B1-Corporate Governance-Operations Management Flashcards
Financial Performances Measures
- Profit-income generated after expenses
- Return on Investment (ROA, ROE)-income generated on a specific investment
- Variance Analysis-actual performance vs expected performance
- Balanced Scorecard-framework used for implementing strategy that converts a company’s strategic objectives into a set of performance measures.
NonFinancial Performance measures
External Benchmarks-Productivity measures
productivity defined as the measure of the ratio of the outputs achieved to the inputs of production.
- Total Factor Productivity Ratios (TFP)- Output / Total Costs
- Partial Productivity Ratios (PPRs)- Output / Specific Quantity
NonFinancial Performance measures
Internal Benchmarks-Productivity measures
(Techniques to find and analyze problems)
- Control Charts-important tool used in statistical quality control (SQC). Used to plot a comparison of actual results by batch or other suitable constant interval to an acceptable range. Show if there is a trend toward improved quality conformance or deteriorating quality conformance.
- Pareto Diagrams (histogram)-used to determine the quality-control issues that are most frequent and often demand the greatest attention.
- Cause-and-Effect (Fishbone) Diagram-once the most frequently recurring and costly defects/problems are identified by the Pareto diagram, a cause and effect diagram may be used to further analyze the defect. Managers use the diagram to identify the sources of problems in the production process by resource and take corrective action.
Transaction Marketing (lowest price)
Customers are attracted for the sake of a single sale
Interaction-Based Relationship Marketing
Customers are attracted for the purpose of a sale that serves as the basis for an ongoing relationship. Repeat business/loyalty discounts
Database Marketing
information is gathered on customers and the information from the database is used to segment customers into target markets for a more effective selling effort.
E-Marketing
use of internet to accomplish marketing functions
Cost Objects
resources or activities that serve as the basis for management decisions.
Operations Mgmnt
Product Costs
Product costs are all costs related to manufacturing of the product
- Inventory and COG Manufactured an sold
- Components-DM, DL, and MOH applied
Operations Mgmnt
Period Costs
Expensed in the period in which they are incurred and are not inventoriable.
- Selling, general, and admin expenses as well as interest
Operations Mgmnt
Objective of Cost accounting(PIE)
- Product costing-(inv and cog manufactured and sold)
- Income Determination (profitability)
- Efficiency measurements (comparisons to standards)
Operations Mgmnt
Traditional Costing: what is it? and steps
All indirect costs are allocated to a single cost pool called “overhead” and allocated as a single pool.
Application of overhead accomplished in two steps:
- Calculated overhead rate = Budgeted overhead costs / estimated cost driver(ie DL $, DLH, MH)
- Applied overhead=actual cost driver x overhead rate (step 1)
Operations Mgmnt
Cost behavior
Variable Costs
Bahavior, amount, Long run-characteristics
Behavior-cost changes proportionally with the cost driver
Amount-variable costs change in total but they remain constant per unit.
Long Run Characteristics-short run and long run effects of variable costs are the same within relevant ranges
Operations Mgmnt
Fixed Cost
Behavior, Amount, Long Run Characteristics
Behavior-in short term and within relevant range, a fixed cost does not change when the cost driver changes.
Amount-Fixed costs remain constant in total but they vary per unit. Volume increases and fixed costs remain the same but fixed cost per unit will decrease.
Long Run Characteristics-given enough time (and a long enough relevant range), any cost can be considered variable.
Operations Mgmnt
Cost accumulation systems
Cost of Goods Manufactured Statement
WIP Beginning
Add:Direct Materials Used
+ Direct Labor
+ MOH Applied
= Total Manufacturing Costs incurred
Total Manufacturing Costs Available
Less: WIP ending
=Cost of Goods Manufactured (completed this period)
Operations Mgmnt
Cost Accumulation Systems
COGS
Finished Goods Inv Beginning
Add: COG manufactured (or net purchases if retailer)
=COGAFS
Less:Finished Goods inv, ending
=COGS
Operations Mgmnt
Job Order Costing
method of product costing that identified the job as the cost objective and is used when there are relatively few units produced adn when each unit is unique or easily identifiable.
Operations Mgmnt
Job Order Costing
Job-Cost Records
maintained for each product, service, or batch of products, and they serve as the primary records used to accumulate all costs for the job. Accumulate data from the following internal docs
- Materials Requisitions
- Labor Time Tickets
- Overview of Job Order Costing
Operations Mgmnt
Process Costing (cost accumulation system)
method of costing that averages costs and applies them to a large number of homogenous items.
- summarize flow of physical units (production report)
- Calc equivalent unit output
- Accumulate the total costs to be accounted for (production report)
- Calculate the unit costs based on total costs and equivalent units
- Apply the average costs to the units completed and the units remaining in ending WIP inventory.
Components of Inventory Cost (BASE) Mnemonic
Raw Materials
WIP
Finished Goods
Inventory: Raw Materials
B Beginning inv of raw materials
A Add: purchases of raw materials
=Raw Materials avail for use
S Subtract:Raw materials used
E Ending inventory of raw materials
Inventory: WIP
B Beg Inv of WIP
A Add: Raw materials used plus direct labor and overhead used
=WIP inventory available to be finished
S Subtract:Inventory transferred to finished goods
E Ending Inventory of WIP
Inventory: Finished Goods
B Beg Inv of finished goods
A Add: Inventory transferred from WIP
=Finished goods inventory available for sale
S Subtract: COGS
E Ending Inv of Finished Goods
Operations Mgmnt
Processing Costing
Cost Flow Assumptions
FIFO 3 Steps
- Beginning WIP x % to be completed
- Units completed-Beginning WIP
- Ending WIP x % completed
- Example*
- WIP, beg= 100 units, 25% completed*
- units completed and transferred out= 600 units*
- WIP, end= 200 units, 40% complete*
- WIP, beg= 100 x 75%= 75
- 600 - 100 = 500
- 200 x 40% = 80
- total = 655
Operations Mgmnt
Processing Costing
Cost Flow Assumptions
Weighted Average 2 steps
- Units Completed
- Ending WIP x % completed
= equivalent units
Example
WIP, beg= 100 units, 25% completed
units completed and transferred out= 600 units
WIP, end= 200 units, 40% complete
- 600
- 200 x 40%= 80
- total = 680
Operations Mgmnt
Processing Costing
Cost per equivalent unit
Weighted Avg and FIFO
Weighted Avg
Beginning Costs + current costs / equivalent units
FIFO
Current costs only / equivalent units
Spoilage
Normal Vs Abnormal
Normal-included in the standard cost of the manufactured product
Abnormal-not included in standard cost of the manufactured product (period cost)
