Reminders Flashcards
When calculating absorpbed cost of a unit
Dont forget to include direct labour. I used direct labour hours per unit to absorb indirect costs but forgot to cost the direct labour itself in..
when using multiple % adjustments order doesnt matter
100 x 10% + x 3% + x 4% -
100 x 4% - x 3% + x 10% +
..same answer
when preparing a cash forcast .. watch out for..
An expenses amount with a depreciation element included. Need to take out the depreciation amount as this doesn’t go in CF
*** Need to do a bit work suggesting performance indicators
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when breaking out 12 month budget watch out for…
..fixed costs … is it a month or a week (been caught out here)
when calculating best product when theres a limiting factor
- Calculate the contribution normally
- Then divide contribution / qty of limiting factor req.
(Can do either with totals or per unit , shd be same)
in osborne wb when given 2 original budgets .. where labour and OHs were clearly not variable … the answer was that they were semi variable and to use HiLo method…. im not sure how could be sure they werent stepped fixed :-(
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Types of budget: Incremental Flexible Rolling Activity based.
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Types of pricing:
Price skimming; penetration pricing; Standard pricing; Cost plus pricing
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when selecting which budget(s) a cost belonged in I forgot it should usually be in 2 budgets with the 2nd being Cash budget (excepting depreciation)
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be very careful when doing budgets to know exactly what a figure is … units or £££s …
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when calculating sub-contracting requirements…
watch out for whether being asked for hours or units in answer
when completing a materials schedule 9osborne) and calculating the COST column …item ‘used in oroduction’ … remember…
…dont calculate this form number of units used in production at purchase price… this doesn’t work !!!
Need to either work out the opening inventory cost per unit and then use both that and the cost per unit of the new purchases and calculate the total using FIFO assumption… or else just use the figures in the £ column and use OI+P-CI=COGS formula.
need to analyse the osborne textbook answers where composing an email and try and work out a structure
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product design royalties are a direct cost (osborne)
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when adjusting an operating budget to build a cash flow note that depreciation included in OB needs to be removed… also that the phrase ‘other OHs include an increase in non-cash provisions of £5K’ did mean that the £5K was to be deducted
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when calculating budgets for labour watch out for..
workrs having a guaranteed minimum
when calculating material usage when given requirement in units (eg sales budget) watch out for OI & CI being given in units…
…if increasing the stock of units remember to change the difference into material requirement.. ie dont make mistake of calculating the material required for sales figure and then adding on the extra units required for stock… need to calculate the total in units and then convert into material requirment for that total.
Remember about the Hi Lo method..
You have to pick out the highest and lowest records and use these …. NOT the top and bottom ones !!!!
Then use one or other of these for calculating the fixed element and check it against the other one.
NB: The other records do not necessarily calculate out.
Remember with stepped cost eg labour is £5K to produce 3000 units….
Answer can only be a multiple of £5K ..
Who is responsible for final approval of budget (Kaplan)
Board of Directors
Which budget?
Incentives OR Commission OR Bonuses to sales staff ? (Kaplan)
Marketing
Which budget?
New conveyor belt (Kaplan)
Capex
Which budget?
Salaries or repairs engineers (Kaplan)
Maintenance
Which budget?
Enhancements to production machines (Kaplan)
Capex
Which accounting treatment?
Overtime premium OR Idle time pay for production workers
Charge to production in a Labour Hours Overhead Rate
Which accounting treatment?
Basic pay for production workers
Direct cost
Which accounting treatment?
Power costs for machinery
Charge to production in a Machine hours OH rate
Which accounting treatment?
Depreciation of production equipment
Charge to Production in a machine hours OH rate
When doing indices what to watch out for?
If doing 2 rows eg. forecasting volume with one index then on the next row doing a price index. I did the price index calc based on the ROUNDED forecast volume which meant my rounding was not always the same as Kaplans.
I would need to have worked along the columns, putting in the rounded volume figure but keeping the unrounded figure open in my calculator and doing the price index from that.
