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Business Finance > Cost Behaviour > Flashcards

Cost Behaviour Flashcards

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1
Q

What is the acid test ratio?

A

The short-term liquidity of a business

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2
Q

Revenue in 2018 is £100000 and in 2019 is £120000, the revenue growth is?

A

20%

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3
Q

The revenue is £120000 and the gross profit is £6000, the gross profit margin is?

A

5%

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4
Q

Cash 1000, trade receivable 1000, inventory 500, current liability 1000, the current ratio is?

A

2.5:1

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5
Q

Which is a measure of profitability?

A

ROCE

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6
Q

What is direct material?

A

Raw material

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7
Q

What is direct labour?

A

People working on final product

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8
Q

What is overhead manufacturing costs?

A

Any other cost happen inside the business

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9
Q

Where do depreciation costs fit in?

A

Overhead manufacturing cost

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10
Q

What is the prime cost?

A

Direct material and direct labour

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11
Q

Conversion cost is?

A

Direct Labour and Overhead manufacturing cost

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12
Q

What is a product’s cost?

A

Direct material, direct labour, overhead manufacturing cost

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13
Q

What is the total production cost?

A

DM, DL, MOH, Marketing and Admin

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14
Q

Depreciation on manufacturing equipment is?

A

MOH

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15
Q

Depreciation on office equipment?

A

S&A

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16
Q

The salary of the CEO goes in?

A

S&A

17
Q

Lubricants & Cleaning Supply is?

A

MOH

18
Q

Steel, plastic and tires used in making cars?

A

DM

19
Q

Wages for assembly line workers?

A

DL

20
Q

Depreciation on delivery trucks?

A

S&A

21
Q

Advertising costs?

A

S&A

22
Q

Variable costs?

A

Cost varies with level of activity

23
Q

Any direct costs are variable, is that correct or no?

A

Yes

24
Q

What is the stepped cost?

A

Expenses that are constant for a given level of activity, but increase or decrease once the threshold is crossed.

25
Q

Fixed costs are usually characterized by?

A

Units costs that decrease as activity increases

26
Q

How would 5% sales commission paid to sales personnel be classified in a manufacturing company?

A

Variable, period cost

27
Q

What are the two parts of financial accounting?

A

Financial Accounting and Financial Reporting

28
Q

What is Financial Accounting?

A

Collecting Data.
Keeping Financial Records.
Analysing and interpreting financial information.
Accounting information is historic (it tells what already has happened).

29
Q

What is Financial Reporting?

A

Preparing financial statements in line with international rules and guidelines, so other people can read and understand them.

30
Q

What are the three Financial Statements?

A

SOPL (“Profit/Loss account”; “Statement of Profit/Loss) - prepared for the whole accounting year.

SOFP (Statement of Financial position/Balance sheet) - prepared at the end of the year.

SOCF (Statement of cash flows)

31
Q

What is the objective of financial statements?

A

To provide useful information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions.

32
Q

Users and interest in financial statements.

A

Present investors - Capital gain, share price growths & dividends.

Potential New investors - Decision to buy or not buy.

Banks - ability to service the debt and pay back capital on time.

Employees - Competitive wages & Job security

Management - Target met for bonuses purposes & highlight weak areas for remedial action.

Suppliers - Continuing business & Ability to pay credit.

Customers - Good Value for money & ability to cover warranty obligations.

Competitors - Ways in which to obtain a competitive advantage.

Government, inc. tax authorities - Employment, tax receipts & compliance with laws and regs.

Regulators/Auditors - Compliance
General public - Current issues e.g. environmental impact.

33
Q

What is cost of Sales?

A

Inventory + Purchases - Closing Inventory (if there is opening and closing stock)

34
Q

What is Gross Profit?

A

Sales - Cost of Sales (COS-COGS).

35
Q

What is Net Profit?

A

Gross Profit - Other Expenses (e.g. Salary, Rent)

36
Q

How to calculate the cash balance?

A

Balance c/f = Balance b/f + total receipts - total payments

37
Q

Gross Profit Margin formula?

A

Gross profit margin = GP/Sales * 100

38
Q

Cost of Sales Formula?

A

Opening Inventories + Purchases - Closing inventories

39
Q

Net Profit?

A

Gross Profit - Other Revenue expenses

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