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Business studies > Management Accounting > Flashcards

Management Accounting Flashcards

1
Q

what is meant by cost

A

how much producing something costs.

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2
Q

what is meant by revenue

A

the cash that flows into a business from the sale of goods or services.

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3
Q

what is meant by profit

A

The money that is left over from the sales of goods once other costs such as wages have been paid for. it is the capital left over which

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4
Q

what is meant by total cost

A

The total costs of a business producing a particular product.

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5
Q

what is meant by average cost

A

?

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6
Q

what is meant by fixed cost

A

costs that do not change as the output changes.

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7
Q

what is meant by variable costs

A

costs that are directly related to the level of output or sales

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8
Q

what is meant by total revenue

A

the number of sales and how much they were sold for.

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9
Q

what is meant by price

A

How much a product was sold for.

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10
Q

what is meant by average revenue

A

The average revenue received for a single item sold

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11
Q

what is a direct cost

A

costs that are directly attributable to a unit output

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12
Q

what is a indirect cost

A

costs that can not be attributed to a particular unit output.

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13
Q

what is a overhead cost

A

costs that can not be attributed to a particular unit output.

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14
Q

what is the impact of costs and revenue on business decisions

A

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15
Q

what is the impact of costs changing on a business and its stakeholders.

A

?

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16
Q

what is a cost centre

A

A specific part of the business where costs can be identified and allocated with reasonable ease.

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17
Q

what is a profit centre

A

profits coming in are ascribed to different parts of a business

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18
Q

how can cost be allocated using full cost allocation

A

Full cost plus pricing seeks to set a price that takes into account all relevant costs of production

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19
Q

how can costs be allocated using absorbtion cost allocation

A

All the indirect costs or overheads of a business are absorbed by different cost centres

20
Q

how can costs be allocated using marginal cost allocation

A

fixed costs and overheads are ignored and the business considers only the variable costs of production.

21
Q

how can the allocation of costs affect a business and its stakeholders

A
  • stakeholders will look at the ‘bottom line’ as it will affect their dividends
  • employees may be affected by the accuracy and relevance of the method used and therefore this will impinge upon sales and therefore the likelihood of retaining their job or gaining any bonuses that may be linked to profits.
  • management decisions will be made on the basis of the costing methods used and therefore their reputation may be affected
  • suppliers will be affected by how much a business is prepared to pay for its suppliers, which in turn will be influenced by the method of costing used.
  • banks and other loan sourced will look at the level of profits to help assess the ability of a business to pay back any such loan.
22
Q

What is meant by ‘break-even’

A

the point where total revenue is equal to the costs (TR=TC)

23
Q

what is meant by contribution

A

the revenue received for selling a product minus the variable costs of producing that good.

24
Q

what is meant by margin of safety

A

the difference between the actual level of output and the break-even level.

25
Q

what is meant by target level of profit

A

the goal for a business. Once the break even level is calculated it is possible for a business to decide on a required level of profit (the target level).

26
Q

what is meant by a ‘stepped fixed cost’

A

costs that are fixed in the short term.

27
Q

how could a business lower its break-even

A

?

28
Q

what are special order decisions

A

If the business were to be offered an additional or special order, the calculation of contribution is very helpful.

29
Q

what is an investment appraisal

A

how a business decide whether to undertake a particular capital investment, such as building a new factory or buying a additional machine
the three methods of investment appraisal are:
1) payback
2) accounting rate of return
3) net present value

30
Q

what is average rate if return

A

also known as accounting rate of return. it is the method of investment appraisal. The profit is expressed as a percentage of the cost of the investment.
to calculate ARR:
1) calculate the total cash inflows (add each year for life of investment)
2) subtract the cost of investment- to gain the profit
3) divide the total profit by the life of the investment
4) divide the answer by the initial cost of the investment to gain the percentage ARR

31
Q

what is net present value

A

?

32
Q

how do quantitative aspects if investment appraisal affect a business and its stakeholders

A

?

33
Q

how do qualitative aspects of investment appraisal affect a business and its stakeholders.

A

?

34
Q

What are the different methods of investment appraisal

A

Net present value
Average Rate of Return
Payback

35
Q

what is meant by a budget

A

A budget is a plan for the future that takes into account the resources that are available to the business

36
Q

what is meant by variance

A

the variance is the amount by which the actual financial results for an item differ from the amount in the budget

37
Q

what is a favourable budget/varience

A

?

38
Q

what is a adverse budget/varience.

A

?

39
Q

what is meant by cash-flow

A

cash flow is the inflows and outflows of cash in a business

40
Q

what is a cash flow statement

A

The forecast shows the amounts of cash that will flow in and out and the likely timings of such inflows and outflows.

41
Q

what is a cash flow forecast

A

estimates of the likely inflows and outflows of cash in and out of the business over a given period of time.

42
Q

what is the difference between cash flow and profit

A

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43
Q

what stratagies will help a business to overcome forecast cash-flow problems.

A
  • increase sales
  • reduce stock levels by selling off stock or buying less stock
  • factoring (the selling of the debts of a business)
  • leasing not buying
  • loans
  • changing creditors and debtor days
  • cut operating costs
44
Q

What is meant by working capital

A

the short term finance required for the day-to-day running of a business

45
Q

what is meant by the working capital cycle

A

?

Business studies (13 decks)

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