Operations Management Flashcards
What does PIE stand for?
Product Costing
Income Determination
Efficiency
Prime Costs =
Direct Materials + Direct Labor
Conversion Costs=
Direct Labor + OH
Product Costs=
Direct Material + Direct Labor + Manufacturing OH Applied
What is the best cost driver to use in activity based costing?
The driver with the highest correlation with the incurrence of manuf overhead
Electricity costs are most likely considered what type of costs?
Overhead costs, not direct materials or prime costs
What is the formula for FIFO method equivalent units?
units completed + % ending inventory - % Beginning Inventory
What are conversion costs made up of?
=LABOR + OH
What is the weighted average method equivalent units calculation?
Units completed + % of ending inventory
To calculate weighted average cost per equivalent unit?
total costs (beginning cost + current costs)/equivalent units (units completed + % of ending inventory
What is another way to calculate conversion costs other than Labor + OH?
Cost of goods manufactured - materials
How do you calculate cost of good manufactured?
= COGS + Ending Inventory - Beginning Inventory
OR
= Beg WIP + Raw Materials used + Direct Labor + OH Applied - Ending WIP
What does the financial scorecard acronym CRPI stand for?
C - costs
R - revenue generating
P - profit generating
I - investment returns
What does the financial scorecard acronym FICA stand for?
F - CRPI (financial)
I - Internal business processes (non-financial)
C - customer satisfaction (non-financial)
A - advancement of innovation and human resources (non-financial)
What is the cost of quality acronym stand for? APIE
Conformance: A - appraisal costs to detect
Conformance: P - prevention
Non-Conformance: I - internal failure
Non-Conformance: E - external failure
What is ABSOLUTE CONFORMANCE in relation to cost of quality?
The most rigorous standard. Zero defects
What is the difference between contribution margin and controllable margin?
Contribution margin is revenue - variable costs, controllable margin is contribution margin - controllable fixed costs
Responsibility accounting is associated with what type of performance reporting?
Reports that focus on revenues and costs that are within the control of the manager being evaluated.
What is the breakeven units formula?
breakeven units =
total fixed costs/Contribution Margin per unit
The correlation coefficient can only be between
-1 and 1
The coefficient of determination will always be a number between
0 and 1
Under the absorption method what is the calculation for COGS?
Direct Materials +
Direct Labor +
Variable OH +
Fixed OH
How is variable costing different than absorption costing in reference to fixed product costs?
Fixed costs under variable costing are immediately expensed, treated as period costs.
What is the formula for breakeven $?
Fixed Costs/Contribution Margin Ratio
CM Ratio = CM/Revenue
What is the Margin of Safety when discussing breakeven sales?
margin of safety is how much additional $ you have from your breakeven $
What is the difference between a master budget and a flexible budget?
Master Budget: Overall budget, consisting of smaller budgets, one specific level of production
Flexible Budget: Series of budgets based on different activity levels within the relevant range.
What happens when a cash dividend is declared?
Increase in current liabilities. Assets remain unchanged until the payment happens.
What is the formula for operating profit margin?
Operating profit = EBIT/Sales
What is the calculation for ROA?
Net Income/Total Assets
OR
Net Income/Sales * Sales/Total Assets
What is the calculation of working capital?
Current Assets - Current Liabilities
What is the calculation of current ratio?
Current Assets/Current Liabilities
what is the quick ratio calculation?
Cash & Equiv + Marketable Sec + AR/Current Liabilities
What is the debt to asset ratio?
Total Liab/Total Assets
What is the DSO Calculation?
AR (ending)/Sales*number of days
What is the operating cycle?
Inventory Days + AR Days
What is a descriptive analytic technique?
Explains what has already happened but not why it has occurred. Diagnostic analytics would focus on why.
How do you calculate the material price variance?
AP-SP * AQ
How to calculate direct labor usage variance?
(Difference in standard and actual hours) * standard rate
How do you calculate a selling price variance?
(Actual Sales price per unit - Budgeted) *actual sold units
What is the formula for direct materials quantity usage variance or efficiency variance?
Standard price * (Actual QTY - Std QTY)
Formula for Direct Labor Efficiency variance?
= Standard rate * (Actual hours worked - Standard hours allowed)
How do you calculate the OH Rate?
Budgeted OH/Budgeted Cost Driver
How do you calculate the applied OH?
OH Rate * Actual Cost Driver
How do you calculate the partial productivity ratio?
the ratio of specific item to the output
what you put in of a specific item, what you got out
ex: amount of iron (4800lbs) to units of pipes produced (12,000) = 2.5
How do you calculate total factor productivity?
total amount of inputs in a common size to what you got out
ex: amount of iron and copper to units produced
How do you calculate Economic Value Added?
NOPAT - (Investment * WACC)
What is the formula for contribution margin?
Sales - Direct Labor - Direct Materials - Variable OH
What is the formula for payback method?
Initial investment/incremental cashflow
When doing a high/low analysis how do you calculate the variable cost per unit?
=Delta between HighLow Cost/Delta between HighLow Units
When doing a high/low analysis how do you calculate the fixed cost?
Take either High or Low Units * Variable cost per unit
Compare amount vs. either High or low total cost
How do you calculate the debt to equity ratio?
Total Liabilities/Equity
Not just debt…
How do you calculate the interest or tax burden?
It is the percent of total you take out of your “income” right before that line on the p&l. It will be less than 1.
Interest burden = (income before interest - interest)/ income before interest
