Mock exam mistakes Flashcards
How is production budget calculated?
Sales
Closing inv
(Opening inv)
What is goal congruence?
alignment of company’s objectives with personal objectives of manager
How is the labour rate planning variance found?
Difference between original standard cost and revised standard cost x actual output
What are 3 functional budgets?
- Labour
- Sales
- Overheads
Is cash a functional budget?
No
At what stage of the budgetary process are budgets are summarised into a master budget?
Stage 6 - Final acceptance of budgets
What should always be used in labour rate variance?
Hrs paid for
What can cause an adverse sales price variance?
Decrease in basic selling price of an item
What is the final stage of the planning and control cycle?
Respond to divergences from the plan
What are 3 categories of relevant costs?
- Incremental
- Differential
- Opportunity
What is the formula for budgeted profit?
MoS in units x Contribution per unit
How is the iso-contribution line used to find where profits are maximised?
- Move line away from the origin
- Regions where other lines first touch x and y axis is target region
What kind of cost is an initial survey?
Sunk cost and not relevant to a decision
Are sunk costs relevant in decision making?
No, unless a digital product
Are committed costs relevant in decision making?
No
What is the formula for relevant cost?
Contribution foregone + direct labour cost
Is netbook value relevant?
No as it’s an accounting measure
When are Fc deemed not relevant?
Allocation of general fixed costs
What is the seasonal index value applied to?
Units
How is budgeted profit worked out using variances?
+ Adverse variances and - Favourable variances
How is w C/S calculated when you have a ratio?
ratio % x c/s for each product
Add together
What is the formula for breakeven point in units in a multi-product scenario?
FC/ Weighted average contribution
Use % of sales to find weighted average Selling price and VC
How is the seasonal variation % found?
(Actual - Bud)/Bud
What factors result in an adverse sales volume profit variance?
- Ineffective ad campaign
- Fall in customer demand
- Increase in selling price
How can the gradient be found?
Least squares formula
What may cause a lower unit cost for a digital product?
- MC close to 0
- Digital products take into account sunk costs
How is the principal budget factor found (bottleneck)?
Number furthest away from target
What is the formula for average standard profit?
Total profit/total units in sales mix
What are the features of beyond budgeting?
- Managers given high degree of freedom
- Costs considered scarce resource
- Goals based on industry benchmarks
What is true of the basic manufacturing standard?
Assessment of time and cost of past activities
What do management accountants do as part of their role?
Forecast trends to assist decision making
What is an allocated cost?
Cost incurred by business as a whole, irrespective of decision
What can a management accountant do to support decision making with respect to planning process?
Prepare annual budgets for individual units
