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Management Accounting > EXAM > Flashcards

EXAM Flashcards

1
Q

Activity Based Costing is

A

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

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2
Q

cost driver rate formula

A

activity costs / activity volume = cost driver rate

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3
Q

target cost formula

A

market price LESS return on sales

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4
Q

basic CVP model is

A

revenue = var costs + fixed costs + income

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5
Q

revenue estimated as

A

sales price * units sold

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6
Q

total variable costs estimated as

A

variable costs per unit * units sold

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7
Q

total fixed costs will

A

remain constant

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8
Q

at the breakeven point

A

income = 0

so revenue = var costs + fixed costs

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9
Q

number of units sold to breakeven

A

number of units breakeven =

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

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10
Q

unit contribution margin

A

(sales - variable costs) / sales

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11
Q

break even point in units

A

fixed expenses / unit contribution margin

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12
Q

break even point in sales

A

fixed expenses / contribution margin ratio

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13
Q

contribution margin ratio

A

contribution margin / sales

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14
Q

(units sold to reach) target income

A

fixed expenses + target income / unit contribution margin

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15
Q

job costing is used when

A

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

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16
Q

Basic cost flow model

A

BB + TI - TO = EB

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17
Q

POHR

A

budgeted total units in the allocation base

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18
Q

overhead applied

A

POHR * Actual Activity

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19
Q

job order costing for decision making

A

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

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20
Q

Absorption Costing

A

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

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21
Q

Variable Costing

A

direct material
direct labour
variable man o/hd

22
Q

managing scarce resources

A

contribution margin per unit of scarce resources should be maximised

23
Q

influences on pricing

A

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

24
Q

life cycle costing tracks

A

costs attributable to each product/service from start to finish

25
Q

linear programming applies to

A

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

26
Q

Theory of constraints

A

seeks to improve products processes by focusing on constrained resources

27
Q

bottlenecks are

A

constraints

28
Q

6 step process (theory of constraints)

A

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

29
Q

centralised

A

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

30
Q

decentralised

A

decisions are made at divisional and departmental levels

31
Q

ROI formula (1)

A

income/invested capital * 100

32
Q

Weighted average cost of capital is

A

weighted average combination of cost of debt and equity

33
Q

WACC formula

A

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

34
Q

residual income formula

A

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

35
Q

EVA formula

A

investment centres after tax operating profit -

(investment centres assets - liabilities) * WACC

36
Q

financial performance measures include changes of

A

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

37
Q

Non financial performance measures help managers

A

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

38
Q

Return on Capital Employed formula

A

company’s EBIT/ capital employed

39
Q

Weighted Average Contribution Margin

A

contribution margin * % of total cost

40
Q

Performance Measurement leads to dysfunctional behaviour

A

depends on the design of management system

good systems will

41
Q

ABM 4 steps

A

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

42
Q

ABM step 1

cost classification

A

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

43
Q

ABM step 2

monthly revenue

A

monthly revenue - total costs

44
Q

ABM step 3

target cost

A

revenue - ROR per month = monthly target cost

* duration = total target cost

45
Q

ABM step 4

cost reduction target

A

total cost * duration - target cost = cost reduction

total cost / cost reduction = %

46
Q

CVP 4 steps

A

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

47
Q

CVP - income statement

A

sales less VC = contribution margin

less fixed costs = operating income

48
Q

CVP Breakeven

A

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

49
Q

Balanced Scorecard

A

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

50
Q

Standard costing

A
  • figures given too late
  • not flexible enough to adapt to changes
  • variances were overused causing loss of morale in workforce
51
Q

who made the balanced scorecard?

A

kaplan and norton

52
Q

relevant costs

A

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

Management Accounting (5 decks)

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