B3 Bitch Flashcards
Waht are the three components to product cost? then break them down in to prime and conversion costs
Product Costs are DM, DL, MOH…
Prime Costs= DM + DL
Conversion Costs = DL + MOH
Whats the difference between product and period costs
Product costs are inventoriable (DM, DL, MOH) and become COGS when sold
Period Costs are expensed when incurred and not inventoriable…think general admin costs
equation for the traditional overhead rate
Budgeted Manufacturing costs / Estimated Cost Driver
What is the relevant range?
Range of volume where the assumption of the cost river are valid and in which the actual value of the cost driver exist
Cost of Goods Manufatured Formula
BASE Formula
BEGINNING WIP
ADD Dm, Dl, MOH
SUBTRACT END WIP
ENDING COGM
Cost of Goods Sold Formula
BASE AGAIN Beginning Finished Goods ADD: COGM SUBTRACT: Ending Finished Goods ENDING COGS
Difference between Job and Process Costing
Job Costing is where the units/batch is customized and easy to allocate costs.
Process Costing is mass produced shit and costs are identified by activity and processes
Lemme know what an equilalent Unit is and how them costs are applied?
An Equivalent unit are those that are fully/partially completed during a period
The costs are found by determining units, then costs then apply assumpotions for costs per unit and allocation of costs
What are the equations for equivalent units and total costs under FIFO
( Beg. WIP * % TO BE completed, NOT completed) \+ Units Completed and Transferred Out LESS: Beginning WIP \+ (Ending WIP * % Completed) =Equiv. UNits
Total Costs = Cost incurred during the current period
What are the equations for equivalent units and total costs under Weighted Average Method
Equiv Units = Units completed and transferred out + (Ending WIP * % Completed)
Total Costs = Costs in Beg. WIP + Costs incurred during the current period
What are some types of spoilahe and how are they accounted for
Abnormal: charged to income for the current period
Normal: Increase the cost of the product being produced (like inventory)
What is Activity Based Costing
Resource consuming activites cause costs and that these costs should be assainged to benefitting products based on the activites performed and the resources consumed….these ABC systems often aplit up costs into various activity centers.
Whats the differnece between the direct method and the step down method
Direct Method is that eah service depts. costs are directly allocated to the production depts. without recognizing the service depth. themselves might use the services from other service depts.
Step-Down Method is a sequential approach to allocate service dept. Costs to production costs as well as other serive depts.
What are the costs before the split off point
they are sunk costs which are not relecent to further processing decisions
what are joint costs
allocated by an arbitrary means such as volume relationships or NRV at the split off point
What is the difference between the total factor productivity ratios and partial productivity ratios
Total factor prod. ratios reflect the quantity of all outputs produced relative to the costs of all inputs used
Partial prod. ratios reflect the quantity of all outputs produced relative to the costs of individual inputs use
What are control charts
used to plot comparison of actual results to a range. It tells us if its trending tom imporvement or deterioration
What do pareto diagrams & fishbone diagrams do
Pareto identifies the frequency (High to low) of defects while fishbone takes a cause and effect approach
What are conformance costs & non conformance costs
Conformance costs are associated with maintainging existing quality standards, include both appriasal and prevention costs
Nonconformace costs are those related to correcting nonconformance with existing stnadards which includes the internal failure and external failure
Controllable margin deinition
represents the diff between the contribution margin (Revenue - Variable Costs) and the controllable fixed costs (costs that managers can impact in less than a year)
What components are identified by blance score cards
FICA Finance Interal Business processes Cusotmer Satisfaction Advanceent of innovation and HR Development
What are the 4 SBU’s to set up business measures
Cost, Revenue, Profit, Investment
What does ROE measure
rate of return earned by a company on the equity component
Dupont ROE equation
Net Profit Margin x Asset Turnover x Financial Leverage
OR ROA x financial Leverage its the same thing
Net profti Margin: NI / Sales
Asset Turn = Sales / Avg. Total Assets
Fin. Leverage = Avg. total Assets / Equity
Extended Dupont ROE
Tax Burden x Asset Turnover x Financial Leverage x Interest Burden x Operating Income Margin
Tax Burden = NI / Pretax Income Interest Burden = Pretax Income / EBIT Operating Income Margin = EBIT / Sales Asset Turn = Sales / Avg. Total Assets Fin. Leverage = Avg. total Assets / Equity
What is residual income
measures the excess of actual income earned which is over the hurdle rate
Waht is the resudal income FORMULA
NI - Required Return
Required Return is = Net Book Value x Hurdle Rate
What is Economic Value Added and how is it different from the resudal
EVA measures the excess of income after taxes earned by the investment over the Rate of Return as defined by the WACC.
It’s diff from Residual because it requires WACC, and is more accurate
Steps and formula to find Economic Value Added
1: Calculate required return and income after taxes
Investment * Cost of Capital = Required Return
2: Compare income and required return
Income after taxes - Required Return = EVA
How do you determine the overhead rate and applied overhead using tradiitonal costing
Overhead Rate = Budgeted OH Cost x Estimated Cost Driver
Applied Overheard = Actual Cost Driver x Overhead Rate (Which is the budget)
Process Costing steps to find product cost:
- summarize flow of physical units w/ production report
- Calcullate “equivalent unit” output
- accumulate the total costs to be accounted for (DM + DL + MOH)
- calculate the avg unit costs based on total costs and equivalent units
- Apply the avg costs to the units completed and the units remaining in WIP inv.
Prevention costs include:
Training, inspection expenses , redesign of product/process
Appraisal Cost include:
statistical quality check, testing, maintence of lab
Internal Failure Include:
rework costs, scrap, downtime
External Failure Include:
Warranty costs, returned goods, liability claims
Four types of Quality Reporting
APIE
Appraisal Cost
Prevention Cost
internal Failure
External Failure
when assigning Joint costs using NRV what do you do?
find nrv by doing like sales vlalue - serperable costs for each product..sum total nrv….next apply the given driver to the product ratio of NRV which will give the final joint cost allocation
How do you compute ROI both ways
Income / Invested Capital
Or
Profit Margin x Investment Turnover
PM = Income /Sales
Turnover = Sales / Invested Capital
