More Revision Cards - Topics I am struggling with Flashcards
What are the four stages of lifecycle costing?
Introduction
Growth
Maturity
Decline
What are the three factors that need to be managed to maximise a products return?
Design costs out of product
Minimise time to market
Maximise life of cycle
What percentage of costs are incurred at the design stage of the life cycle?
80% and 90%
What can life cycle costs be classified as?
Development Costs
Design Costs
Manufacturing Costs
Marketing Costs
Distribution Costs
What is target costing driven by?
External market factors
What should the requirement of target costing be driven by?
Strategic profit planning rather than a standard mark up
What are BI tools used to produce?
Management information that is already produced in-house
What does BI tools enable you to do?
Produce a more up-to date basis, in a more use friendly format
What are the pros of BI tools?
User friendly
Savings include efficiency gains
May replace a disparate array of tools already being used
Allow company to forecast more accurately
Greater understanding of what is most profitable
Emerging trends spotted earlier
What is an annuity?
A constant annual cash flow for a number of years
How do you calculate the PV of an annuity factor?
annual cash flow x annuity factor
How do you calculate the annuity factor?
(1 - (1+r)^-n)/r
r = cost of capital
n = number of periods
e.g AF for a 6 year annuity at 10%
(1-(1.1)^-6)/0.1 = 4.355
What is a perpetuity?
Annual cash flow that occurs forever
How do you calculate the PV of a perpetuity?
PV = cash flow/ r
r = required rate of return
OR
PV = cash flow x 1/r
1/r = perpetuity factor
What is an example of a quantitative cost?
Purchase price of machinery
Installation and training costs
What is an example of a quantitative benefit?
Lower direct labour costs
Lower scrap costs
Lower stock costs
What is an example of a qualitative cost?
Increased Noise
Lower morale if staff are made redundant
What is an example of qualitative benefit?
Reduction in production time
Improved product quality
What are IT controls?
Personal controls
Access controls
Computer equipment controls
What are application or program controls?
Performed automatically by system
Completeness checks
Validity checks
ID and authentication checks
What is the base layer of the BI stack?
Data sources where data is extracted, translated and loaded by ETL software into data warehouse
What is above the base layer of the BI stack?
Application layer
What is on the application layer of the BI stack?
Presentation or delivery layer to make it easier for management to understand data
What do we assume while doing a capital investment appraisal?
All cash flows are know with certainty
Sufficient funds available
Zero Inflation
Zero Taxation
What are the appraisal methods?
NPV, considers time value of money
IRR, considers time value of money
Discounted payback periods
ARR
If the IRR if greater than the cost of capital should we accept project?
Yes
If the IRR if less than the cost of capital should we accept project?
No, reject project
If a manager is responsible for a particular aspect of operating costs what is the responsibility centre called?
Cost Centre
If a manager is responsible for revenue what is the responsibility centre called?
Revenue Centre
If a manager is responsible for both revenue and costs what is the responsibility centre called?
Profit centre
If a manager is responsible for investment decisions as well as for revenue and costs what is the responsibility centre called?
Investment centre
What is benchmarking?
Continuous process of measuring a firms products, services and activities against other organisations
What is the idea behind benchmarking?
Ascertain how processes and activities can be improved
What are the five types of benchmarking?
Internal
Competitive
Functional
Strategic
Customer
What is internal benchmarking?
Other units and departments in the same organisation used
What is competitive benchmarking?
Most successful competitors used
What is functional benchmarking?
Comparisons made with similar functions
What is the strategic benchmarking?
Form of competitive benchmarking aimed at reaching decisions for strategic action and organisation change
What is customer benchmarking?
Compares performance with performance expected by customers
What is economic value added?
Measure of performance similar to residual income
Profit figure used is economic profit and capital employed figure used is the economic capital
What is the basic concept of economic value added?
Performance of company as a whole should be measured in terms of value added to business during profits
What are the types of business risk?
Strategic
Product
Contractual Inadequacy
Fraud and Malfeasance
Commodity Price
Product reputation
Operational
What is strategic risk?
Risk that business strategies will fail e.g. product launches
What is product risk?
Risk of failure of new product launches/loss of interest in existing products
What is commodity price risk?
Risk of change in products reputation or image
What is operational risk?
Risk that business operations may be inefficient or business processes may fail
What is a contractual inadequancy risk?
Risk that terms of a contract do not fully cover a business against all potential outcomes
What is fraud and malfeasance risk?
Malfeasance means doing something wrong or committing an offence.
Organisations may be exposed to fraud, or of actions employees that result in an offence or crime
