Lecture 2 Flashcards
instruments of management accounting
budgeting and profitability
proportional (variable) cost
related manifacturing of product: material costs and direct labour
fix costs
indipendent from manufacturing activity (marketing, R&D, administration..)
ways to allocate fix costs
1) proportional costs (more fix costs on the product that costs the most)
2) labour time
3) sales revenue (more fix costs on the product that sells the most)
if a product seems to create losses
can still make contribution to cover fixed costs
types of cost accounting
1) full cost
2) cost contribution: flexible prices to contribute to fix costs
problem with full-cost
additional volume given away
cost contribution= gross profit
sales revenues -proportional costs
gross margin (=contribution intensity)
gross profit/sales reveneu *100
Net profit
gross profit- fix costs
Net margin
Net profit/sales revenue*100
risk of c.c.
sales people sell below full costs to receive more orders, could be that the sum is smaller that the fixed costs
Break even
fix cost/contribution intensity
not really proportional costs
1) with declining sales we cannot immediately dismiss workers
2) short-term increase of sale –> overtime (higher rates)
3) larger volume favorable purchase price
distribution of fix costs variantions depending on the client
1) sale to a large customer requires less sales- and acquisition-costs
2) adaptation of a product for specific needs requires effort
not really fix costs
1) more equipment and structure to produce more
2) more people in marketing and sales to sell more
3) more administrative staff to manage more volume
valuation of investment
productivity life and impact
definition of investment
measures that quantitavely or qualitatively alter the production and sales capacity to achieve higher returns or lower costs
methods for investment analysis
1) static: time value of money not taken into account
2) dynamic method: future expenditures and reveneus are convertet to current value
paypack period calculation
1) avarage calculation (uniform surplus over time)
2) the cumulated cash flow calculation ( for each period reveneu and surplus)
