PLANNING AND MEASUREMENT Flashcards
margin of safety?
difference between your actual or current sales and the break even point. It shows how far sales revenue decrease before operating income become negative.
what is the floor and ceiling in a transfer pricing decision?
the floor is opportunity cost plus costs of outlay. the ceiling is the market price
target pricing?
set prices based on what you think customers are willing to pay based on perceived value
economic value added?
net operating profit after taxes less cost of capital
how is the overhead rate calculated?
dividing estimated overhead costs(both variable and fixed) by a budgeted or estimated quantity of a cost driver. Example: total overhead costs of 75,000 divided by 20,000 budgeted direct labor hours for a overhead application rate of 3.75 per direct labor hour
conversion cost?
direct labor + overhead
how is a spoilage question done?
normal spoilage is a manufacturing cost because it’s an inherent part of production, so it is included in finished goods.Abnormal spoilage is treated as a period cost.If total units completed are 5500 with 5000 being saleable, 200 being normal spoilage, and 300 being abnormal spoilage, then 5200 is included in finished goods. so 5200/5500 times the total cost:(5200/5500)*99,000=93,600 which is what will be debited to finished goods
how to use high-low method:
total costs y=a+b(x)y=total costsa=fixed costsb=variable cost per unitx=number of kilos,etcb is change in costs divided by change in kilos, or (y2-y1)/(x2-x1)
what does a JCL do?
Job control language initiates programs, specifies priorities and running sequences, and which databases are used and which files are used
What is the order of creating master budget?
sales budget is first, then production budget, budgeted income statement then budgeted balance sheet
absorption costing?
assigns all 3 factors(direct material, direct labor, and both fixed and variable manufacturing overhead) to inventory
direct costing?
assigns only variable manufacturing costs to inventory- which means variable manufacturing overhead
what does r squared actually mean?
percentage of variation in the dependent variable explained by the variation in the independent variables
what are x and y in a line equation?
x is the independent variable, and y is the dependent variable.
overhead efficiency variance?
The overhead efficiency variance is the difference between actual direct labor hours worked, and the standard quantity of hours allowed for actual production, times the variable overhead rate per hour.
overhead volume variance?
The overhead volume variance equals the difference between the master budget for fixed overhead and applied fixed overhead. The variance has one cause only: producing a number of units different from that specified in the master budget.
labor efficiency variance
The labor efficiency variance is the difference between actual direct labor hours worked, and the standard quantity of hours allowed for actual production, times the direct labor wage rate per hour.
material usage variance?
This variance is the difference between the actual quantity of material used, and the standard quantity allowed for the output achieved, times the standard price of material.
Diff between spending variance for fixed overhead and variable overhead?
The spending variance for variable overhead is the difference between the actual overhead and the budgeted overhead based on actual direct labor hours. The spending variance for fixed overhead is the difference between the actual overhead and the master budget for fixed overhead. Neither variance is affected by the denominator used for allocating fixed overhead.
what is incremental or differential cost?
the total difference in cost of two alternatives.
using PERT or CPM, activity slack is?
max amount of time an activity can be delayed without delaying the entire project
financial planning process:
1) analyzing the investment and financing alternatives available to a firm, 2) forecasting the future consequences for each of the alternatives, 3) deciding which alternatives to undertake, 4) measuring subsequent performance against established goals. Measuring the subsequent performance is the final step in that process.
what are the steps to process improvement?
1) design, 2) modeling (which involves simulation of the process), 3) execution (including training of personnel and testing of the process), 4) monitoring, and 5) optimization.
what is a pareto chart?
a bar chart or histogram that ranks the causes of variations in a process from most to least frequent, which is intended to indicate their effects on quality
what is a control chart?
measures deviations from process standards, a fishbone diagram identifies causes of defects and their effects
steps in project management:
project initiation, project planning, project execution, project monitoring and control, and project closure
a cost management system is:
a planning and control system that measures the cost of significant activities, identifies non value-added cost, and identifies activities.
relevant range?
level of activity where fixed costs remain fixed
diff between theoretical capacity and practical capacity?
Theoretical capacity assumes output is produced 100% of the time. Practical capacity adjusts theoretical capacity for non-production time such as holidays and maintenance shutdowns.
Utilizing the expected annual capacity approach to overhead application, can result in overapplied overhead when:
Actual overhead costs were less than expected and/or production was higher than expected.Overhead is applied based on a calculated rate per unit. This calculated rates uses estimate overhead costs divided by an estimated activity level. If either the estimated overhead is higher than the actual overhead or the estimated activity level is lower than the actual activity level, overhead can be overapplied.
labor rate variance?
actual rate paid minus standard hourly rate times the total hours worked
labor efficiency variance?
number of hours worked less hours supposed to have been worked times the standard rate
material price variance?
diff of total price paid and total price should have paid for the same amount
fixed overhead spending variance
It is the difference between the actual overhead spending and the budgeted overhead spending.
most likely strategy to reduce breakeven point?
decrease fixed costs and increase contribution margin
what is six sigma similar to?
total quality management
what are the 4 types of costs of quality?
prevention costsappraisal costsinternal failure costsexternal failure costs
steps for business continuity plan
create framework and structure, identify the scope of the plan, its key roles, and assign individuals to roles. Understand and evaluate organizational risks. Define alternative methods to ensure delivery of products and services. Strategy for handling crisis incidents. embed plan in organizational culture. educate, train, and make aware.
