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MCS - E2 > P2 > Flashcards

P2 Flashcards

1
Q

Benefits of ABC

A
  • more accurate for non volume related items
  • flexible
  • more reliable of long run variable costs
  • meaningful financial and non financial measures
  • identifies cost behaviour
  • logical costing work
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2
Q

what is ABM (Acitivitiy based management)

A

is the use of ABC analysis for cost management. it classifies between value and non value adding activities.

system of managment which uses ABC info for a vatiety of purposes including cost reduction, cost modelling, and customer profitability analysis

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3
Q

Direct Product Profitabilty

A

a method which relates the indirect costs to the goods according to the way the goods are used or creaed.

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4
Q

Customer Profitability Analysis

A

different customer diff in profitability

analysis of revenue streams and service costs associated with specific customers

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5
Q

Principles of TQM

A
  1. right the first time

2. continuous improvement

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6
Q

Cost of Quality

A

conformance - Prevention / Appraisal

non conformance - Internal & External

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7
Q

Quality Circles

A

Group voluntarily meet identify investigate, analyse and solve work related problems

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8
Q

Theory of constraints (process - 5 steps )

A
  1. id the bottleneck
  2. decide how to exploit
  3. suborinate all else to the decisions of point 2
  4. elevate the systems bottlenecks
    5 if a bottleneck is then revmoved, start process agin to resolve the next
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9
Q

throughput

A

sales revenue less direct material costs

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10
Q

return per factory hour

A

throughput per hour/product time on the bottleneck resource

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11
Q

cost per factory hour

A

total factory cost / total time on the bottleneck resource

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12
Q

value adding activities x 3

A
  • customer is willing to pay for the output
  • activity physically changes the output in some way
  • the activity is performed correctly at the first attempt
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13
Q

Target Costing

A

driven by external market.

  1. set SP
  2. minus margin
  3. dev with cost now available

proactive, while standard costing is reactive

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14
Q

target cost gap

A

gap between actual cost and needed cost to achieve SP and margin

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15
Q

value analysis / value engineering

A

value analysis relates to existing producst while value engineering relattes to new products
focus on activities that add value to the product as perceived by the customer.

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16
Q

types of value (value adding activities)

A
  1. cost value - to produce
  2. exchange value - what a customer will pay
  3. use - function
  4. esteem - status associated to owning it
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17
Q

Porters value chain

A

primary activities -

  1. inbound logisitcs
  2. operations
  3. outbound logisitcs
  4. marketing and sales
  5. service

secondary activities/support

  1. firm infrastructure
  2. HR management
  3. Tech dev
  4. Procurement
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18
Q

relevant cash flows - def & types

A

is a future, incremental cash flow

  • sunk cost - already occured
  • incremental - extra costs, revenue only
  • fixed costs - ignore unless incremental
  • committed costed - ingored. happenig no matter what
  • opp costs - include
  • depreciation - never relevant, a/c adj not cash flow

avoidable vs unavoidbale csots

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19
Q

captail investment process (phases x 3)

A

creation (ID obj, search opps & id states of nature)

decision (list possible outcomes, mesure payoffs, select investment projects)

implementation (obtain autho, review cap invest deicisions)

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20
Q

reasons for the time value of money

A

consumption preference, impact of inflation, risk

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21
Q

methods used to appraise investments (4)

A

NPV, IRR, Payback period, ARR

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22
Q

adv of NPV

A
  • considers time value of money (int, infl, risk)
  • is an absolute measure of return
  • based on cashflow and not profits
  • considesr the whole life of the project
  • should lead to max of shareholder wealth
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23
Q

IRR decision criteria

A

if the IRR is greater than the cost of cap then accept

24
Q

adv of IRR

A
  • considers time value of money
  • is a % and therefore easily understood
  • uses cashflows not profit
  • considers the whole life of the project
  • ## can be calculated when the cost of cap is unknown
25
Q

disadv of IRR

A
  • not a measure of absolute profitability
  • estimate only
  • non conventional cashflows will give rise to no or multiple IRRs
26
Q

capital rationing

A

occurs when insufficient funds are available to undertake all beneficial proejcts.

use the profitability index to decide, or DPBI - discounted prayback profitability index.

27
Q

disadvantages of the payback period

A
  • time value of money is ignored
  • cashflows after the payback period are ignored
  • not a measure of absolute profitability
28
Q

good risk?

A

speculative risk

29
Q

categories of risk (multiple)

A

strategic risk, product risk, commodity ridk, product reputation risk, operational risk,

30
Q

risk appetite

A

the amount of risk an organisation is willing to accept in pursuit of value

31
Q

risk capactiy

A

amount of risk a company can bear

32
Q

risk attitude

A

overall approach to risk (board being risk adverse or risk seeking)

33
Q

risk management methods

A 
TARA
Transfer
avoid
reduce
accept
34
Q

risk mapping

A

tara on a grid. probability vs impact

35
Q

cima fundamental ethical issues

A 
integrity
objectivity
professional competence and due care
confidentiality
professional behaviour
36
Q

4 Vs of big data

A

Velocity
Volume
Variety
Veracity (value)

37
Q

price elasticity of demand

A

measures the change in demand as a result of a change in price

38
Q

factors affecting the price elasticity of a product

A 
- scope of the market 
info within the market
availability of substitutes
complementary products
disposable income
necessities
habit items
39
Q

product life cycle

A

introductory phase
growth
maturity
decline

40
Q

market based pricing strategies

A

premium pricing - pricing above competition on a permanent basis
market skimming - high price, then down and down
penetration pricing - low to enter
price differentiation - diff prices to diff people. (eg off peak prices etc)
loss leader pricing - loss on the main item, but upsell add ons
discount pricing - low cost, high volume, low margin (ikea)
product bundling

41
Q

cost pluspricing

A

cost plus a mark up. only good for companies that know the quantity to be sold.

42
Q

objectievs of transfer pricing

A

goal congruence
performance measurement
maintaining divisional autonomy
minimizing the global tax liability
recoridign the movement of goods and services
a fair alloation of profits between divisions

43
Q

methods to set a transfer price

A

market based
cost based
negotiated prices

44
Q

dual pricing

A

where one price is recording by the selling division and another by the buying division. the difference is then sorted out by head office.

45
Q

optimum replacement cycle

A

as machinery ages its residual value decreases and its running costs increase

factors to consider :

  • capital cost of new machinery
  • operating costs
  • resale value
  • taxation and investment incentives
  • inflation
46
Q

limtations with the optimum replacement cycle

A

assumes comapny repalces like for like BUT

  • changing tech
    inflation
    change in production plans
47
Q

sensitivity analysis

A

posing what if questions. under NPV questions, what would happen if the NPV moved by 10% etc.

48
Q

pros of sensitivity analysis

A
  • easily understood
  • id’s areas that are crucial to the success of the project.
  • id’s just how critical some of the forecasts are
49
Q

cons of sensitivity analysis

A
  • assumes that changes of variables can be done independently
  • only ids how far a variable needs to change, not look at the probability of such a change
  • doesnt point at the right answer, just shows you were thigns are wrong.
50
Q

scenario planning

A

id high impact high uncertainty factors in the environment
- for each factor, id different possible futures
cluster together different factors to id various consistent future scenarios
build detailed analysis to id and assess future implications
for each scenario, id & assess possible courses of action

51
Q

responsibility accounting

A

cost centre - only operating csots
revenue - revenue
profit - revenue and cost

52
Q

fixed bugdet

A

produced for a single level of activity

53
Q

fliexible budget

A

designed to change as volume of activity changes

54
Q

benchmarking

A

a continuous process of measuring a firms products, sevices and activities against other best performing organisations either internal or external to the firm. idea is to ascertain how the processes can be improved.

55
Q

types of benchmarking

A 
internal 
competitive
functional (similar depts in other non direct competitors)
strategic (companies in the same industry might agree to join a collaborative benchmarking process managed by a 3rd party such as a trade organisation.
56
Q

balanced scorecard

A

financial perspective
customer perspective
internal business process perspective
learning & growing perspective

MCS - E2 (3 decks)

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