B4 (1/2 BV) Flashcards

1
Q

Business Process management seeks

A

incremental change by tweaking existing process and design

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2
Q

Switching from traditional inventory to Just in Time

A

decrease cost per purchase order and increase carrying cost (carrying cost only decrease with fewer items in inventory for a shorter period of time)

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3
Q

Benefits of just in time system

A

for raw material include limitation of non value adding operations

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4
Q

Total Quality Management (TQM) Characteristics

A

customer focus, continuous improvement, quality circles

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5
Q

Benefits of Just in Time System

A

management strategy is cost reduction, work in process reduction, quality improvement

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6
Q

Companies that adopt just in time purchasing

A

often experience reduction in suppliers

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7
Q

Lean Management Philosophy main objective is

A

waste reduction

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8
Q

Kaizen use analysis of production processes to ensure

A

that resources used stay within costs

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9
Q

theory of constraints says organizations with

A

must work past it

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10
Q

Theory of constraints is concerned with

A

maximizing throughput by identifying and solving constraints

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11
Q

High Low Cost: Variable Cost

A

High Low Cost:

Change in total cost
—————————— = Variable Cost
Change in Volume cost

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12
Q

Probability Risk analysis is an extension of

A

sensitivity analysis (used to examine the possible outcomes given different alternatives)

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13
Q

Sensitivity analysis uses a

A

trial and error method in which the sensitivity of the solution to changes in variables calculated

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14
Q

The regression analysis model is the best classifier of

A

cost as either fixed or variable and estimates the dependent and cost variable.

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15
Q

When a value is an “intercept” means its touch the line.

A

Values are “Y” and production in units “X”

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16
Q

1) R-Squared
2) P-Value
3) Standard Error
4) T-Statistic hypothesis

A

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

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17
Q

y=a+bx
1) a= ______________
2) bx= _____________
3) y= _______________

A

y=a+bx
1) a= fixed cost
2) bx= variable cost (x independent variable)
3) y= total cost

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18
Q

In the regression analysis the coefficient of determination measures

A

goodness of fit / how well a statistical model predicts an outcome

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19
Q

1) Learning curve analysis
2) Expected Value
3) Continuous Probability

A

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

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20
Q

If stock L is perfectly negatively correlated with M that presents a portfolio with the

A

the least amount of risk, it’s a better option than stock J and K having no correlation

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21
Q

Costs that are relevant when deciding the point at which a product should be sold in order to maximize profit is

A

separable costs after split off point

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22
Q

1) Just in time system maintains:
2) Inventory turnover:

A

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

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23
Q

Selling obsolete inventory at a loss would increase the…

A

the quick ratio. The reduction of inventory values and recording loss would have no impact on quick assets.

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24
Q

Cash advance is made to a divisional office does not change the….

A

current assets or current ratio because the reduction of cash is offset by increase in accounts receivable

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25
Q

Cash Conversion Cycle Formula

A

Cash Conversion Cycle = Days in Inventory + Days Sales in Accounts Receivable - Days of Payables Outstanding

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26
Q

A positive measure would reflect the strong direct relationship means the

A

coefficient is 1

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27
Q

Cost Based Pricing is associated with

A

Price Stability, Price Justification, Fixed Cost Recovery

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28
Q

Absorption costing absorbs

A

fixed overhead costs into the unites produced. The units placed in inventory can absorb some of the managers cost and raise profits.

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29
Q

Breakeven analysis assumes that over the relevant range unit variable costs are unchanged. Fixed costs are always constant

A

relevant range unit variable costs are unchanged. Fixed costs are always constant

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30
Q

Cost Volume profit analysis are

A

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

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31
Q

An increase in production levels within a relevant range most likely result from

A

increasing the total cost

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32
Q

Absorption costing will produce a greater

A

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

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33
Q

To maximize profit at full capacity

A

contribution margin per hour should be maximized

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34
Q

Issuing capital stock for cash results in an increase in both

A

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

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35
Q

Increase in sales collection would decrease the

A

cash conversion cycle because cash conversion cycle is calculating how long it takes to receive the cash

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36
Q

Relevant costs are incremental costs which represent the change with

A

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)

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37
Q

Opportunity cost of making a component part in a factory with no excess capacity is

A

net benefit given up from the best alternative use of the capacity

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38
Q

Opportunity cost is

A

the contribution to income that is foregone by not using a limited resource for its best alternative use

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39
Q

Opportunity cost is the

A

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

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40
Q

Sunk costs are costs incurred in the

A

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

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41
Q

Research and development costs are

A

sunk costs because they are costs in the past

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42
Q

Sales volume variance arises solely because

A

the quantity actually sold differs from the quantity budgeted to be sold

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43
Q

A revenue variance (aka sales price variance) is due to a

A

change in unit selling prices

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44
Q

Purchasing Manager would be responsible for

A

a price variance

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45
Q

Purchasing Manager is directly involved in negotiation of

A

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

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46
Q

When actual sales are less than budget, budget do not

A

change at all

47
Q

A flexible budget is appropriate for any activity that has a

A

variable cost (ex: marketing budget and direct material usage budget)

48
Q

Within a relevant range

A

total fixed costs remain constant. Fixed costs per unit therefore decreases as production levels (number of units) increase. On other hand variable costs per unit remain constant, so total variable costs increase as production levels increase.

49
Q

Flexible budget adjusts the

A

budget amounts for differently levels of activity. The flexible budget identifies volume components of variances from planned activity.

50
Q

A master budget is an

A

overall budget consisting of many smaller budgets, that is based on one specific level of production. A flexible budget is a series of budgets based on different activity levels within relevant range

51
Q

When management is developing the capital budget they use a

A

profit center equipment requests because department requests, appropriately justified, would provide key insight into capital requirements of business

52
Q

Flexible budget uses

A

budgeted revenue and costs per unit, but is adjusted based on actual units of output

53
Q

Operating/ financial budget

A

(operating budget describes plan for revenue and expenses) examples are cash budget, sales budget, production budget

54
Q

Flexible budget the budgeted amounts

A

are adjusted for the actual levels of activity/ actual results/ levels of production

55
Q

Flexible budget provides

A

cost allowances for different levels of activity whereas a static budget provides costs for one level of activity

56
Q

The cash budget must be prepared before

A

you can complete forecasted balance sheet

57
Q

The budgeted income statement produces

A

produces anticipated accrual basis net income or loss and is added to beginning owners equity to generate the owners equity section of the budgeted balance sheet

58
Q

The statement of cash flows is usually the last

A

pro forma statement prepared. This is because everything affects cash. Only when everything else has been estimated can cash flow projected

59
Q

The cash receipts budget includes

A

loan proceeds

60
Q

Selling and Administrative budgets need to be

A

detailed in order that the key assumptions can be better understood

61
Q

Cost of goods manufactured budget would most directly relate to

A

would most directly relate to materials used, direct labor, overhead applied, and work in process inventories budgets

62
Q

Production budget is calculated from

A

from the desired ending inventory and the sales forecast

63
Q

Participative budgeting is more time consuming because

A

more time consuming because it requires input from multiple stakeholders

64
Q

Relevant costs is best for evaluating

A

discontinued items because it considers alternatives

65
Q

Standards imposed by management without employee input are referred to as

A

authoritative standards

66
Q

Benchmarking

A

the current performance of operations to current performance measures

67
Q

Manufacturing industries such as

A

industries such as mass production are typical areas where standard cost systems are used. However, service industries may also use a standard cost system

68
Q

Opportunity cost is the cost of the next best thing so if it cost $5 each for 5,000 units or 10,000 to rent extra space. The $________ is the opportunity cost.

A

The $10,000 is the opportunity cost.

69
Q

1) When establishing a budget the first thing you do is __________
2) The cash budget is usually broken down into _________________
3) The cash budget alerts management to __________________
4) The cash budget shows _________________________

A

1) When establishing a budget the first thing you do is forecast sales volume
2) The cash budget is usually broken down into monthly periods
3) The cash budget alerts management to periods when there will be excess cash available for investment
4) The cash budget shows itemized cash receipts and disbursements during the period, including financing activities and the beginning and ending cash balances

70
Q

Cost Objectives

A

1) Valuation of unexpired costs
2) Efficiency measurement
3) Determination of Net Income

71
Q

A firm earning a profit can increase its return on investment by

A

increasing sales revenue and operating expenses by the same percentage

72
Q

In using a process cost system, a production report is usually generated that fully accounts for all units and costs. The physical flow of units is fully accounted for by

A

Determining that the units in process at the beginning of the period plus the units transferred in are equal to the units transferred out plus ending inventory.

73
Q
A
74
Q
A
75
Q
A
76
Q
A
77
Q
A
78
Q
A
79
Q
A
80
Q
A
81
Q
A
81
Q
A
82
Q
A
83
Q

Contribution Approach

A

Revenue
- Variable Costs
________________
Contribution Margin
- Fixed Costs
______________________
Net Income

84
Q

Contribution Margin Ratio

A

Contribution Margin / Revenue

85
Q

Absorption Formula

A

Revenue
- Cost of Goods Sold
___________________________
Gross Margin
- Operating Expenses
___________________________
Net Income

86
Q

Breakeven Point in Units

A

Total Fixed Costs
______________________________
Contribution Margin Per Unit

87
Q

Breakeven points in dollars

A

Total Fixed Costs
_____________________________
Contribution Margin Ratio

88
Q

Sales Volume for Target Profit

A

(Fixed Cost + Pretax Profit)
______________________________
Contribution Margin per Unit

89
Q

Selling Prices based on Assumed Volume

A

(Fixed Costs + Variable Costs + Pretax Profit)
______________________________
Number of Units Sold

90
Q

Margin Safety Formula

A

Total Sales - Breakeven Sales

91
Q

Quick Ratio

A

Cash & Equivalents + Securities + Receivables
______________________________
Current Liabilities

92
Q

Operating Cash Flow Ratio

A

Cash Flow from Operations
______________________________
Ending Current Liabilities

93
Q

Working Capital Turnover

A

Sales
__________________________
Average Working Capital

94
Q

Days in Inventory

A

Ending Inventory
_________________________
Cost of Goods Sold / 365

95
Q

Days in Accounts Receivable

A

Ending Accounts Receivable
______________________________
Sales / 365

96
Q

Days in Payable Outstanding

A

Ending Accounts Payable
__________________________
Costs of goods sold/ 365

97
Q

Operating Cycle

A

Days in Inventory + Days sales in accounts receivable

98
Q

Debt to Equity

A

Total Liabilities
_________________
Total Equity

99
Q

Total Debt Ratio

A

Total Liabilities
_________________
Total assets

100
Q

Gross Margin

A

Sales - Cost of Goods Sold
___________________________
Sales

101
Q

Operating Margin

A

Operating Income
____________________
Sales

102
Q

Profit Margin

A

Net Income
______________
Sales

103
Q

Return on Equity (ROE)

A

Net Income
_____________________
Average total equity

104
Q

Return on Assets (ROA)

A

Net Income
______________________
Average Total Assets

105
Q

Flexible Budget

A

(Variable Cost per Unit x Activity Level ) + Fixed Costs

106
Q

Direct Materials Purchases Budget

A
107
Q

Direct Materials Usage Budget

A

Beginning Inventory at Cost
+ Purchase at Cost
- Ending Inventory at cost
______________________________
= Direct Materials Usage

108
Q

Direct Labor Budget

A

Budgeted Production
x Hours required to produce each unit
______________________________
= Total number of hours needed
x Hourly Wage Rate
______________________________
= Total Wages

109
Q

Manufacturing Overhead Variances

A
110
Q

Volume Variance

A

1) Budgeted Fixed Overhead - Applied Fixed Overhead
2) (Actual Production in Units - Budgeted Production in Units) x Per Unit Standard Fixed Overhead Rate

111
Q

Sales Volume Variance

A

[Actual Sold Units - Budgeted Sales Units] x Standard Contribution Margin per Unit

112
Q

Sales Price Variance

A
113
Q

NRV Formula

A

Expected Selling Price - Total Production & Selling Cost