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Management Information > Everything Cards > Flashcards

Everything Cards Flashcards

1
Q

The management account provides information for managers to assist in:
1. Costing
2. Decision making
3. Planning
4. ______
5. ______ _______

A
  1. Control
  2. Performance evaluation
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2
Q

Management accounts are prepared for _____ stakeholders.

Financial accounts are prepared for ______ stakeholders

A

Internal

External

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3
Q

Financial accounts should be true and fair

And hat should management accounts be?

A

As accurate as possible

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4
Q

How often are management accounts prepared?

A

On demand

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5
Q

______ accounting: recording and reporting historical data

_____ accounting: deciding where the company wants to go and ensuring it gets there

A

Financial

Management

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6
Q

Define cost object

A

Anything for which costs can be measured

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7
Q

Define composite cost units

A

They are cost units made up of two elements and are used where a single measure would be inappropriate for control purposes

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8
Q

Cost classification can be done by function (admin etc.) or by _____ (materials, ages etc.)

A

Nature

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9
Q

Prime cost = total _____ costs

A

Direct

(Costs that can be traced in full to the product)

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10
Q

What is a cost card?

A

A breakdown of all costs involved for a product

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11
Q

Define the relevant range

A

The relevant range is the range of activity levels within which assumed cost behaviour patterns occur

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12
Q

Define responsibility accounting

A

The system of accounting that segregates revenue and costs into areas of personal responsibility in order to monitor and assess the performance of each part of an organisation

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13
Q

Define responsibility centre

A

The department or function whose performance is the direct responsibility of a specific manager

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14
Q

Define absorption costing

A

The method by which a share of total production overheads is added to the prime cost, in order to calculate the full production cost of a product/service per unit

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15
Q

What is the OAR? (Overhead absorption rate)

A

Production overhead / activity level

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16
Q

Predetermined OAR = ?

A

Budgeted overhead / budgeted activity level

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17
Q

Steps of activity based costing (ABC):

  1. Group overheads into cost pools
  2. Identify cost drivers for each activity
  3. Calculate a cost per unit of cost driver
  4. ?
A

Absorb activity costs into production based on usage of cost drivers

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18
Q

Where is Job costing appropriate?

A

Where each separately identifiable cost unit or job is of relatively short duration

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19
Q

Where is contract costing appropriate?

A

Where each separately identifiable cost unit is of relatively long duration

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20
Q

Process (continuing operation) costing:

The cost per unit of output from each process is determined by dividing the _____ ______ cost by the number of _____ produced in each period

A

Total process

Units

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21
Q

Define the Just in Time (JIT) approach

A

The approach to operations planning and control based on the idea that goods and services should be produced only when they are needed

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22
Q

A push JIT System goes from _____ to production to customer

A

Supplier

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23
Q

Reasons for preparing a budget can be memorised using PRIME. What does this stand for?

A

Planning
Responsibility
Integration and coordination
Motivation
Evaluation and control

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24
Q

True or false: the following are all functions of the budget committee

Timetabling
Communication of final budget to managers
Monitoring of actual and budgeted results to assess the effectiveness of the budgeting process

A

True

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25
Q

Define the budget manual

A

A collection of instructions governing the responsibilities of persons and the procedures, forms and records relating to the preparation and use of budgetary data

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26
Q

What is the principal budget factor?

A

The factor which limits an organisation’s activities

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27
Q

What three things does a master budget normally comprise of?

A

Budgeted income statement
Budgeted balance sheet
Cash budget

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28
Q

What is the high low method?

A

A technique for analysing the fixed and variable cost elements of a semi-variable cost and thus predicting the cost to be incurred at any activity level within the relevant range

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29
Q

What are the three steps to the high low method?

A
  1. Difference between the period with the highest volume of activity and the period with the lowest volume of activity
  2. Calculate variable cost per unit
  3. Calculate fixed cost
  4. Find cost for the given activity level
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30
Q

Define linear regression analysis

A

The statistical technique for establishing a straight line equation to represent a set of data

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31
Q

Why is linear regression analysis superior to the high low method?

A

Because it takes account of all sets of recorded data

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32
Q

Coefficient of correlation, r:

If 0
If 1
If -1

A

Variables are not correlated
Perfect positive correlation
Perfect negative correlation

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33
Q

Seasonal variations:

Additive model?
Multiplicative model?

(TS= actual time series, T= trend, SV= seasonal variation)

A

TS = T + SV

TS = T * SV

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34
Q

The following assumptions are part of what?

  1. What happens in the past will continue to happen in the future
  2. A linear trend relation
  3. Seasonal variations are constant or proportional to the trend line
A

Time series analysis

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35
Q

Big data concerns high volume, high velocity and high ______ information

A

Variety

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36
Q

Define data mining

A

The process of sorting through data to identify patterns and relationships between different items

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37
Q

Define cognitive bias

A

Bias arising from human perception, including bias depending on how data is presented

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38
Q

Define incremental budgeting

Define zero based budgeting

A

Basing the forthcoming year’s budget on the current year’s results modified for changes in activity levels and prices

Each budget is prepared from the beginning or zero

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39
Q

Define working capital

A

The value of current assets less the value of current liabilities

40
Q

What are the two main objectives of working capital management?

A

Increase profits of a business
Provide sufficient liquidity

41
Q

Inventory turnover = 365 * ?

Receivables collection period = 365 * ?

Payables payment period = 365 * ?

A

Inventory / CoS (Converse for inventory turnover ratio)

Receivables / revenue

Payables / purchases

42
Q

Current ratio = ?

Quick ratio = ?

A

Current assets / current liabilities

Current assets excluding inv / current liabilities

43
Q

Is a higher or lower current ratio preferable?

A

Higher

44
Q

Rate of inventory should be as _____ as possible

A

High

45
Q

Define the cash operating cycle

A

The period of time between outflow of cash to pay for raw materials and the inflow of cash from customers

46
Q

Calculating the cash operating cycle:

+ Raw materials holding period
+ Average production period
+ average inventory holding period
+ average receivables collection period
- average payables payment period

Give each formula which is * 365

A

Average inv of raw mat / annual usage
Average inv of WIP / annual CoS
Average inv of finished goods / annual CoS
Average receivables / annual revenue
Average payables / annual purchases

47
Q

What is the reorder level system?

A

Fixed quantity is ordered whenever inventory calls to a predetermined level

48
Q

What is the periodic review system?

A

Inventory levels are reviewed at fixed time intervals to fit in with production schedules

49
Q

ABC system: the aim here is to reduce the work involved in inventory control in a business which may have what?

A

Several thousand types of inventory items

50
Q

Give the economic order quantity model

A

EOQ = (2CoD/Ch)^1/2

D = annual demand in units
Co = cost of placing an order
Ch = annual cost of holding one unit in inventory

51
Q

What does the economic order quantity model give?

A

The ideal order quantity to minimise total inventory cost

52
Q

Define cash budget

A

A statement in which estimated future cash receipts and payments are tabulated in such a way as to show the forecast cash balance of a business at defined intervals

53
Q

Define divisionalisation

A

The division of a business into more or less autonomous regional or product-centres business, each with its own revenues, expenditures and investments

54
Q

What is responsibility accounting?

A

The decentralisation of authority, with the performance of the decentralised units or responsibility centres measured in terms of accounting results

55
Q

What is the aim of a shared service centre?

A

To achieve significant cost reductions while improving service levels through the use of standardised technology and processes and service level agreements

56
Q

Define return on investment (ROI)

Give the equation

A

How much profit has been earned in relation to the amount of capital invested in the centre

Controllable divisional profit / divisional capital employed * 100%

57
Q

A project should be accepted if it _____ current ROI

A

Increases

58
Q

Define residual income (RI)

A

A measure of the centre’s profits after deducing a notional or imputed interest cost of the capital invested in the centre

59
Q

The balanced scorecard focuses on four different perspectives; what are they?

Damn girl, that’s FIIC

A

Financial
Customer
Internal business
Innovation

60
Q

Define a flexible budget

A

A flexible budget recognises different cost behaviour patterns and is designed to change as the volume of activity changes

61
Q

Define standard costing

A

A control technique that reports variances by comparing actual costs to preset standards so facilitating action through management by exception

62
Q

Define breakeven analysis

A

The study of interrelationships between costs, volume and profit at various levels of activity

63
Q

Define the break even point (BEP)
Give its formula

A

The number of units sold in order for the business to break even

Total fixed costs / contribution per unit

64
Q

Define the contribution ratio
Give its formula

A

A measure of how much contribution is earned from each £1 of sales revenue

Contribution per unit / sales price per unit * 100%

65
Q

Give the breakeven revenue formula

A

Fixed costs / contribution ratio

66
Q

Define the margin of safety
Give its formula

A

The amount by which sales can fall below budgeted sales without a loss being incurred

(Budgeted sales - breakeven sales) / budgeted sales * 100%

67
Q

Sales volume to achieve target profit formula?

A

(Fixed costs + required profit) / contribution per unit

68
Q

Define payback period

A

The time required for the cash inflows from a capital investment project to equal the initial cash outflow

69
Q

Define the accounting rate of return
Give its formula

A

The amount of profit, or return, that a business can expect to make based on an investment made

Average annual accounting profit / average investment or initial investment * 100%

70
Q

Average investment formula?

A

1/2 * (initial investment + final or scrap value)

71
Q

Define net present value (NPV)

A

The present value of cash inflows less present value of cash outflows

72
Q

Define annuity

A

A series of identical cash flows for a number of years

73
Q

Define a perpetuity

A

A series of identical annual cash flows that continue forever

74
Q

Define net terminal value (NTV)

A

The cash surplus remaining at the end of a project after taking account of interest and cash repayments

75
Q

Define the discounted payback period (DPP)

A

The time it will take before a projects cumulative NPV turns from being negative to positive

76
Q

Define the internal rate of return (IRR)

A

The discount rate at which the NPV is zero, or the annual return (in present value terms) that a project is expected to achieve

77
Q

What are hopwoods three distinct ways of using budgetary information to evaluate managerial performance?

A

Budget constrained
Profit conscious
Non-accounting

78
Q

Overtime premium payments are always classed as what?

A

Factory overheads

79
Q

The following describes what:

Functions or locations for which costs are ascertained and related to cost units for control purposes

A

Cost centre

80
Q

Overhead absorption rates are calculated to attribute overhead costs to cost _____

A

Units

81
Q

What is known as spreading common costs over cost centres on the basis of benefit received?

A

Overhead apportionment

82
Q

True or false

There is no need for a single product company to allocate and apportion overheads in order to determine overhead cost per unit

A

True

83
Q

Overhead absorption rates are based on actual or budgeted information?

A

Budgeted

84
Q

True or false

A predetermined absorption rate does not avoid fluctuations in unit costs caused by abnormally high or low overhead expenditure or activity levels

A

False

85
Q

Budgeted capacity = budgeted overheads / ?

A

Absorption rate

86
Q

Overheads are under absorbed when actual overhead expenditure _______ the amount absorbed

A

Exceeds

87
Q

True or false

Fixed production overheads are included in a marginal costing system inventory valuation

A

False

88
Q

Why are inventory valuations always higher with absorption costing than marginal costing?

A

As fixed overheads are included

89
Q

Which of the following is not an objective of budgeting

Authorisation
Expansion
Performance evaluation
Resource allocation

A

Expansion

90
Q

Budgets are prepared for _____ use and are not usually communicated to ______

A

Internal
Shareholders

91
Q

What task should first be carried out when preparing the master budget?

A

Identify the principal budget factor

92
Q

Is the cash budget a functional budget?

A

No

93
Q

True or false

A master budget will include a cash budget

A

True

94
Q

_____ ______ can be used to obtain more accurate forecasts

A

Machine learning

95
Q

Closing inventory value under marginal costing excludes what?

A

Fixed overhead per unit

Management Information (1 decks)

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