Module 2 : Calculation and Cost systems Flashcards

1
Q

cost-volume-profit analysis: defintion

A

some costs are fixed while others change in proportion to the volume of output

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2
Q

contribution margin: definition

A

corresponds to the incremental value generated by a product and is used to cover a company’s fixed costs

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3
Q

The contribution margin per unit : definition

A

the difference between the selling price and the variable cost per unit

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4
Q

The contribution margin : calculation

A

Revenu - variable cost

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5
Q

Contribution margin percentage : definition

A

shows the contribution margin in relation to the revenues

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6
Q

Contribution margin percentage: calculation

A

dividing the contribution margin by the revenues

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7
Q

the operating income margin (in percentage) : definition

A

shows the relation of the operating income to the revenues

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8
Q

breakeven: definition

A

denotes the critical output quantity x at which the total revenue is just as large as the total cost.

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9
Q

Profit calculation (at break even)

A

Sales - costs
ou
Contribution Margin - Fixed costs

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10
Q

Break-Even-Quantity

A

Fixed cost/ Contribution Margin per unit

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11
Q

Break Even Sales

A

Fixes cost / 1 - variable cost/ selling price per unit

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12
Q

Degree of employment

A

which covers the total fixed costs and the variable costs attributable to the quantities sold

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13
Q

Assumptions: Break event point

A

–> All costs are recorded and divided into fixed and variable costs.
–> Selling price and variable costs per unit are independent of the quantity
–> Fixed costs are independent of the quantity
–> There is no warehouse (sales = production)

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14
Q

Revenues

A

Cout variable - Cout fixe
or
Contribution margin/ contribution margin in percentage

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15
Q

Process-Costing Systems

A

Cost accumulation on masses of identical or similar units of a product or service based on average costs.

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16
Q

Job-Costing: definition

A

Calculation of costs for a cost object through direct accumulation of costs on a distinct, identifiable cost object (product, service).

Job = distinct mandate (usually directly for clients)

Process : Manufacturing overhead Costs –> direct manufacturing Labour hours –> CHF direct manufacturing per labour unit

17
Q

Difference between Process-Costing Systems and Job Costing ?

A

Process : each process, production cost reports

Job: each job, Job costs sheets

18
Q

Job Costing : calculation

A

Costs of each job / Units produced for the job

costs are calculated by direct accumulation on a distinct, identifiable cost object (eg. product or service)

19
Q

Process Costing: calculation

A

Total manufacturing costs / units produced during the period

20
Q

For which kind of company what cost system makes more sense?

A
  • Job Costing : For manufactured batches of unique products or specialzed services
  • Process costing: For Companies that produce identical units through a series of processes
21
Q

Overhead Calculation (Uniform Costings)

A

Allocation of costs based on product costs

page 25

Manufacturing Overhead cost –> % cost allocation based on product cost

22
Q

Activity based Costing

A

Cost allocation is based on the processes required

Process (deisgn, Setup, Manufacturing) –> look at part Square feet, setup hours and Maschine hours

23
Q

Cost pool

A

the grouping of individual indirect cost items.
–> not every single cost has to be allocated individually
–> simplifies the assignment of indirect costs to the cost objects
–> allows the grouping of indirect costs with the same cost-allocation base together.

24
Q

Activity based Management (ABM): definition

A

describes management decisions that use activity-based costing information to satisfy customers and improve profits

25
Process in the ABM
- Cost reduction and process improvement -Design decisions -Product pricing and mix decisions
26
Cost reduction and process improvement
- Manufacturing and distribution personnel use ABC systems to focus on cost reduction efforts - Managers set cost-reduction targets in terms of reducing the cost per unit of the cost-allocation base
27
Design decisions
- Management can identify and evaluate new designs to improve performance by evaluating how product and process designs affect activities and costs - Companies can work with their customers to evaluate the costs and prices of alternative design choices
28
Product pricing and mix decisions
- ABC gives management insights into the cost structures for making and selling diverse products - It provides more accurate product cost information and more detailed information on costs of activities and the drivers of those costs
29
ABM Systems Are Most Beneficial When..
- Significant amounts of indirect costs are allocated using only one or two cost pools - All or most costs are identified as output unit-level costs (lowest level activities identified) - Products make diverse demands on resources because of differences in: - Volume - Process steps - Batch size - Complexity - Products that a company is well-suited to make and sell show small profits while products for which a company is less suited show large profits - Complex products appear to be very profitable and simple products appear to be losing money - Operations staff have significant disagreements with the accounting staff about the costs of manufacturing and marketing products and service
30
Limitations of ABC Systems
ABC systems require management to: - estimate costs of activity pools and to identify and measure cost drivers for these pools - Activity-cost rates also need to be updated regularly - Very detailed ABC systems are costly to operate and difficult to understand
31
ABM in Service and Merchandising companies
Costs are divided into homogeneous cost pools and classified as:  Output unit-level  Batch level  Product, or service-sustaining  Facility sustaining costs --> The cost pools correspond to key activities Costs are allocated to products or customers using activity drivers or cost-allocation bases that have a cause-and-effect relationship with the cost in the cost pool