BEC 2 Flashcards
What is the type and purpose of prevention costs? Name some examples.
Type: comformance cost
Purpose: to prevent a defect in production from occurring in the first place.
Examples: Employee training Inspection expenses Prevention maintenance Redesign of product Redesign of processes Search for higher-quality suppliers
What is the type and purpose of appraisal costs? Name some examples.
Type: conformance cost
Purpose: to detect defects in products before reaching the customer or next department.
Examples: Statistical quality checks Testing Inspection Maintenance of the laboratory
What is the type and purpose of internal failure costs? Name some examples.
Type: nonconformance cost
Purpose: to correct a defect before being shipped to the customer.
Examples: Rework costs Scrap Tooling changes Costs to dispose Cost of the lost unit Downtime
What is the type and purpose of external failure costs? Name some examples.
Type: nonconformance cost
Purpose: to fix a defect after being shipped to the customer
Examples: Warranty costs Costs of returning the good Liability claims/lost customers Reengineering an external failure
When does an investor have risk seeking behavior?
Certainty equivalent (the point at which the investor is indifferent to risk) > expected return on an investment - seeking a lower return for higher risk.
When does an investor have risk averse behavior?
Certainty equivalent < investment’s expected rate of return - seeking higher return for higher risk
What is the APR of quick payment discount formula?
(365/Payment period - Discount period) x (Discount % / 100%-Discount %)
What do data flow diagrams visualize?
The logical flow of data for business processes
What do flowcharts visualize?
Both the logical and physical flows of data for business processes
What is the overall cost of capital?
Also called the hurdle rate, it is the rate of return required to cover a firm’s cost of resources used.
What is free cash flow to the firm and how is it calculated?
The amount of cash made after taking reinvestments in non-current assets into consideration
Net income/net operating profit after taxes + Noncash expenses - Increase in working capital - Capital expenditures
What is the difference between target costing and transfer pricing?
Target costing is used to determine the product cost to ensure profitability per unit and total sales volume.
Transfer pricing is used to determine the transaction price between related parties.
When is the market price method of transfer pricing used?
This method sets the transfer price at the current selling price between willing buyers and sellers (an arm’s-length transaction).
When is the full cost method of transfer pricing used?
This method sets the transfer price equal to the variable costs per unit plus the fixed costs per selling unit.
When is the negotiated price method of transfer pricing used?
This method establishes the transfer price with a negotiation between the buyer and seller.
