cost accounting & performance management Flashcards
for purposes of allocating JC to J products , the sales price at point of sale, reduced by cost to complete after split off
Net Sales Value at Split off point
allocating Joint cost to joint products the sales price at point of sale reduced by cost to complete after split off is assumed to be equal to
sales value at split off point
Joint Costs assigned to a product if costs are assigned using the NRV
Sale - Separable Costs = NRV
Activity based costing divides the production process into activitities where cost are accumulated
the production process assumes activities consume resources
in an activity based costing system, what should be used to assign a department’s manufacturing overhead costs to products produced in varying lot sizes
multiple cause and effects relationships
Activity-based costing assigns costs to activities or santractions and allocates them to products according to their use of each activity t
this method means multiple cause and effect relationships
multiple or departamental overhead rates are considered preferable to single or plant wide o/h rates
when various products are manufactured that do not pass through the same departments or use the same manufacturing techniques
multiple or departamental overhead rates are considered preferable to single or plant wide o/h rates
when various products are manufactured that do not pass through the same departments or use the same manufacturing techniques
ABC refines product cost information becasuse the cost system
emplasizes long term product analyasis (when fixed costs become variable costs
ABC refines product cost information because the cost system
emphasize long term product analysis (when fixed costs become variable costs
each should be considered in the selection of appropriate cost drivers for ABC
Cost of Measurement
Degree of Correlation
Behavioral effects
Volume based production is a hallmark of
Traditional Costing where the volume alone is the essential driver of how costs are allocated.
Performance reports should include
excptional items that are controllable, user focus, specific time horizon
Critical success factors identified in the balanced scorecard generally include
financial, internal business processes, customer, and human resource consideration
Critical success factors identified in the balanced scorecard generally include
financial, internal business processes, customer, and human resource consideration
Controllable margin is computed as contribution margin net of controllable costs
Controllable costs represent those fixed costs that managers can impact in lass than one year.
financial and non financial features of an organization
that contribute to its success in achieving strategy are referred to as critical success factors and are classified as
an increase in conformance costs resulted in a higher quality product
therefore in a decrease in non-conformance costs
an increase in conformance costs(Prevention & Appraisal) resulted
in a higher quality product and a decresed in non-conformace costs(Internal and external failure)
an increase in conformance costs(Prevention & Appraisal) resulted
in a higher quality product and a decreased in non-conformance costs(Internal and external failure)
rework
is an internal failure cost
Maintenance is a
prevention cost
inspection
is a prevention cost
Product recall
is an external failure
total quality control program
a product -quality related cost incurred in detecting individual products that do not conform to specification is an example of Appraisal Cost
appraisal costs would detect individual products that do not conform to specifications. examples of appraisal costs include
statistical quality checks, inspections, testing, maintenance of lab
The four categories of cost associated with product quality are
prevention, appraisal, internal failure, external failure
the cost of statistical quality control in a product cost system is categorized as
appraisal
appraisal includes the cost of
statistical quality control
appraisal costs include
statistical quality checks, inspection, testing.
external failure costs include
lost customers, warranty costs, and liability claims
Absolute conformance is the most rigorous standard of quality
because it represents a perfect or ideal level of compliance.
Conforming costs are those preventive and appraisal costs invested
to detect and prevent errors and do not represent quality standards
nonconforming costs are those internal and external failures associated with correcting quality errors associated with
non-compliance and do not represent quality standards.
conformance costs (Prevention & Appraisal)
non conformance costs (internal & External)
total productivity ratios consider all inputs
simultaneously as well as the prices of the inputs
Residual Income is the difference between
Net Income and the required return (required return is net book value)
Investment turnover
Sales / Aveg investment
the imputed interest rate used in the residual income approach for performance measurement and evaluation
can be best caraterized as historical weighted average cost of capital is usually used as the target or hurdle rate in the residual income approach
the imputed interest rate used in the residual income approach for performance measurement and evaluation
can be best caraterized as historical weighted average cost of capital is usually used as the target or hurdle rate in the residual income approach
Economic value added
is the residual income technique used for capital budgeting and performance evaluation. it represents residual (excess) income of project earnings in excess of the cost of capital
Economic value added
is the residual income technique used for capital budgeting and performance evaluation. it represents residual (excess) income of project earnings in excess of the cost of capital
ROA is a profitability that produces a percentage output
making it easy to compare companies that differ in size.
which of the following methods is best suited for evaluating the performance of a firms capital at any given year
EVA is a measure that uses net operating profit after taxes (NOPAT) and compares it to the required return for the capital
operating profit - EBIT -
can be derived by starting with NI and backing out the effects of int expense and taxes
ROA
is a profitability measure that can be used to evaluate the efficiency of asset usage and management, and the effectiveness of business strategies to create profits
operating leverage, days sales in AR and inventory turnover are all
measures of operational efficiency, specifically, efficiency in managing working capital
goal congruence is promoted through the use of the residual income approach
The ROI approach may cause segments that achieve high returns to reject investments that may benefit the company but lower the segment’s rate of return
the optimal imputed interest rate used in the RI approach can be best described as the
target return on investment set by the company’s management
on a divisional level, return on assets is
operating income divided by average total assets.
