenecks and re-evaluating the whole system

23
Q

What are the 5 steps of alleviating bottlenecks?

A
  1. Identify the binding constraint
  2. Exploit the constraint - get maximum output
  3. Subordinate everything else - all operating at the same rate as binding constraint
  4. Elevate the constraint - increase resources to make more efficient
  5. Return to step 1
24
Q

What are the steps to finding the throughput maximising output and associated throughput contribution?

A
  1. Identify the bottleneck
  2. Find the throughput contribution per unit of bottleneck resource
  3. Prioritise production of the product with the higher throughput contribution
  4. Calculate how many of each product can be produced given the constraint
  5. Multiply units by t/put contribution per product
25
Q

What is the throughput accounting ratio?

A

(Throughput contribution per time period)/(Conversion cost per time period)

26
Q

What does a t/p ratio of greater than 1 mean?

A

The business is generating return faster than it is incurring costs

27
Q

At what level are most costs incurred in digital products?

A

At the feature rather than product level

28
Q

What is the common split of fixed and variable costs in digital products?

A

Many more fixed costs and just minimal marginal costs of reproducing digital products

29
Q

What are the 10 types of digital costs?

A
  1. Design and development
  2. Individual features or functions
  3. Infrastructure of the platform
  4. Payment method
  5. Marketing
  6. Licence (fixed)
  7. Royalty (variable)
  8. Support
  9. Administration
  10. Staff
30
Q

What are the 7 main problems with digital costing?

A
  1. Hard to determine standard costs
  2. Drivers of overheads and their impacts may be difficult to assess
  3. Many costs incurred up front, but many extended over time
  4. Product lifetimes may be difficult to estimate
  5. Difficult to allocate feature costs across products
  6. Complex financial accounting
  7. Difficult to determine responsibility
31
Q

What are the benefits of digital costing systems?

A

Information is more detailed, more up to date and can allow better customer and location cost analysis. Operational costs should be lower as systems are automated

32
Q

What are the key features of a digital costing system?

A
  1. Real time market information about costs of supply
  2. Real time information about cost drivers
  3. Conjunction of market and product design information
  4. Use of analytics to assess supplier and supply behaviour over time
  5. Use of intelligent decision software
  6. Ability to deal with many decisions
  7. Use of microservices

CIMA - P1 (14 decks)

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