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Management Information > Management Information > Flashcards

Management Information Flashcards

1
Q

A cost object is…

A

An object were trying to ascertain the cost of.

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2
Q

A cost unit is…

A

E.g. Cost per inventory item.

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3
Q

Is overtime wages a direct or indirect cost?

A

Indirect as it is due to a full work load in general.

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4
Q

How is inventory valued?

A

Lower of cost and net realisable value.

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5
Q

When doing the periodic weighted average and there were sales in the period, do you value sales at cost at end of prior period or current period?

A

Current period

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6
Q

What does ABC stand for in terms of costing?

A

Activity based costing, based on levels of activity in the business areas.

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7
Q

An overhead absorption rate is used to…

A

Charge overheads to products

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8
Q

A cost driver is…

A

Something like labour hours or machine hours… They drive up the cost.

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9
Q

Life cycle costing is…

A

Costing that includes development costs and development costs as well as the costs incurred in the production life cycle.

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10
Q

Target costing is…

A

Reducing life cycle costs to reach a target profit.

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11
Q

What is marginal costing?

A

Only variable production costs assigned to unit. Fixed costs charged in full to PnL. (No sales and marketing)

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12
Q

What is the “contribution” of a sold good?

A

Selling price less variable (marginal) costs.

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13
Q

How does profit per unit and contribution per unit vary with sales?

A

Profit per unit will vary, contribution per unit will be constant.

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14
Q

If there are both variable and fixed costs in terms of both manufacturing, and selling and admin, how would out work out the absorption net profit?

A

Total sales. less all variable costs for each item sold less sold items proportion of fixed manufacturing costs. Less all fixed selling and admin costs.

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15
Q

What is the difference in how fixed manufacturing costs are treated in working out absorption net profit vs marginal net profit?

A

In absorption net profit, only the proportion related to the items sold is deducted, in marginal net profit it is all deducted.

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16
Q

If inventory levels have decreased, will absorption costing profit be higher or lower than marginal costing profit?

A

Lower.

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17
Q

True or false, If inventory has increased then marginal profits will be greater than absorption profits?

A

False as costs of other items now sold deducted also in this years profits.

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18
Q

What is dual pricing?

A

The supplying sector of a company credited with market value or cost plus. Receiving sector debited with different price, I.e. Marginal cost

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19
Q

What is in the master budget?

A

Budgeted income statement, balance sheet and cash statement.

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20
Q

If the coefficient of correlation is 0.8 then what percentage of the data can be explained by the linear line?

A

0.64…. Square it, this is the coefficient of determination.

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21
Q

What is “working capital”?

A

Current net assets

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22
Q

What is the “current ratio”?

A

Current assets / current liabilities. It’s a measure of aggressiveness. 1.7 is about average.

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23
Q

What is the inventory turnover ratio?

A

Cost of sales / inventory

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24
Q

What is the inventory turnover period?

A

(Inventory/ cost of sales) X 365

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25
Q

What is the receivables collection period?

A

(Receivables/ revenue) X365

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26
Q

What is the payables payment period?

A

(Payables/ purchases) X365

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27
Q

What is the quick ratio or the liquidity ratio?

A

(Current assets - inventory)/ current liabilities

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28
Q

What is the raw materials holding period?

A

(Average inventory of raw materials/ trade payables) X365

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29
Q

What is the average payables payment period?

A

(Average trade payables/ annual purchases) X365

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30
Q

What is average production period?

A

(Average inventory of work in progress/ annual cost of sales) X365

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31
Q

What is average inventory holding period?

A

(Average inventory of finished goods/ annual cost of sales) X365

32
Q

What is average receivables collection period?

A

(Average receivables/ annual sales revenue) X365

33
Q

How do you calculate the length of the cash operating cycle?

A

The raw materials holding period - average payables payment period + average production period + average inventory holding period + average receivables collection period

34
Q

What is the economic order quantity system?

A

Sqrt( 2 X cost of ordering X usage time of item / cost of holding item of that period)

35
Q

How do you use economic order quantity system?

A

Divide annual usage by number given to see amount of orders to be placed annually.

36
Q

What does the balanced scorecard focus on?

A

Customer, innovation and learning, financial and internal business.

37
Q

What is material total variance?

A

The difference between what the items should have cost and what they did cost. It is also the difference between price variance and usage variance.

38
Q

Is material price variance calculated based on materials purchased or materials used?

A

If closing inventory is valued at standard cost then use material purchases in period, if closing inventory is valued at actual cost then value with materials used in production.

39
Q

What is the labour total variance?

A

It is the difference between what the labour did cost and what it should have cost. It is also the difference between the rate variance and the efficiency variance.

40
Q

What is the contribution ratio?

A

A measure of how much contribution is from each pound of sales revenue. Break even point is then fixed costs / contribution ratio.

41
Q

What is the margin of safety?

A

What fraction/ amount of sales of the budgeted amount will give you a profit?

42
Q

What is the internal rate of return in terms of discount factors?

A

The discounted cash flow rate of return that a project is expected to achieve, the one at which the NPV is zero.

43
Q

What is controllable residual income?

A

Controllable profit less cost of capital used in the business to the extent that the capital is controllable.

44
Q

The contractor is…

A

The person fulfilling the work on the contract.

45
Q

What is a principal budget factor?

A

The factor which limits an organisations activities. E.g. Sales demand.

46
Q

What are the classic signs of over trading?

A

Lengthening of cash operating cycle and rapid increase in sales.

47
Q

How do you work out the break even point from the contribution ratio?

A

Fixed costs/ contribution ratio

48
Q

How are overhead absorption rates calculated? (Budgeted or actual figures)

A

From the budgeted figures

49
Q

What should transfer pricing achieve?

A

Give a realistic measurement of divisional profit and encourage an organisation wide profit maximising level.

50
Q

2 examples of inventory holding costs…

A

Insurance, opportunity cost of capital tied up

51
Q

In capital cash cycle calculations, the raw materials…

A

Is put over trade payables… Like purchases, but purchases is subtracted.

52
Q

What must you remember in calculating payback period with depreciation?

A

Use the profits before depreciation was removed.

53
Q

What must you remember in calculating ARR with depreciation?

A

It is accounting, so after depreciation.

54
Q

What is a forecasted cost?

A

A predicted cost, but not used in calculations, if it is then it’s a budget.

55
Q

Are accounting rate of return and internal rate of return similar?

A

No, the first is kind of like how much payback you get. The second is the discount rate needed for NPV to be 0.

56
Q

Variance reporting is…

A

On the differences between the flexed and the actual results.

57
Q

Direct costs are…

A

Variable costs, directly attributable

58
Q

In doing the weighted average inventory valuation at the end of a period…

A

Find the new average from the additions in that period and before first, then deduct the sales from the period.

59
Q

The master budget consistent a of…

A

A budgeted balance sheet, a budgeted income statement and a cash budget. It is prepared from the information in the functional budgets and is therefore the last to be prepared.

60
Q

What is under/ over absorption in the PnL on the absorption basis?

A

Reconciling amount between the fixed costs that have been absorbed based on amount sold and the actual fixed costs budgeted for in the cost of sales line.

61
Q

What are prime costs?

A

Costs directly associated with the product.

62
Q

Does absorption costing use actual costs or budgeted costs?

A

Actual costs.

63
Q

What is material price variance?

A

The difference between what the used amount of materials costed and what it should have costed.

64
Q

What is material total variance?

A

The difference between what the amount of made units costed and what they should have costed.

65
Q

What is material usage variance?

A

The difference between what should have been used and what was used to give the produced amount at the standard cost.

66
Q

What is labour total variance?

A

The difference between the standard labour cost off the output produced and the actual labour cost incurred.

67
Q

What is the labour rate variance?

A

Difference between what the labour should have cost and what it did cost for the hours worked.

68
Q

What is labour efficiency variance?

A

The difference between the hours that should have been worked, and were worked, to give the output, at the standard rate.

69
Q

What is total variable overhead variance?

A

The difference between what the overheads costs for the units made, and what they should have costed.

70
Q

What is variable overhead expenditure variance?

A

Difference between the cost of variables that should have been incurred in the hours worked and the actual cost incurred.

71
Q

What is variable overhead efficiency variance?

A

Difference between the amount of hours that should have been used for the units produced, and the amount actually used, at the standard cost.

72
Q

What is sales price variance?

A

The difference between what the sales revenue should have been for the quantity sold, and what it actually was.

73
Q

What is sales volume variance?

A

The difference between the actual units sold and the budgeted amount sold at the standard contribution per unit.

74
Q

What is a top down budget?

A

One imposed by management with little or no input from operating personnel.

75
Q

Does residual income calculation include deducting the cost of capital?

A

yes, well it did in a question about divisional profit

76
Q

Does ROI calculation include deducting the cost of capital?

A

No…

Management Information (1 decks)

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