B4 (1/2 BV) Flashcards
Business Process management seeks
incremental change by tweaking existing process and design
Switching from traditional inventory to Just in Time
decrease cost per purchase order and increase carrying cost (carrying cost only decrease with fewer items in inventory for a shorter period of time)
Benefits of just in time system
for raw material include limitation of non value adding operations
Total Quality Management (TQM) Characteristics
customer focus, continuous improvement, quality circles
Benefits of Just in Time System
management strategy is cost reduction, work in process reduction, quality improvement
Companies that adopt just in time purchasing
often experience reduction in suppliers
Lean Management Philosophy main objective is
waste reduction
Kaizen use analysis of production processes to ensure
that resources used stay within costs
theory of constraints says organizations with
must work past it
Theory of constraints is concerned with
maximizing throughput by identifying and solving constraints
High Low Cost: Variable Cost
High Low Cost:
Change in total cost
—————————— = Variable Cost
Change in Volume cost
Probability Risk analysis is an extension of
sensitivity analysis (used to examine the possible outcomes given different alternatives)
Sensitivity analysis uses a
trial and error method in which the sensitivity of the solution to changes in variables calculated
The regression analysis model is the best classifier of
cost as either fixed or variable and estimates the dependent and cost variable.
When a value is an “intercept” means its touch the line.
Values are “Y” and production in units “X”
1) R-Squared
2) P-Value
3) Standard Error
4) T-Statistic hypothesis
1) R-Squared the coefficient of determination and is the proportion of the total variation in a dependent variable (y) explained by independent variable (x)
2) P-Value measure of the likelihood that tested data could have occurred by chance or current event
3) Standard Error is a measure of average variability of a sampling
4) T-Statistic hypothesis testing and computation of confidence levels
y=a+bx
1) a= ______________
2) bx= _____________
3) y= _______________
y=a+bx
1) a= fixed cost
2) bx= variable cost (x independent variable)
3) y= total cost
In the regression analysis the coefficient of determination measures
goodness of fit / how well a statistical model predicts an outcome
1) Learning curve analysis
2) Expected Value
3) Continuous Probability
1) Learning curve analysis: is used to determine increases in efficiency or production as experience is gained
2) Expected Value analysis: represents the long term average of repeated trials and is found by multiplying the probability of each outcome by its payoff
3) Continuous Probability simulation: is a procedure that studies a problem by creating a model of the process then through trial and error attempt to improve problem solutions
If stock L is perfectly negatively correlated with M that presents a portfolio with the
the least amount of risk, it’s a better option than stock J and K having no correlation
Costs that are relevant when deciding the point at which a product should be sold in order to maximize profit is
separable costs after split off point
1) Just in time system maintains:
2) Inventory turnover:
1) Just in time system maintains a much smaller level of inventory.
2) Inventory turnover (COGS divided by average inventory) increases with a switch and inventory as percentage of total assets decreases
Selling obsolete inventory at a loss would increase the…
the quick ratio. The reduction of inventory values and recording loss would have no impact on quick assets.
Cash advance is made to a divisional office does not change the….
current assets or current ratio because the reduction of cash is offset by increase in accounts receivable
Cash Conversion Cycle Formula
Cash Conversion Cycle = Days in Inventory + Days Sales in Accounts Receivable - Days of Payables Outstanding
A positive measure would reflect the strong direct relationship means the
coefficient is 1
Cost Based Pricing is associated with
Price Stability, Price Justification, Fixed Cost Recovery
Absorption costing absorbs
fixed overhead costs into the unites produced. The units placed in inventory can absorb some of the managers cost and raise profits.
Breakeven analysis assumes that over the relevant range unit variable costs are unchanged. Fixed costs are always constant
relevant range unit variable costs are unchanged. Fixed costs are always constant
Cost Volume profit analysis are
all costs can be divided into fixed and variable elements, total costs are directly proportional to volume over the relevant range, volume only relevant factor affecting cost
An increase in production levels within a relevant range most likely result from
increasing the total cost
Absorption costing will produce a greater
net income than variable costing bc absorption is treatment of fixed costs as unexpired inventory and recognized as COGS when relieved (thereby having a higher inventory causing Net income to go up). Under variable costing all fixed costs are treated as periodic expenses
To maximize profit at full capacity
contribution margin per hour should be maximized
Issuing capital stock for cash results in an increase in both
equity(aka working capital) (from the stock issuance) and current assets (from the cash collected). Total debt total assets debt is unchanged but assets increase from cash therefore ratio will decrease
Increase in sales collection would decrease the
cash conversion cycle because cash conversion cycle is calculating how long it takes to receive the cash
Relevant costs are incremental costs which represent the change with
different alternatives, Differential costs represents cost associated with two separate courses of action, avoidable costs which is adverted by selecting different course of action, opportunity cost, direct costs and variable costs (sometimes relevant but not always)
Opportunity cost of making a component part in a factory with no excess capacity is
net benefit given up from the best alternative use of the capacity
Opportunity cost is
the contribution to income that is foregone by not using a limited resource for its best alternative use
Opportunity cost is the
potential benefit lost by selecting a particular course of action. If idle space has no alternative use, there is no benefit foregone; opportunity cost is zero
Sunk costs are costs incurred in the
in the past that will not change as a result of any decision made in the future. These costs are considered irrelevant in decision making
Research and development costs are
sunk costs because they are costs in the past
Sales volume variance arises solely because
the quantity actually sold differs from the quantity budgeted to be sold
A revenue variance (aka sales price variance) is due to a
change in unit selling prices
Purchasing Manager would be responsible for
a price variance
Purchasing Manager is directly involved in negotiation of
materials prices and would have the greatest influence over the direct materials price variance. The direct materials price variance could be used to monitor purchasing manager performance
Direct Materials Purchases Budget
Manufacturing Overhead Variances
Sales Price Variance
