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Operations Management Flashcards

1
Q

What’s control chart & how is it used as a statistical quality-control total?

A
  • Statistical plot that helps to detect deviations before they generate defects
  • Used in statistical quality control and determine “zero” defects
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2
Q

What’s pareto diagrams used for?

A

How frequently a type of defect may occur

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3
Q

What’s fishbone diagram used for?

A
  • Used to analyze the source of potential problems and their location by cause and effect
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4
Q

What is the formula for cost of goods manufactured (COGM)?

A

Beginning WIP

+ DM, DL, OH

  • Ending WIP

= COGM

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5
Q

What is the formula for cost of goods sold (COGS)?

A

Beginning finished goods

+ COGM

  • Ending finished goods

= COGS

Beginning inventory

+ Purchases

  • Ending inventory

= COGS

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6
Q

What is difference between job order costing & process costing?

A
  • Job Order Costing: Expensive, heterogenous, tailor-made, unique
    • Ex: Aircraft, Printing, Industrial research projects
  • Process Costing: Continuous mass-produced, costs are determined by activity/process/department
    • Ex: Gas, Oil Steel, Ruber, Lamber
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7
Q

How are equivalent units calculated using FIFO?

A

Beginning WIP x % to be completed

+ Units completed - Beginning WIP

+ Ending WIP x % completed

= Equivalent units

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8
Q

How are total costs calculated using FIFO?

A

Current cost only/Equivalent units

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9
Q

How are equivalent units calculated using weighted average?

A

Units completed

+ Ending WIP x % completed

= Equivalent units

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10
Q

How are total costs calculated using weighted average?

A

Beginning cost + Current cost/ Equivalent units

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11
Q

Formula for absorption method

A

Sales

Less: Variable & Fixed COGS

Gross Margin

Less: Variable & Fixed SG&A

Operating Income

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12
Q

Formula for variable (contribution) method:

A

Sales

Less: Variable COGS, SG&A

Contrbution Margin

Less: Fixed OH, SG&A

Operating Income

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13
Q

Explain the difference between contribution & abosrption approach:

A

Treatment of Fixed OH

  • Abosorption: Product cost
  • Contribution: Period cost
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14
Q

Formula for contribution margin ratio

A

Contribution Margin / Revenue

* CM = Selling Price - Variable Costs

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15
Q

Formula for breakeven point in units

A

Fixed Cost + Pre-tax Profit

SP - VC [CM]

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16
Q

Formula for breakeven point in $

A

Fixed Cost + Pre-tax Profit

CM Ratio

* CM Ratio = Unit Price x Breakeven in Units

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19
Q

Formula for margin of safety in dollars:

A

Total Sales - Breakeven Sales in Dollars

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20
Q

Formula for setting selling prices based on assumed volume:

A

Fixed costs + Variable costs + Pretax profit

of units sold

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21
Q

Formula for fixed spending OH:

A

Spending Variance = Actual FOH – Budgeted FOH

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22
Q

Identify direct materials variances:

A
  • Price = AQ x (SP - AP)
  • Quantity (Usage) = SP x (SQ - AQ)

Actual < Standard (Favorable)

Actual > Standard (Unfavorable)

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23
Q

Identify direct labor variances:

A
  • Rate = AH x (SR - AR)
  • Efficiency = SR x (SH - AH)

Actual < Standard (Favorable)

Actual > Standard (Unfavorable)

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25
Q

Formula for sales price variance:

A

(Actual SP per unit - Budgeted SP per unit) x Actual units sold

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26
Q

Formula for sales volume variance:

A

(Actual sold units - Budgeted sold units) x Standard CM per unit

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27
Q

What’s cause-and-effect diagram?

A
  • Identify potential causes of failures/defects
  • Used to identify the reasons why a process goes out of control
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28
Formula for free cash flow
Operating Income 'After' Taxes (NOPAT) + Depreciation & Amortization \< Capital Expenditures \> \< Change in Net Working Capital \> = Free Cash Flow
29
What are the product costs?
* Direct material * Direct Labor * Overhead
30
Formula for book value per share
* C/S + Retained Earnings / Outstanding Shares
31
What's cross-sectional analysis?
Comparing results and ratios with other firms in the same industry
32
What are the perspectives of balance scorecard?
* Financial * Customer * Internal Business Process * Learning & Growth
33
What's customer perspective in balance scorecard?
* Customer satisfaction * Customer retention * Targeted market segments
34
What's internal business process perspective in balance scorecard?
* # of defects & cycle time * % of on-time deliveries * # of rejects
35
What's learning & growth perspective in balance scorecard?
* Employee satisfication & retention * Hours of training per employee * Information technology expenditures per employee
36
What's the characteristic of **capital** budget?
Forecasts future purchases & disposals of PP&E
37
What's the characteristic of **financial** budget?
Plan to ensure that there are sufficient funds available for the company's operation
38
What's the characteristic of supply chain management?
Focuses on the sharing of information with suppliers & customers
39
Formula for production volume variance
Budgeted Fixed OH - Applied Fixed OH * Favorable: Applied \> Budgeted * Unfavorable: Applied \< Budgeted
40
Issuing indirect materials to production increases which acct?
Manufacturing OH **control**
41
Weighted-average using probabilities as weights is the
Expected value
42
Equation of regression analysis and describe each symbol
y = a + bx * y = Dependent variable * z = y-axis * b = Slope * x = Independent variable
43
In the cost of quality, spoilage is an example of
Internal failure costs
44
What's master budget?
* Targeted for the company as a whole * For one year or less
45
What's include in master budget?
* Operation budget * Financial budget
46
Disadvantage of EVA
Fails to reflects all of the ways that value maybe created
47
What are the period costs?
* Abnormal spoilage * Freight-out * Marketing & re-handling costs * SG&A expenses
48
Formula for times interest earned
EBIT / Interest Expense
49
Formula for % of profit margin
Net Income / Net Sales
50
Formula for production volume variance
Budgeted fixed OH - Applied fixed OH
51
Which costing method results in the lowest inventory value?
Variable costing * Only includes variable costs
52
Formula for reorder point
Lead time units + Safety stock * Lead time units = Lead time x Sales during lead time [Avg daily sales]
53
Which covenant requires to maintain a minimum level of working capital?
Affirmative covenant
54
What's cost accounting?
* GAAP * **Ex**ternal focus
55
What's managerial accounting?
* Not GAAP * **In**ternal focus
56
"True" rate of interst is same as:
Effective rate
57
What's a letter of credit?
* Sale of goods by a foreign exporter to a domestic importer * Reduce risk to **ex**porters
58
What are the internal factors under SWOT?
SWOT * **S**trength: Patents, copyrights, highly trained people, product mix * **W**eakness
59
What are the external factors under SWOT?
SWOT * **O**pportunities * **T**hreats * Ex: Business cycle, competitor action, gov't regulation
60
Which costing method is for **external** use only?
Absorption (Full Costing)
61
Which costing method is for **internal** use only?
Variable (direct costing)
62
Who is responsible for direct material variance?
* DM Price → Purchasing * DM Usage → Production
63
Who is responsible for direct labor variance?
* DL Rate → Personnel * DL Efficiency → Production
64
ABC system implemented under which circumstance?
Produced products that heterogeneously consume resources
65
The relationship between bond price and interest rate
* Inversely related * ↑ bond prices, ↓ interest rate
66
Types of budgets in the order
* Sales * Production * DM purchases * Cash disbursements
67
Formula for return on sales
Net income / Sales
68
Which standard cost variance is **least** controlled by a **production** supervisor?
Overhead volume
69
Formula for effective interest rate (EAR)
( 1 + i / n )n - 1 * i = Stated interest rate * n = Compounding frequency
70
Value-based management focuses on
Financial measures
71
Indirect materials to a production department increases
Factory overhead **control**
72
What's default risk?
* The risk that a debtor might not pay their debts * Creditor's risk exposure
73
What's credit risk?
* Inability to secure financing or not @ attractive interest rate * Debtor's risk exposure

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