BAR - Deck 4 Flashcards
FIFO method equivalent units
FIFO method equiv units = units completed + % End inv - % Beg Inv
Weighted Avg Method for equiv units
Weighted Avg Method For Equiv Unit Cost = Units completed + Ending WIP X % completed
Cost per equiv unit = (Beg Cost + Current cost) / equiv units = total cost / equiv units
what to do if a company does not formally recognize over/underapplied OH until yr end?
net charge OH can be debited (if OH underapplied) or credited (if overapplied)
(note: overapplied means too much exp was recorded»_space;> cr. to reduce the net exp)
COGM
COGM = End FG Inv + COGS - Beg FG Inv
Conversion costs & prime costs
Conversion costs = DL + OH
Prime Costs = DM + DL
how to apply OH
Apply OH by dividing bgt VOH and FOH by bgt cost driver & then multiplying by actual amt of cost driver used
What do financial and nonfinancial performance measures focus on
fina measures deal w/ costs, revs, or fina reports
nonfina measures focus on operational statistics rather than items measured in dollars
nonfina meas are calcs that do not come from numbers presented in the fina stmts
Describe Strategic Business Units (SBUs)
Cost centers have least amt of responsibility
Investment centers have most amt of responsibility
Cost - one dimension that managers control entirely (control the level of costs incurred)
Rev - responsible for one fina dimension, but revenue generation is not under the control of managers
Profit - responsible for rev & cost together
Investment - consider cost & rev, & relationship b/w profits generated and assets invested
costs of quality
conformance costs
- Appraisal costs - incurred to detect defects
- Preventative costs - help prevent the production of defective units
nonconformance costs
- internal failure costs - costs occurred inside the org BEFORE it goes to outside third party
- external failure costs - prod / servs failed to conform to req AFTER being delivered to customers
NOTE: an inc in conformance costs can result in a higher quality product and dec in non-conformance costs
Purpose of responsibility acct
developing perf reports emphasizing costs and revs that managers can control
core earnings
Core earnings = profits (or losses) derived from a company’s primary business, and they disregard one-time revs or costs that are not part of main biz activities
variable costing vs absorption costing
variable costing - only var costs are included in inventory (Fixed manu costs are period costs)
absorption costing - includes fixed manu costs
diff in NI under var costing vs absorption costing = amt of fixed manu costs X change in inventory
= fixed manu costs - (fixed manu costs / # of units produced * # of units sold)
absorption costing»_space;> greater income than variable costing as inventory levels inc
coefficient of determination R^2 & correlation coefficient
coefficient of determination, R^2 = percentage of variation in the dependent variable explained by the variation in the independent variables
correlation coefficient - meas strength of linear relationship
coefficient of determination = (coefficient of correlation) ^2
high low method
High low method: variable cost = change in cost / change in volume
Breakeven units
Breakeven units = Fixed costs / CM per unit
round up if need whole numbers
breakeven point in $
Breakeven point in $ = Unit price X Breakeven point (in units) OR Total FCs / CM margin ratio
Margin of safety
margin of safety = excess of sales over break even sales
master budget
based on one specific level of production
generally comprises operating bgts and fina bgts prepared in anticipation of achieving a single level of sales volume for a specific period
includes the entire company
flexible budget
can be prepared for any production
fina plan that allows for adjustments for changes in production or sales and accurately reflects expected costs for the adjusted output
can cover many levels of activity, not just one department
is depreciation or fixed IR notes affected by inflation
no - depr is based on historical cost and fixed IR notes based on fixed amort sched
ROA equals….
NI / total assets
Asset turnover X profit margin
(Sales / assets) X (NI / Sales)
ROA = profitability ratio that produces a percentage output, making it easy to compare companies that differ in size
Op inc equals…
EBIT
formula for operating profit margin
operating profit margin = operating profit / sales
cash conversion cycle equals…
cash conversion cycle = days in inventory period + days sales in AR - days of payables outstanding
types of analytics
- Descriptive - used to describe or explain what has already happened
- Diagnostic - explain why something has occurred
- Predictive
- Prescriptive
Descriptive and diagnostic»_space;> backward-looking
predictive and prescriptive»> Forward-looking
data mining techniques
clustering - identifies customers in a certain geographic area; identifies similar data
association - discovers links b/w two items; often find hidden patterns in data, such as two prod often purchased together
sequencing -looks for sequential patterns; often helps discover similar patters in transaction data over time
times interest earned
measures the abilitiy of a company to cover interest charges
greater ability»_space;> less risk of bankruptcy
most desirable quick (acid test) ratio
high quick ratio is most desirable»_space;> most liquid ST assets on B/S
Material price variance
Material price var = (AP-SP) X AQ
diff b/w actual price and std price X actual qty
DL usage / efficiency variance
DL usage / efficiency variance = (AH - SH) X SR
Difference in std and actual hrs X Std rate
formula for applied OH
applied OH =(std VOH rate X std DL hrs allowed) + (Std FOH rate X Actual production)
Bgt OH based on std hrs
Bgt overhead based on std hrs = (Std VOH rate X Std DL hrs allowed) + (Std FOH rate X Std production)
FOH volume variance formula
FOH vol variance = (actual units - std units) X Std rate
SP variance formula
SP variance = (actual SP/unite - Bdg SP/unit) X Actual sold units
DL efficiency variances
DL efficiency variance = std rate X (actual hrs worked - Std hrs allowed)
How is OH applied
OH is applied = est OH rate applied to the actual cost driver
