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ACCA > F5 - PM > Flashcards

F5 - PM Flashcards

1
Q

How can improve throughput accounting ratio (TPAR) (5)

A

(5)

  • Increase selling price
  • Reduce material cost per unit.
  • Reduce expenditure on operating cost/factory cost
  • Improve efficiency and increase the number of unit or product -> affect total TP per hour.
  • Elevate the bottleneck ->more hours available of bottleneck resource ->operating cost per bottleneck hour would fall -> TPAR increase.

However, have some adverse consequences from some of its measures.

  • Increase sale price ->may reduce demand for product.
  • Reduce material cost per unit ->Quality may fall and bulk discount may be lost.
  • Reduce operating exp -> Quality may fall and/or errors increase.
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2
Q

Throughput accounting - Formula

A

a,Total factory cost (TFC) = Fixed production cost, including labour, but not including administrative cost

b. Return per factory hour =(Sale - material purchases) / Time on bottleneck resources
=TP Contribution per unit / Limited factor per unit

c. Cost per factory hour = Total factory cost / Time on bottleneck resource
=Total fixed cost per month or week/ limited factor per month or week

d.TPAR = Return per factory hour / cost per factory hour

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3
Q

ABC aborption - Cost pool and cost drivers

  • Machine set up cost
  • Machine maintenance cost
  • Ordering cost
  • Delivery cost
  • Power,heating and lighting
  • Salaries of indirect labour
  • Inspection costs
A

ABC aborption - Cost pool and cost drivers
-Machine set up cost ->No of production run or set up

-Machine maintenance cost -> No of machine hours

  • Ordering cost ->No of orders
  • Delivery cost -> No of deliveries
  • Power,heating and lighting -> Floor area (square metres)
  • Salaries of indirect labour -> No of labour hours
  • Inspection costs -> No of inspections
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4
Q

Which cost below is relevant or not?
1. Notional costs? No relevant
2. Common costs are only relevant if the viability of the whole process is being assessed? Yes, relevant
3.Differential costs in a make or buy decision are not considered to be relevant? Not true, must relevant.
Differential cost are extra, incremental, so are relevant

A
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5
Q

Limiting factor decision: Note

  1. If only one LF and many >=2 products
  2. If may LF and only 2 products
A

1.If only one LF and many >=2 products ->max contribution per LF or min cost.
2. If may LF and only 2 products -> use Linear programming (LP)
Maximise contribution -> Push
Minimise contribution -> Pull
Vi du: Dep X,Y,Z co 2 san pham A,B

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6
Q

Shadow price and Slack

A
  1. Shadow price or dual price is extra contribution earned if one extra LF is available
    Example: Since optimal is identified based on Dep X,Y
    Shadow price: $0.2 per hour in Dep X (calculate revised contri)
    $0.6 per hour in Dep Y
    Dep Z: They have no shadow price
    2.Slack: Is an under-utilised resource
    Example: Slack in Dep Z: 12000 hours - 10200 hours = 1800 hours
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7
Q

Incremental budgeting - The weakness

A

Incremental budgeting - The weakness (4)

  1. Assumes activities and methods of working will continue in the same way.
  2. Encourage spending up to the budget so that the butget is maintained next year.
  3. The budget may become out of date and no longer relate to the level of activity or type of work being carried out.
  4. Any inefficiency in the previous budget is carried forward to the current year plan
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8
Q

Incremental budgeting - The strength

A

Incremental budgeting - The strength (4):

  1. The budget is stable and change is gradual.
  2. The system is relatively simple to operate and easy to understand.
  3. Co-ordination between budgets is easier to achieve.
  4. The impact of change can be seen quickly
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9
Q

Incremental budget for local government-advantage and disadvantage

A

ADVANTAGE:

  1. Simple and easy to prepare.
  2. Fast and cheap to prepare.
  3. Suitable for mature low growth industries where last year’s expenses are similar to coming year’s expenses.

DISADVANTAGE:

  1. Any errors in previous year’s result will continue into the budget.
  2. the NFPO will not attempt to reduce cost in cremental budgets because assume expenses will be the same next year.
  3. Incremental budget is not suitable if government (NFPO) have different projects last year and this year because diff project incur diff cost
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10
Q

Zero based budgeting (ZBB): Steps,Advantages, disadvantages

A

Zero-based budgeting: save cost, found in service industries where cost likely to be discretionary (tuy y),suitable for NFPO.
4 Steps:Prepare decision packages,Rank,Funding,Utilise.
ADVANTAGES (5)
1.Emphasis on future need not past actions.
2.Eliminates past errors that may be perpetuated (ton tai lau dai) in an incremental analysis.
3.A positive disincentive for management to introduce slack into their budget.
4.A considered allocations of resources.
5.Encourage cost reduction

DISADVANTAGES (5):

  1. Can be costly and time consuming.
  2. May lead to increased stress for managements.
  3. Only really applicable to a service environment.
  4. May”re-invent” the wheel each year.
  5. May lead to lost continuity of action and short term planing.
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11
Q

Activity Based Budgeting (ABB): Applicability and Benefit of ABB

A

APPLICABILITY (4):

  1. Complex manufacturing environment.
  2. Wide range of products.
  3. High proportion of overhead costs.
  4. Competitive market.

BENEFIT OF ABB (3):

  1. Better understanding of overhead cost.
  2. Identifies the accurate relationship between product and activity.
  3. Each activity more accurately describes where costs are incurred.

DISADVANTAGES: Difficult to identify the major activities in compex organisations.

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12
Q

Rolling budget - Advantages and Disadvantages

A

ADVANTAGES:

  1. Budgeting process should be more accurate.
  2. Much better information upon which to appraise the performance of management.
  3. Budget will be much more “relevant” by the end of the traditional budgeting period.
  4. It forces management to take the budgeting process more seriouly.
  5. Co allow budgeted cost to grow in rolling budget in order to meet industry growth.
  6. Changes to budgets are allowed during the budgetary period.

DISADVANTAGES:

  1. More costly and time consuming.
  2. An increase in budgeting work may lead to less control of the actual results.
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13
Q

Beyond budgeting - ADVANTAGES and DISADVANTAGES.

A

BEYOND BUDGETING -= Rolling budget (monthly or quaterly) + NFPI (Non financial performance indicator ie: staff
skill,brand,customer loyalty, satisfaction)

ADVANTAGES (4):

  1. Create a culture based on beating the competition (since goals are related to external benchmarks) rather than simply gaining more internal resources.
  2. Reward can be team-based increasing the amount of motivation.
  3. It is easier to judge the performance of people lower down the organisation (who are closer to customers).
  4. Manager are given more power and takes on more responsibilities. It empowers junior managers so they can respond more quickly to changes in the external environment.

DISADVANTAGES (5):

  1. It is not suitable for low growth mature industries.
  2. Manager must work in the best interest of the organisation and has no dysfunctional behaviour.
  3. Manager may not have experience, knowledge and skills to react to changes in the business environment.
  4. There are too many IFPIs and it is difficult to prioritise the importance.
  5. Rolling budget is demanding and the manager may lack the skills tom implement.
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14
Q

Types of standards (3): Ideal standard, Attainable standard, Basis standard
What is ideal standard

A

Ideal standard (3):

  1. A standard that assumes perfect working conditions and does not make allowance for any losses, waste and machine breakdown.
  2. It can be used as a long-term organisational goal and is particularly applicable in total quality management environments.
  3. The variances can only be adverse and it may have an adverse motivational impact
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15
Q

Types of standards (3): Ideal standard, Attainable standard, Basis standard
What is Attainable standard

A

Attainable standard (3):

  1. it is based upon efficient (but not perfect) levels of operations but will include allowances for normal material losses, realistic allowances for fatigue, machine breakdown, etc.
  2. Attainable standards must be based on a tough but realistic performance level so that its achievement is possible, but has to be worked for.
  3. They are used for budgeting and budgetary control
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16
Q

Types of standards (3): Ideal standard, Attainable standard, Basis standard
What is Basis standard

A

Basis standard (2):

  1. These are long-term standards which remain unchanged over a period of years. Their sole use is to show trends over time for such items as material prices, labour rates and efficiency and the effect of changing methods.
  2. They can not be used to highlight current efficiency because they are out-of-date
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16
Q

Types of standards (3): Ideal standard, Attainable standard, Basis standard
What is Basis standard

A

Basis standard (2):

  1. These are long-term standards which remain unchanged over a period of years. Their sole use is to show trends over time for such items as material prices, labour rates and efficiency and the effect of changing methods.
  2. They can not be used to highlight current efficiency because they are out-of-date
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17
Q
  1. Nếu đề cho Actual Selling price per unit và Average market price per unit thì:
    Average market price per unit là RSP.
    Pls take note
    2.Analyse sale volume variance into components for market size and market share.
    => Market share means sale volume operational V
    Market size means sale volume planning V
A
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18
Q

Divisionalisation (Decentralisation): refers to delegating responsibilities to individual managers or units heads.
Advantages (4) and Disadvantages (4)

A

Advantages (4):

  1. Increase motivation of individual managers as they feel involved in the decision making of organisation.
  2. It is a form of training for the divisional managers and easy for them to rise through the ranks to strategic positions.
  3. It should promote goal congruence as all decisions been takin are all geared towards achieving the objectives of the whole organisation.
  4. Reduces the time taken to make decision.

Disadvantages (4):

  1. Divisional managers may take dysfunctional decisions.
  2. There is a need for a performance appraisal system to assess the perfomance of individual managers.
  3. Top manager may lose control by delegating decision making to divisional managers since they are not aware of what is going on in the whole organisatin.
  4. Lack of economies of scale.For example,efficient cash management can be achieved much more effectively if all cash balances are centrally controlled.
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19
Q

5 characteristic of big data: 5V

A

Charateristic of Big Data (5V)

  1. Volume
  2. Velocity (speed)
  3. Variety
  4. Veracity (accuracy and truthfulness)
  5. Value: Must add value to Co
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20
Q

Type of information system for bottom mgt, middle mgt, top mgt.

A

BOTTTOM MANAGEMENT (2):

  1. Transaction processing system: Abt daily sale and purchase.
  2. Customer relationship management system:record customer detail.

MIDDLE MANAGEMENT (3):

  1. Management information system: Generate regular report.
  2. Manufacturing resource planning system:Use at factory to control cost with various analysis.
  3. Enterprise resource planning system (ERPS):Ingegrate information fr all depts into a single system,creating a date warehouse which allows calculations such as customer profitability analysis and forecasting trends.

TOP MANAGEMENT (2):

  1. Strategic enterprise management system (SEMS): Take ERPS add non-financial data such as balanced scoredcard to allow an overall picture of biz to be built up.
  2. Executive information system (EIS):this allows senior members of staff to see summarised position of organisation as well as “drilling down” to see more detail abt ares of interest.
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21
Q

Types of Data security controls.

A

Types of Data security controls.

  1. Logical access controls: use computer and smart phone and banking app to remotely carry out banking trans.
  2. Database controls: grant diff users access to diff specific data.
  3. Hierarchical passwords:Use diff password to grant access to diff users to access diff information.
  4. Range check: Check for valid input but not check if data is accurate.
  5. A closed system-controlled testing:Internal control, internal use only, restric external factors.
  6. Ensuring security of confidental information:
    - Mornitoring emails to ensure the right recipient.
    - Encryption of files to ensures data is secure even if stolen.
    - Dial back facility
22
Q

Which of following examples of direct data capture costs?

  1. Use of bar coding and scanners.
  2. Payroll department’s processing of personel costs.
  3. Completion of timesheets by employees.
A

Answer: Only 1 and 3.

Because processing cost is not data collection cost

23
Q

CE = NCA + CA - CL

= NCL + Equity

A
24
Q

ROCE = PBIT/CE X %, in which: CE = NCA + CA - CL = NCL +
Equity

ADVANTAGE AND DISADVANTAGES OF ROCE

A

ADVANTAGE OF ROCE (4):

  1. Easy to understand and culculate.
  2. The most common way in which biz unit perfomance is measured and evaluated and is certainly the most visible to shareholders.
  3. Managers may be happy in expressing project attractiveness in the same terms in which their perfomance will be reported to shareholders,and according to which they will ben evaluated and rewarded.
  4. Continuing use of ROCE can be explained largely by its utilisation of BS and P/L which is familiar to managers, namely profit and CE.
25
Q

DISADVANTAGE OF ROCE (5)

A

DISADVANTAGE OF ROCE (5):

  1. Fails to take acc of the project life or the timing of cash flows and time value of money within that life.
  2. When assets are valued at net book value,reported performance improves with time as the assets get old. In this case,there is disincentive to invest in new assets.
  3. It uses accounting profit and capital employed,hence subject to manipulation due to various accounting conventions.
  4. Performance measurement based on ROCE encourages short-termism in decision making. Failure to invest in new assets could be harmful to the long-term interest of the division and the organisation as a whole.
  5. It is diff to assess the significance of ROI. There is no definite investment signal.The decision to invest or not remains subjective in view of the lack of objectively set target ROI.
26
Q

RI = Profit - (CE x Cost of capital)

ADVANTAGES AND DISADVANTAGES

A

ADVANTAGES OF RI (3): RI overcomes many of problem of ROI.

  1. Encourage investment centre managers to undertake new investments if they add to residual income.
  2. As a consequence,it is more consistent with objective of maximising the total profitability of company,
  3. Possible to use different rates of interest for different types of asset.

DISADVANTAGES (3):

  1. Like ROI, residual income is also based on accounting profit and capital employed which can be manipulated.
  2. It encourage investment centres managers to think in short-term about how to increase next year’s residual income for the centre,hence does not encourage decision making for long term
  3. RI is not as widely used as ROI despite overcoming some of problems in ROI
27
Q

Key issues of performance measurement (4)

A

Key issues of performance measurement (4):

  1. Goal congruent decision making
  2. Short-termism
  3. Management fraud
  4. Transfer pricing
28
Q

Balance scorecard: Force managers to look at the biz from four important perspective. What is these?

A

Four important perspective of balance scorecard:

  1. How do we look to shareholders? - Financial perspective
  2. How to customer see us? Customer perspective
  3. What must we excel at? Internal perspective
  4. Can we continue to improve and create value? Innovation & learning perspective.
29
Q

Balance scorecard ADVANTAGE and DISADVANTAGE

A

ADVANTAGES (2):

  1. Simple with 4 perspectives to suggest FPI and NFPI
  2. Each perspective will affect another such as satisfied customer will generate more profits for shareholders.

DISADVANTAGES (2)
1. Maybe to many KPI such as 4 perspective x 4 KPI each = 16
KPI.
2.Conflicting aims in perspectives such as aim to reduce cost in the financial perspective will reduce customer satisfaction and reduce internal biz effective.

30
Q

BUILDING BLOCK MODEL: Particularly suited to service industries.

A

1.Standard: are budgets
-Ownership: involve staff during budgeting to create ownership.
- Achievability: Set reasonable targets.
-Equity: Set fair /equitable target
2.Rewards:are sal and bonus
-Clarity: be clear on sal and bonus
-Motivating: Offer attractive bonus.
-Controllability: targets set mus be within staff control.
3.DIMENSION: ARE CRITICAL SUCCESS FACTOR
Leading factors inl quality,resource ultilisation,flexibility and innovation.
Lagging factors inl profit and competitiveness

31
Q

Not for profit Organisation (public sector,Govt,club,Society,charities): what are objectives?

A

Not for profit objectives (6):

  1. Client satisfaction
  2. Employee satisfaction.
  3. Maximisation of surplus (perhaps to assist in growth or protect against loss of future funding)
  4. Growth
  5. Usage of facilities (ig library svs)
  6. Maintenance of capability (ig fire svs or army)
32
Q

Problem of performance measure of NFPO (7)

A

Problem of performance measure of NFPO (7)

  1. Multiple objectives.
  2. Measurement of services provided (Services are more qualitative than quantitative)
  3. No profit motive
33
Q

Transfer pricing - Objectives (5)

A

Transfer pricing - Objectives (3):
1.Goal congruent decision making: a good TP system shall maximise HO profit
2.”Fair” performance measurement: Fair share of profits among buyer and seller div.
3.Maintaining divisional autonomy: a good TP system shall encourage div to trade with each other.
Disadvantages: -Negociation is time-consuming
-Leads to conflict between divisons.
-Negociated TP are unlikely to reflect
rational factors
-They will reflect personality/skill/status
-Senior managment will nedd to spend substantial time overseeing the process.
4.Minimising global tax liability: Multinational organisation
5.Recording the movement of goods and svs.

Note: To encourage dv to trade with each other ->follow the GENERAL RULE: All goods and services should be tranferred at opportunity cost.

34
Q

TP is a range of prices,depends on company policy, bargaining powers of div, negociation skills of div managers.
There are many TP but only one optimal transfer price (OTP) that will optimise profits for entire organisation.
3 rules for OTP?

A

3 rules for OTP:
-Rule 1: OTP in a perfect market:
OTP = market price or market price less any internal cost savings.

-Rule 2:Spare capacity exist at the seller div.
OTP = VCPU ig DM + DL + VOH

-Rule 3: Full capacity at seller Division
OTP = VCPU of product A + Opportunity cost of pdt B

35
Q

Risk and challenge of Big Data (5)

A

Risk and challenge of Big Data (5)

  1. Quality of the data: Must be relevant and reliable
  2. Veracity:
  3. Cost
  4. Skill
  5. Loss and theft of data
36
Q

Benefit of big data analytics (6)

A

Benefit of big data analytics (6):

  1. Better understand of customer behaviour.
  2. Targeted marketing message.
  3. Decision - making
  4. New product and services.
  5. Performance mesurement
  6. Costing: Big data identify trend and providing forecast
37
Q

Budget preparation (7)

A

Budget preparation (7):

  1. Budget aims
  2. Identify the principal budget factor
  3. Prepare the sale budget
  4. Prepare all other functional budgets
  5. Negociation
  6. Review.
  7. Acceptance
38
Q

Traditional budgeting: Annual fixed budets and incremental budgeting

5 modern budgeting: 
  -Zero based budgeting
  -Rolling budgetings
  -Non-participatory budgets
  -Activity based budgeting: suitable for knowledge-based companies (KBC) such as microsoft who focus on activities and not on costs to meet objectives
   ABB use cost pools and cost drivers to plan next year's activities
  -Beyond budgeting by Hope and Fraser:
     = Rolling budget + NFPI
A
39
Q

Use of standard cost

A

Use of standard cost (5):

  1. Preparation of budgets
  2. Stock valuation
  3. Budgetary control and variance analysis
  4. Dicision making(pricing)
  5. Performance monitoring and evaluation
40
Q

Problem in setting standards (4)

A

Problem in setting standards (4):

  1. Deciding how to incorporate inflation into planned unit costs.
  2. The cost of setting up and maintaining a system of establishing standars.
  3. Possible behavioral problems.
  4. Deciding on the quality of materials and grade of labour to be used
41
Q

Which one is true?

  1. Mix variances should be calculated whenever a standard product contains two or more direct materials.
  2. When a favourable mix variance is achieved, there may be a counterbalancing adverse yield variance.
A

Answer:
1 wrong cause should only cal if 2 or more materials can be mixed together in diff proportion.
2 correct

42
Q

What is the maximum transfer price should be?

A

Answer: Lower of net marginal revenue for tranferrring-in division and the external purchase price in the market for the intermediate product.
Example:
Marginal cost is $5
External intermediate market of $7 but selling cost is $0.5
If the transferring-in division can use TP to make an end product that earns a contribution of $10
->Maximum TP is the lower of $7 and $10
->Minumum TP should be $5 + (7-5-0.5) = $6.5

43
Q

Mat $0.8 per kg.
Shadow price $2
What does it mean?

A

Means (2)
1.Contribution increase $2 for each addtional of Mat purchased at the current market price.
2. Maximum price which should be paid for addtional kg of Mat IS $2.8
CHU Y: KHONG PHAI LA $2 MA LA $2.8 vi shadow price is maximum EXTRA over the current purchase price

44
Q

Which of following used to study POSSIBLE FUTURE OUTCOME when there are many different variables in situation and the relationships between variables are not predictable?

  1. Sensitivity analysis
  2. Stress testing
  3. Pay-off table
  4. Simulation model
A

Answer: Simulation model

45
Q

Nếu đề cho learning curve thì tính revise hour RH sẽ căn theo unit thực tế,
DLH = 460 X 7 hours x 460^-0.152

A
46
Q

Economics of scale: Increase out put leading reduce factory cost

A
47
Q

Which of the following explain a labour efficiency planning variance?

  1. A change in employment legislation requiring staff to take longer rest period
  2. Customer demanding higher quality products leading to a change in product design
  3. The learning effect for labour being estimated incorrectly in the production budget
A

Answer: 1,2,3

All correct

48
Q

Which of the following about ZBB is correct?

  1. It is best to support expenses rather than to direct costs.
  2. It can link strategic goals to specific funtional areas
  3. It is consistent with top-down budgeting approach.
A

Answer: Only 1 and 2 correct
3 wrong because: ZBB rely on bottom mgt who are closer and familiar to daily operations so that can start new project from scratch.

49
Q

Dang bai hoi: Which of followings would improve TPAR :

  1. Increase selling price of Z by 10%
  2. Increase selling price of Y by 10%
  3. Reduce material cost of product Z by 5%
  4. Reduce material cost of Y by 5%
A

Cach lam: So sanh TPAR of Z, Y before and after change and take the biggest diff for answer

50
Q

Followings about EV are correct or not?

  1. EV profit is the profit which has the highest probability of being achieved?
  2. EV gives no indication of dispersion (su phan tan) of possible outcomes?
  3. EV are relatively insensitive to assumption about probability?
  4. EV may not correspond to any of actual possible outcomes?
A

Answer: Ony 2 and 4 correct

51
Q

Co allows employee to access external information.

-> Time spent by employee using search engines is direct cost of accessing external information or not?

A

Answer: NO

Because cost to search but no relevant infor downloaded

52
Q

Consequences of using ideal standard?
-> có nhiều nhưng one of them là:
Standards can become more useful for long-term targets

A
53
Q

Div A, loss 100 (where divisional fixed cost 650, allocated HO 50)
Div B, loss 10
If A close, will avoind all division’s specific cost and half of HO cost allocated.
Question: What is revised total net loss?

A

Answer: Current loss in Div B: (10)
Add: 50% HO cost retained (25)
Net loss if shut Div A: (35)

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