Semester 1 Flashcards
What is the purpose of information systems?
- Process data
- Store data/info
- Communicate info
What do information systems produce output for?
-Planning
-Recording + processing transactions
-Monitoring + measuring performance
-Controlling
-Decision making
Types of information systems
TPS (Transaction processing system)
MIS (Management info system)
EIS (Executive info system)
ERP (Enterprise resource planning)
CRMS (Customer relationship management software)
Information levels
- Strategic: LT Decisions, Uncertain, external sources
- Tactical: Activity summary, medium term planning, internal
- Operational: V detailed, lots data, ST Decisions, internal
What is big data?
Large volumes of raw data, analysed to reveal patterns
What is a cost object?
Any activity that requires a separate measurement of costs
Name the manufacturing costs
- Direct materials
- Direct labour
- Manufacturing overheads
Name the non-manufacturing costs
- Administrative overheads
- Marketing overheads
What is equation for prime cost?
Direct material + Direct labour
What is equation for conversion cost?
Direct labour + manufacturing overheads
Is a supervisor salary an indirect or direct cost?
It depends on cost object
What is a product cost?
A manufacturing cost
An asset (inventory) in BS when unsold
An expense in IS when sold
Included in inventory valuation
What is a period cost?
It’s a non-manufacturing cost
It’s an expense in IS
Not included in inventory valuation
Do total variable costs increase or decrease over time?
Increase
Do variable costs per unit increase or decrease over time?
They remain the same
Do total fixed costs increase or decrease over time?
They remain the same
Do fixed costs per unit increase or decrease over time?
Decrease
What is a semi-variable cost?
Part fixed part variable
What is a step fixed cost?
Remains fixed until a certain point
What is FIFO?
Oldest stock sold first, so inventory valued @ newest price
What is LIFO?
Newest stock sold first, so inventory’s valued at oldest price
Not allowed by IAS 2
What is WAC?
No order pattern for items sold, so inventory’s valued at same price (average price)
What is capital expenditure?
Big 1 off asset purchase
Used to generate revenue over long term
E.g property, machinery
What is revenue expenditure?
Daily, ongoing costs to allow business to operate
E.g rent, wages, admin fees
High low method
Variable costs = difference in cost/ difference in output
High low method
Variable costs = difference in cost/ difference in output
What is Job order costing?
Method used to calculate costs of individual products/batches
E.g mattress company who have lots of different products
What is process order costing?
Method used to calculate costs for mass production of 1 product
E.g paper company just making paper
What is process order costing?
Method used to calculate costs for mass production of 1 product
E.g paper company just making paper
OAR Plant Wide Rate method + features
Simple but inaccurate
Applies overheads direct to production department (allocation bases are labour + machine hours)
Only valid for businesses with a few products
OAR 2 Stage allocation process
Complex but more accurate
Applies to traditional and ABC systems
Contribution sales ratio
Contribution / selling price x 100
Contribution per unit
Selling price - variable cost
Break even point definition
Number of units needed to be sold to cover fixed costs
TR=TC
BEP (in units)
Fixed costs/CPU
Margin of safety (revenue)
Total revenue- BEP revenue
Margin of safety (%)
Actual units - BEP units
———————————
Actual units
BEP revenue
Fixed cost/ CS ratio
Does change in total sales volume change the BEP?
No
Target profit units needed
Fixed costs + target profit = no. of units
———————————-
CPU
Marginal costing aspects
Cost of producing 1 extra unit
Used for ST decision making
Total variable costs to produce 1 extra unit
Not acceptable under IAS2
Absorption costing aspects
All costs of manufacturing 1 product
Used to calculate inventory valuation and profit
Acceptable under IAS2
If there’s a limiting factor what do you prioritise? And if there’s not ?
Yes- prioritise CPU of limiting factor
No- prioritise CS ratio
Draw a break even chart
Check internet
Assumptions of limiting factor theory
CPU is consistent for each product
Production process is linear + resources used at constant rate
Resources availability is limited + must be allocated efficiently
Functions of a budget
Planning
Coordinating
Communicating
Motivating
Evaluating performance
Functions of a budget
Planning
Coordinating
Communicating
Motivating
Evaluating performance
Different types of budget
Participatory (managers involved at all levels)
Zero based budget (start with blank sheet)
Incremental budget (start with last years budget)
Rolling budget (constantly adjusting same budget)
Different types of budget
Participatory (managers involved at all levels)
Zero based budget (start with blank sheet)
Incremental budget (start with last years budget)
Rolling budget (constantly adjusting same budget)
Order of budgets
Sales budget
Production units , Labour utilisation
Materials usage
Materials purchase
Cash budget
Write out the steps in each of 4 budgets
Production units:
Sales
- opening inv
+ closing inv
——————-
Production units
Materials usage:
Production units
Usage in kg or m
————————
Cost of usage
Labour utilisation:
Production units
Labour hours
————————
Cost of hours
Materials purchase:
Production units
-opening inv
+ closing inv
———————-
Cost of purchase
Flexed budget
Budgeted costs with actual units
Sales margin volume variance
(Actual units-budgeted units) x budgeted cpu
Or different in profit between flexed and normal budget
Sales margin price variance
(Actual selling price - budgeted selling price) x actual units
Labour efficiency variance
[ (budgeted labour hours x actual units) - actual total labour hours ] x budgeted labour rate
Labour rate variance
(Budgeted labour hourly rate £ - actual labour hourly rate £) x actual total labour hours
Material usage variance
[ (Budgeted material quantity x actual units) - actual total material quantity ] x budgeted price per m
Material price variance
(Budgeted cost per m of material - actual cost per m of material) x actual total material quantity
