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BEC > B3 - Operations Management: Cost Accounting and Performance Management > Flashcards

B3 - Operations Management: Cost Accounting and Performance Management Flashcards

1
Q

What is cost allocation?

A

Distribution of OH.

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2
Q

What is cost management?

A

Control of costs.

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3
Q

What are conversion costs?

A

Costs that include DL and OH.
They do not include DM!

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4
Q

What are semivariable costs?

A

Cost that are fixed to certain point, and from then on, they are variable.
Ex: Maria and her cell phone!

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5
Q

What are sunk costs?

A

Costs that are in the past and unavoidable.

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6
Q

What are commited costs?

A

Costs that are in the future and unavoidable.

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7
Q

What is a mixed cost?

A

Costs that have variable and fixed components.

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8
Q

What are prime costs?

A

Materials + Labor

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9
Q

What are the two costs that includes all costs?

A

Prime Costs + Conversion Costs

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10
Q

How do you allocate cost?

A

Step 1 = Total Hrs = Units * Hrs per Unit
Step 2 = Cost per Hr = Budgeted costs / Total Hrs
Step 3 = Cost per Unit = Hours per unit * Cost per Hr

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11
Q

How do you calculate direct materials?

A

Beg Bal
(+) Purchases
(+) Transportation
(-) Returns
(-) Materials Used
(=) End Bal

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12
Q

What is process costing?

A

A method of allocating production costs to products and services by averaging the cost over the total units produced.

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13
Q

What is operation costing?

A

Hybrid system that allows you to use process costing for some costs and job order costing for other costs.

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14
Q

What is job order costing?

A

A method of allocating production costs to products and services that are identifiable as separate units and require greater or lesser amounts of work to complete.

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15
Q

What is activity based costing?

A

A system that accumulates all costs of overhead for each of the activities of the organization and then allocate those activity costs to the cost objects that caused the activity.

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16
Q

How do you calculate equivalent units under WAG?

A

Units completed + (WIP * Completed %)

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17
Q

How do you calculate equivalent units under FIFO?

A

Unfinished Beg Inv
(+) Finished Inv
(-) Beg Inv
(+) WIP * % Completed
(=) Equivalent Units in FIFO

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18
Q

What is another way to calculate COGS?

A

COGM
(+) Beg FG Inv
(-) End FG Inv
(=) COGS

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19
Q

What is the formula for equivalent cost per unit under WAG?

A

(Beg Cost + Current Cost) / Equivalent Units

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20
Q

What is the formula for equivalent cost per unit under FIFO?

A

Current Cost / Eq Units

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20
Q

What are conversion costs?

A

DL + OH

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21
Q

What is the formula for Cost of Jobs Completed?

A

COGM = DM + DL + OH applied + Beg WIP - End WIP

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22
Q

What is the formula for End WIP?

A

Beg WIP
(+) Mfg Cost
(-) Goods transferred to FG
(=) End WIP

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23
Q

What is the formula for OH Rate?

A

OH Rate = Total Estimated OH / Total Est Cost Driver

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24
Q

What is the formula for OH Applied?

A

OH Applied = OH Rate * Hrs/Units used

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25
Q

What is another way to calculate COGM?

A

Mfg Cost
(+) Beg WIP
(-) End WIP
(=) COGM

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26
Q

What is the difference between Direct Costing and Variable Costing?

A

NONE! It’s the same shit!
Direct costing capitalizes variable costs and expenses fixed costs.

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27
Q

What is Target costing?

A

Establishes std costs that must be attained.

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28
Q

When are plant-wide rates used?

A

When manufacturing ops are more labor based and highly automated.

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29
Q

When are departmental rates used?

A

When manufactured product resources vary between departments.

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30
Q

What is Sales Value at Split-off?

A

Sales price - Cost to Complete

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31
Q

How are joint costs allocated?

A

Based on: URIN
1. Unit Volume
2. Relative sales vale at split-off
3. NRV.

32
Q

What makes a non-value added cost most significant?

A

A cost that can’t be controlled, therefore can’t be lowered.

33
Q

What are the factors that should be considered when selecting cost drivers in ABC?

A
  1. Behavioral effects.
  2. Cost of measurement.
  3. Degree of correlation.
34
Q

What is an Engineered cost?

A

A cost that has an observable and known relationship to a quantifiable activity base.

35
Q

How do you allocate joint costs under the NRV method?

A
  1. Product Sales Allocation:
    (Units * Sales price) - Separable Costs
    Then, get %
  2. Joint Costs * % allocation
36
Q

How do you allocate joint costs under the NRV method?

A
  1. Product Sales Allocation:
    (Units * Sales price) - Separable Costs
    Then, get %
  2. Joint Costs * % allocation
37
Q

How do you allocate joint costs under the relative sales value method?

A

Similar to NRV, but with no separable costs.

38
Q

How do you allocate joint costs under the physical quantity basis?

A

Similar to relative value method, but with no selling costs.

39
Q

How do you calculate foregone contribution margin?

A

Additional Revenue***
(-) Additional Cost
(=) Contribution Margin Foregone

***Sales Price w/ Improvement
(-) Reg Sales Price
(=) Additional Revenue (if given by unit, then times # of units).

40
Q

What are the 2 types of Conformance/Good Quality costs?

A
  1. Prevention Costs.
  2. Appraisal Costs.
41
Q

What are the 2 types of Non-Conformance/Bad Quality costs?

A
  1. Internal Failure Costs.
  2. External Failure Costs.
42
Q

What are Prevention Costs?

A
  1. Training.
  2. Inspection (RM).
  3. Maintenance.
  4. Redesign (product & processes).
  5. Search for high quality suppliers.
43
Q

What are Appraisal Costs?

A
  1. Statitic QC.
  2. Testing.
  3. Inspection (FG).
  4. Maintenance.
44
Q

What are Internal Failure Costs?

A
  1. Rework.
  2. Scrap.
  3. Tooling Changes.
  4. Disposal.
  5. Lost unit.
  6. Downtime.
45
Q

What are External Failure Costs?

A
  1. Warranty costs.
  2. Cost of returning goods.
  3. Liability claims.
  4. Lost customers.
  5. Reengineering an external failure.
46
Q

What are the Critical Success Factors of the Balance Scorecard?

A
  1. Financial.
  2. Internal Processes.
  3. Customer Satisfaction.
  4. HR (Learning & Growth).
47
Q

What is a Fishbone diagram?

A

Looks like a timeline. Helps managers analyze problems that contribute to occurrence of defects.

48
Q

What is a Pareto diagram?

A

Bar + Line chart.
Bars have individual errors.
Lines have cumulative errors.
Helps prioritize improvement efforts.

49
Q

What is a Control chart?

A

Shows performance of a particular process within acceptable levels.

50
Q

How do you calculate controllable margin?

A

Controllable Margin = Contribution Margin - Controllable Costs

51
Q

What are controllable costs?

A

Fixed costs that managers can impact in less than a year.

52
Q

What is responsibility accounting?

A

When charges are made and assigned to a manager because he or she authorized the cost.

53
Q

What is contribution accounting?

A

When performance is measured based on the contribution of a segment.

54
Q

What is a profit center responsible for?

A

A profit center is responsible for Revenues and Costs.

55
Q

What is a revenue center responsible for?

A

Revenues only.

56
Q

What is an investment center responsible for?

A

Revenues, expenses, and investment capital.

57
Q

What is Absolute Conformance?

A

The mother of Quality. Perfect quality.

58
Q

What is Goalpost performance?

A

Assumes a range of acceptable results. Has margin for error.

59
Q

What are the 4 perspectives of the balance scorecard?

A
  1. Innovation.
  2. Customer Satisfaction.
  3. Internal Business Processes.
  4. Finance.
60
Q

How do you calculate Total Productivity Ratio?

A

TPR = Qty of Output Produced / Cost of All Inputs Used

61
Q

How do you calculate Partial Productivity Ratio?

A

PPR = Qty of Output Produced / Qty of Input Used

62
Q

What is the formula for EVA?

A

EVA = NOPAT - Required Return*

*Required Return = Investment * WACC

63
Q

What is EVA?

A

Residual Income that remains after the cost of all capital, including equity capital, has been deducted.

64
Q

What is the formula for ROI?

A

ROI = Income / Assets or Investment Capital

65
Q

Why is ROI not so effective?

A
  1. It only focuses on ST results.
  2. Encourages managers to let go investmests that may be beneficial.
66
Q

What is residual income?

A
  1. Residual after deducting imputed interest on assets.
  2. Income in excess of a desired minimum return.
  3. Measures profitability.
67
Q

What is the formula for residual income?

A

Residual Income = Net Income - Required Return*

*Required Return = NBV Equity * Hurdle Rate

68
Q

What is a good reason to use residual income instead of ROI?

A
  1. Goal congruence is promoted.
69
Q

What is discentive to invest?

A

When, based on ROI, a manager rejects a project that may result in positive cash flows.

70
Q

What is the imputed interest rate in the residual income approach?

A

Most likely WACC.

71
Q

What is the formula for Profit Margin?

A

Operating Profit Margin = Operating Profit / Sales
Net Profit Margin = Net Income / Sales

Profit Margin = ROI / Asset Turnover

72
Q

What is the formula for ROE?

A

ROE = Profit Margin * (Sales / Assets) * (Assets / Equity)

73
Q

How do you calculate Required Costs to Achieve Target Income?

A

Required Costs = Revenue Forecast - Target Income

*Target Income = Residual Income

74
Q

What are the attributes for TQM?

A
  1. Customer needs.
  2. Continuos improvements.
  3. Quality circles.
75
Q

What are Control Charts?

A

They show whether there is a trend toward improved quality conformance or deteriorating quality conformance.
Has three horizontal lines: 1. Upper limit, Average, Lower limit, and then dots show trends.

76
Q

What is a Pareto Diagram?

A

Looks like a fishing pole!
Shows what quality control issues are most frequent and which ones need more attention.

77
Q

What is a Fishbone Diagram?

A

Analyzes in deep those quality control issues found on the Pareto Diagram.

BEC (8 decks)

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