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CIMA P2 > More Revision Cards - Topics I am struggling with > Flashcards

More Revision Cards - Topics I am struggling with Flashcards

1
Q

What are the four stages of lifecycle costing?

A

Introduction
Growth
Maturity
Decline

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2
Q

What are the three factors that need to be managed to maximise a products return?

A

Design costs out of product
Minimise time to market
Maximise life of cycle

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3
Q

What percentage of costs are incurred at the design stage of the life cycle?

A

80% and 90%

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4
Q

What can life cycle costs be classified as?

A

Development Costs
Design Costs
Manufacturing Costs
Marketing Costs
Distribution Costs

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5
Q

What is target costing driven by?

A

External market factors

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6
Q

What should the requirement of target costing be driven by?

A

Strategic profit planning rather than a standard mark up

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7
Q

What are BI tools used to produce?

A

Management information that is already produced in-house

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8
Q

What does BI tools enable you to do?

A

Produce a more up-to date basis, in a more use friendly format

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9
Q

What are the pros of BI tools?

A

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

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10
Q

What is an annuity?

A

A constant annual cash flow for a number of years

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11
Q

How do you calculate the PV of an annuity factor?

A

annual cash flow x annuity factor

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12
Q

How do you calculate the annuity factor?

A

(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

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13
Q

What is a perpetuity?

A

Annual cash flow that occurs forever

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14
Q

How do you calculate the PV of a perpetuity?

A

PV = cash flow/ r
r = required rate of return

OR

PV = cash flow x 1/r
1/r = perpetuity factor

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15
Q

What is an example of a quantitative cost?

A

Purchase price of machinery
Installation and training costs

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16
Q

What is an example of a quantitative benefit?

A

Lower direct labour costs
Lower scrap costs
Lower stock costs

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17
Q

What is an example of a qualitative cost?

A

Increased Noise
Lower morale if staff are made redundant

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18
Q

What is an example of qualitative benefit?

A

Reduction in production time
Improved product quality

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19
Q

What are IT controls?

A

Personal controls
Access controls
Computer equipment controls

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20
Q

What are application or program controls?

A

Performed automatically by system
Completeness checks
Validity checks
ID and authentication checks

21
Q

What is the base layer of the BI stack?

A

Data sources where data is extracted, translated and loaded by ETL software into data warehouse

22
Q

What is above the base layer of the BI stack?

A

Application layer

23
Q

What is on the application layer of the BI stack?

A

Presentation or delivery layer to make it easier for management to understand data

24
Q

What do we assume while doing a capital investment appraisal?

A

All cash flows are know with certainty
Sufficient funds available
Zero Inflation
Zero Taxation

25
Q

What are the appraisal methods?

A

NPV, considers time value of money
IRR, considers time value of money
Discounted payback periods
ARR

26
Q

If the IRR if greater than the cost of capital should we accept project?

A

Yes

27
Q

If the IRR if less than the cost of capital should we accept project?

A

No, reject project

28
Q

If a manager is responsible for a particular aspect of operating costs what is the responsibility centre called?

A

Cost Centre

29
Q

If a manager is responsible for revenue what is the responsibility centre called?

A

Revenue Centre

30
Q

If a manager is responsible for both revenue and costs what is the responsibility centre called?

A

Profit centre

31
Q

If a manager is responsible for investment decisions as well as for revenue and costs what is the responsibility centre called?

A

Investment centre

32
Q

What is benchmarking?

A

Continuous process of measuring a firms products, services and activities against other organisations

33
Q

What is the idea behind benchmarking?

A

Ascertain how processes and activities can be improved

34
Q

What are the five types of benchmarking?

A

Internal
Competitive
Functional
Strategic
Customer

35
Q

What is internal benchmarking?

A

Other units and departments in the same organisation used

36
Q

What is competitive benchmarking?

A

Most successful competitors used

37
Q

What is functional benchmarking?

A

Comparisons made with similar functions

38
Q

What is the strategic benchmarking?

A

Form of competitive benchmarking aimed at reaching decisions for strategic action and organisation change

39
Q

What is customer benchmarking?

A

Compares performance with performance expected by customers

40
Q

What is economic value added?

A

Measure of performance similar to residual income
Profit figure used is economic profit and capital employed figure used is the economic capital

41
Q

What is the basic concept of economic value added?

A

Performance of company as a whole should be measured in terms of value added to business during profits

42
Q

What are the types of business risk?

A

Strategic
Product
Contractual Inadequacy
Fraud and Malfeasance
Commodity Price
Product reputation
Operational

43
Q

What is strategic risk?

A

Risk that business strategies will fail e.g. product launches

44
Q

What is product risk?

A

Risk of failure of new product launches/loss of interest in existing products

45
Q

What is commodity price risk?

A

Risk of change in products reputation or image

46
Q

What is operational risk?

A

Risk that business operations may be inefficient or business processes may fail

47
Q

What is a contractual inadequancy risk?

A

Risk that terms of a contract do not fully cover a business against all potential outcomes

48
Q

What is fraud and malfeasance risk?

A

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

CIMA P2 (19 decks)

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