EXAM

Question 1

Activity Based Costing is

Answer 1

a method that identifies activities performed within the organisation as it delivers goods and services

Question 2

cost driver rate formula

Answer 2

activity costs / activity volume = cost driver rate

Question 3

target cost formula

Answer 3

market price LESS return on sales

Question 4

basic CVP model is

Answer 4

revenue = var costs + fixed costs + income

Question 5

revenue estimated as

Answer 5

sales price * units sold

Question 6

total variable costs estimated as

Answer 6

variable costs per unit * units sold

Question 7

total fixed costs will

Answer 7

remain constant

Question 8

at the breakeven point

Answer 8

income = 0

so revenue = var costs + fixed costs

Question 9

number of units sold to breakeven

Answer 9

number of units breakeven =

fixed costs / (unit contribution margin - variable cost per unit)

Question 10

unit contribution margin

Answer 10

(sales - variable costs) / sales

Question 11

break even point in units

Answer 11

fixed expenses / unit contribution margin

Question 12

break even point in sales

Answer 12

fixed expenses / contribution margin ratio

Question 13

contribution margin ratio

Answer 13

contribution margin / sales

Question 14

(units sold to reach) target income

Answer 14

fixed expenses + target income / unit contribution margin

Question 15

job costing is used when

Answer 15

units are distinctive, have high value and costs can be traced to the job

Question 16

Basic cost flow model

Answer 16

BB + TI - TO = EB

Question 17

POHR

Answer 17

budgeted total units in the allocation base

Question 18

overhead applied

Answer 18

POHR * Actual Activity

Question 19

job order costing for decision making

Answer 19

provides overview of profitability on individual jobs and gives a quick overview of info to plan future costs

Question 20

Absorption Costing

Answer 20

direct material
direct labour
variable man o/hd
fixed man o/hd

Question 21

Variable Costing

Answer 21

direct material
direct labour
variable man o/hd

Question 22

managing scarce resources

Answer 22

contribution margin per unit of scarce resources should be maximised

Question 23

influences on pricing

Answer 23

prices are based on costs, and are determined by the market forces

Question 24

life cycle costing tracks

Answer 24

costs attributable to each product/service from start to finish

Question 25

linear programming applies to

Answer 25

production situations with lots of products. aims to find the product mix that maximises products.

Question 26

Theory of constraints

Answer 26

seeks to improve products processes by focusing on constrained resources

Question 27

bottlenecks are

Answer 27

constraints

Question 28

6 step process (theory of constraints)

Answer 28

1) identify appropriate measure of value 2) identify organisations bottleneck 3) use bottleneck to produce only high value products 4) synchronize other processes to bottleneck 5) increase bottlenecks capacity 6) find the next bottleneck

Question 29

centralised

Answer 29

decisions are handed down from the top and subordinates carry them out

Question 30

decentralised

Answer 30

decisions are made at divisional and departmental levels

Question 31

ROI formula (1)

Answer 31

income/invested capital * 100

Question 32

Weighted average cost of capital is

Answer 32

weighted average combination of cost of debt and equity

Question 33

WACC formula

Answer 33

(after tax cost of debt* market value of debt) + (cost of equity*market value of equity) / (market value of debt*market value of equity)

Question 34

residual income formula

Answer 34

investment centres profit - (investment centres invested capital * imputed interest rate)

Question 35

EVA formula

Answer 35

investment centres after tax operating profit - | (investment centres assets - liabilities) * WACC

Question 36

financial performance measures include changes of

Answer 36

revenues/costs/cash flows/operating income/invested capital/share price

Question 37

Non financial performance measures help managers

Answer 37

focus on profit drivers and recognise lags between financial and non financial performances

Question 38

Return on Capital Employed formula

Answer 38

company's EBIT/ capital employed

Question 39

Weighted Average Contribution Margin

Answer 39

contribution margin * % of total cost

Question 40

Performance Measurement leads to dysfunctional behaviour

Answer 40

depends on the design of management system | good systems will

Question 41

ABM 4 steps

Answer 41

1) cost classification 2) work out monthly revenue 3) target cost 4) cost reduction target

Question 42

ABM step 1 | cost classification

Answer 42

unit level/batch level/product level/facility level/customer level cost driver rate * cost driver volume

Question 43

ABM step 2 | monthly revenue

Answer 43

monthly revenue - total costs

Question 44

ABM step 3 | target cost

Answer 44

revenue - ROR per month = monthly target cost | * duration = total target cost

Question 45

ABM step 4 | cost reduction target

Answer 45

total cost * duration - target cost = cost reduction | total cost / cost reduction = %

Question 46

CVP 4 steps

Answer 46

1) estimated income statement 2) breakeven - -- changes 3) new breakeven 4) new income statement

Question 47

CVP - income statement

Answer 47

sales less VC = contribution margin | less fixed costs = operating income

Question 48

CVP Breakeven

Answer 48

selling price - VC = unit CM unit CM * product mix = WAUCM WAUCM / fixed costs = breakeven volume - breakeven by product

Question 49

Balanced Scorecard

Answer 49

-suitable for large organisations -high cost of implementation -takes a long time HOWEVER customer satisfaction may outweigh these

Question 50

Standard costing

Answer 50

- figures given too late - not flexible enough to adapt to changes - variances were overused causing loss of morale in workforce

Question 51

who made the balanced scorecard?

Answer 51

kaplan and norton

Question 52

relevant costs

Answer 52

future differentiated cash flows (mention sunk costs and opportunity costs) relevance depends on info. short term decisions have diff costs to long term