Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Strat Cost > chapter 14 > Flashcards

chapter 14 Flashcards

1
Q

is a means of gathering and using information.

A

management control system

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

MANAGEMENT CONTROL SYSTEMS

A

financial data
nonfinancial data
formal control system
informal conroll system

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

evaluating management control systems

A

motivation
goal congruence
effort

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

responsibility centers

A

cost center
revenue center
profit center
investment center

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

price one subunit charges for a product or service supplied to another subunit of the same organization.

A

transfer price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

are the products transferred between subunits of an organization.

A

intermediate products

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

are the products transferred between subunits of an organization.

A

intermediate products

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

transfer pricing results to

A
  1. help achieve company’s strategies and goals
  2. fit the organization’s structure
  3. promote goal congruence
  4. promote sustained high level of management effort
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

three different methods of transfer pricing

A

market based
cost based
negotiated transfer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

By using market-based transfer prices in a perfectly competitive market, a company can achieve the following:

A

Goal congruence
Management effort
Subunit performance evaluation
Subunit autonomy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

When supply outstrips demand, market prices may drop well below their .

A

historical average

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

process by which managers at all levels gain information about the performance against pre established criteria as set out in budgets, plans and goals

A

performance evaluation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

performance is evaluated at many different levels in the firm

A

top management
mid managemenf
operating level

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

evaluation by upper level managers of the performance of mid level managers

A

management control

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

evaluation of operating level employees by mid level managers

A

operational control

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

objectives of management control

A
  1. motivate managers to exert a high level of effort to achieve the goals set by top management
  2. provide the right incentive for managers to make decisions consistent with the goals set by top management
  3. determine fairly the rewards earned by managers for their effort and skill and the effectiveness of their decision making
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

a specific unit of an organization assigned to a manager who is held accountable for its operations and resources

A

Strategic Investment Unit (SIU); Responsibility Center

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

central to any effective profit planning and control system

A

performance evaluation and control

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

also known as responsibility accounting

A

strategic performance measurement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

system used by top management to evaluate SIU Managers

A

strategic performance measurement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

one in which decision making is not confined to a few top executives but rather spread throughout the organization, with managers at various levels making key operating decisions relating their sphere of responsibility

A

decentralized organizations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

basic conditions necessary for an effective strategic performance measurement

A
  1. a well-defined organization structure
  2. well-defined and established standards of performance in revenues, cost, and investments
  3. a system of accounting that identifies any revenues, expenses, and assets to specific units in the organization
  4. a system that provides for the preparation of regular performance reports
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

a unit within the organization which has control over costs, revenues, profits, and investment funds

A

strategic business unit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

unit within organization wherein the manager is responsible for minimizing costs subject to some output constraints

A

COST SBU

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

a unit that has no control over generating revenue or the use of investment funds

A

COST SBU

26
Q

a unit or segment within the organization wherein the manager is responsible for the generation of revenues and control of costs incurred in that SBU

A

Profit SBU

27
Q

unit or segment within the organization where the manager is responsible for the control of revenues, cost, and investment made in that SBU

A

investment SBU

28
Q

ROI Formula

A

net operating income/average operating assets

29
Q

ROI formula another

A

operating profit margin x asset turnover (return on sales)

30
Q

limitations of ROI

A
  1. emphasize short run performance rather than long run profitability
  2. results to disincentive for high ROI units to invest in projects with ROI greater than the minimum rate of return but less than units current ROI
31
Q

other criteria in evaluating performance rather than relying on ROI only

A
  1. growth in market share
  2. increase in productivity
  3. product innovation
  4. peso profit
  5. receivable and inventory turnover
  6. ability to venture into new and profitable areas
32
Q

is the net operating income that an investment SBU is able to earn above some minimum return on the operating assets

A

residual income

33
Q

larger residual income figure results to

A

better performance rating received by division’s manager

34
Q

advantages of residual income

A
  1. a unit pursues an investment opportunity costs as long as the return from the investment > minimum rate of return set by the firm
  2. the firm can adjust the required rates of return for differences in risk and types of assets
  3. possible to calculate different investment charge for different types of assets
35
Q

limitations of residual income

A
  1. since RI not %, it is not useful for composing units of significantly different sizes. if large unit, large RI, even with poor performance.
  2. not as intuitive as ROI
  3. difficult to obtain minimum rate of return
36
Q

a business unit’s income after taxes and after deducting the cost of capital

A

Economic Value Added (EVA)

37
Q

usually obtained by calculating a weighted average of the cost of the firm’s two sources of funds - borrowing and selling stocks

A

cost of capital

38
Q

main advantage of EVA

A

focuses manager’s attention of creating value for shareholders by earning profit greater than the firm cost of capital

39
Q

a unit/segment within an organization where the manager is responsible for selling budgeted quantities of various products or services at budgeted price

A

revenue SBU

40
Q

three types of variances useful to revenue SBU in meeting their goals

A

sales price variance
sales volume variance
sales mix variance

41
Q

this variance shows how much of the difference between the actual and budgeted CM is caused by the difference between the actual and budgeted sales prices

A

sales price variance

42
Q

measures the difference between actual unit sales and budgeted unit sales

A

sales volume variance

43
Q

this variance is a measure of the change in CM caused by selling products in proportion (mix) different from those that were budgeted

A

sales mix variance

44
Q

which will transfer price affect

A

not directly effect on company’s effect
indirect effect on company profit by influencing decisions of the division manager

45
Q

four general approaches are used on setting transfer price

A

-minimum transfer price
-market-based transfer price
-cost based transfer price
*variable cost
*full cost
*alternative cost measures
-negotiated transfer price

46
Q

general rule for making transfers to maximize a company’s profits in either perfect or imperfect market uses the formula

A

minimum transfer price

47
Q

from buying division’s perspective, maximum acceptable transfer price is equivalent to

A

price offered by outside supplier

48
Q

transfer price is the price at which goods are sold on the the open market

A

market based

49
Q

correspondence or consistency of individual subgoals with company goals

A

goal congruence

50
Q

eliminates the negative effect of fluctuations in production efficiency in one division on the reported income of another division

A

standard full cost

51
Q

sales price variance formula

A

(actual sales price - master budget sales price) x actual unit sales

52
Q

sales volume variance formula

A

(actual unit sales - master budget unit sales) x master budget average contribution margin per unit

53
Q

master budget average contribution margin per unit

A

master budget total CM / master budget sales

54
Q

transfer price formula if without excess capacity

A

differential cost pee unit + lost CM per unit on outside sales

55
Q

sales mix variance formula

A

(actual sales mix percentage for product - budgeted sales mix percentage for product) x actual total units of all products + budgeted units CM of product

56
Q

sales quantity variance

A

(actual total units of all products sold - budgeted total sales units of all products) x budgeted sales mix % of product x budgeted CM per unit of product

57
Q

market size variance formula

A

(actual total units of market - budgeted total units of market) x budgeted market share x weighted average budgeted CM per unit

58
Q

market share variance formula

A

(actual market share - budgeted market share) x actual total units of industry x weighted average budgeted CM per unit

59
Q

EVA formula

A

operating income*after tax - (average operating assets x WACC)

60
Q

residual income formula

A

operating income - (average operating assets x minimum rate of return)

Strat Cost (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions