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MI > Overall > Flashcards

Overall Flashcards

1
Q

Define prime cost

A

Total direct costs

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2
Q

Cost object vs cost element

A

Cost object = output
Cost element = input

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3
Q

Contribution formula

A

Selling price - variable costs

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4
Q

Profit under marginal costing (2)

A

Contribution - fixed costs

OR

Sales - variable cost of sales - variable selling costs - fixed costs

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5
Q

Profit under absorption costing

A

Sales
Less cost of sales:
opening inv
variable production costs
fixed production overhead absorbed
closing inventory

+/- fixed overhead under/over absorbed
=gross profit

Less non-prod costs

=net profit

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6
Q

Which of the following describes a dual pricing system of transfer pricing

A

The receiving division is charged with the standard variable cost of transfers made and

The supplying division is credited with the market value

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7
Q

Reasons for budgeting

A

Planning
Responsibility
Integration and coordination
Motivation
Evaluation and control

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8
Q

3 Styles of performance evaluation in Hopwood’s studies

A

Budget constrained
Profit conscious
Non-accounting

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9
Q

4 perspectives of balanced scorecard

A

Financial
Customer
Internal business
Innovation and learning

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10
Q

Breakeven point formula (2)

A

Contribution required to breakeven / contribution per unit

OR

Total fixed costs / contribution per unit

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11
Q

Contribution ratio formula

A

Contribution per unit / sales price per unit *100%

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12
Q

Breakeven revenue formula

A

Contribution required to break even / contribution ratio

OR

Fixed costs / contribution ratio

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13
Q

Margin of safety formula (2)

A

Budgeted sales - breakeven sales

(budgeted sales - breakeven sales)/Budgeted sales *100%

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14
Q

Sales volume to achieve target profit (given required profit)

A

= (fixed costs + required profit) / contribution per unit

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15
Q

ARR

A

average annual accounting profit / initial (or average) investment *100%

where average investment is the (initial value + scrap value) / 2

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16
Q

IRR is equal to:

A

The interest rate that equates the present value of expected future cash inflows to the intiial cost of the investment outlay

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17
Q

If the IRR is greater than the cost of capital what does it mean?

A

Later cash flows have been discounted too much

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18
Q

How many IRRs can one project have?

A

It is possilbe for a project to have up to as many IRRs as there are sign changes in the cash flows

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19
Q

How to calculate the trend and seasonal variation under the additive model

A

Get a X month average depending on the length of the cycle specified in question, this gives you the moving average aka the trend

Then use formula
Total sales (TS) usually for a specific month= Trend (T) + Seasonal variation (SV)
To get the TV

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20
Q

What is budget bias

A

Any bias toward certain objectives in the setting of the budget that may lead to under or overestimation

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21
Q

Formula for residual income (RI)

A

RI = Controllable profit - Imputed interest charge on controllable investment

22
Q

Formula for ROI

A

ROI = Controllable divisional profit / divisional capital employed *100%

23
Q

Closing inventory under marginal costing

A

Units x production variable costs

24
Q

How to remember which will leave a higher inventory value out of MC vs AC (SIAM)

A

SIAM
Stocks
Increase
Absorption
More

25
Q

Formula: difference in marginal and absorption costing profit =

A

= change in stock units x OAR per unit

26
Q

Optimum transfer price for transfer pricing

A

Optimum transfer price = external market price - cost savings with internal transfer

27
Q

What is overtrading

A

Increased amount of cash required to fund the cash operating cycle increases as the cycle gets longer and sales rapidly increase. Leading to less liquidity

28
Q

EOQ model

A

Root(2CoD/Ch)

Where
Co= cost of ordering (one time)
D = annual demand in units
Ch = Cost of holding one unit of inventory

29
Q

How to get the reorder interval from the EOQ

A

Square root the EOQ (again)

30
Q

Features of effective feedback

A

Only significant differences are highlighted

Controllable costs and revenues should be separately identified

Timely

Concise and accurate

Communicated to those with authority

31
Q

What budget does variance reporting use

A

The flexed budget not the original budget

32
Q

How do you calculate sales volume variance

A

Variance in sales volume x the budgeted contribution per unit

33
Q

How to calculate net terminal value

A

NPV *1.discount rate^[years in question (not inc 0)]

34
Q

Raw materials holding period

A

Avg inventory of raw materials / annual usage * 365

35
Q

Average production period

A

Avg inventory of work in progress / annual cost of sales * 365

36
Q

Average inventory holding period

A

Average inventory of finished goods / annual cost of sales * 365

37
Q

Average receivables collection period

A

Avg receivables / annual sales revenue *365

38
Q

Average payables payment period

A

Average payables / annual purchases * 365

39
Q

Quick liquidity ratio

A

Current assets excluding inventory / current liabilities

40
Q

What does a treasury dept do?

A

All about short term cash management, including credit control and short term investment but nothing long term

41
Q

Define labour efficiency variance

A

L = V * R
V is variance in labour hours
R is standard rate per hour

42
Q

Breakeven point =

A

contribution required to breakeven / contribution per unit

OR

total fixed costs / contribution per unit

43
Q

Contribution ratio

A

Contribution per unit / sales price per unit *%

44
Q

Breakeven revenue =

A

Contribution required to breakeven / contribution ratio

OR

Fixed costs / contribution ratio

45
Q

Margin of safety

A

Budgeted sales - breakeven sales

OR put it over budgeted sales for a %

46
Q

Sales volume (units) to acheive taget profit

A

Fixed costs + required profit / contribution per unit

47
Q

Sales (£) to acheive target profit

A

Fixed costs + required profit / contribution ratio

48
Q

Contribution per unit

A

Selling price - (all) variable costs

49
Q

Current ratio

A

Current assets / current liabilities

50
Q

Liquiditiy / quick ratio

A

Current assets excluding inventory / current liabilities

51
Q

Residual income (RI)

A

Controllable profit - imputed interest charge ON controllable investment

MI (2 decks)

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