Session 1 and 2 Flashcards
Define ‘lean production’/just in time
a management approach where a business produces units only in response to customer orders
enterprise risk management
a process used by a company to proactively identify and manage foreseeable risks
Define corporate social responsibility
considering the needs of all stakeholders when making decisions
define cognitive bias
a distorted thought process that can adversely affect planning and decision making
3 categories of manufacturing costs
Direct materials Direct labour manufacturing overhead
Define direct materials
materials that can be physically traced to a product
define direct labour
labour costs that can b easily traced to individual units of a product
define manufacturing overhead
all costs of manufacturing that are not direct materials or direct labour
administrative costs
costs associated with the general management of an organization
product costs
all costs involved in acquiring or making a product (iventoriable or manufacturing costs)
period costs
all costs not included in product costs.
2 types of period costs
marketing costs, admin costs
relevant range
the range in which fixed and variable cost assumptions are valid
cost object
any unit of analysis for which cost data is desired
direct cost
can be easily traced to a cost object
Describe a schedule of CGM
Cost structure
portionn of fixed, variable, and mixed costs found at a organizaion
true variable costs
varies in driect proporion to the level of production activity
step-variable cost
a cost that is obtainable only in large amounts and increases and decreases only in responce to large changes in activity
curvilinear costs
costs that show a curved relationship to activity
cotribution margin
the amount left on a income statement after variable expenses have been deducted
commited vs discretionaly fixed costs
discretionary is normally 1 year range
What is CVP
Cost-volume-profit analysis. Shows the relationship between cost, volume, and profit
CVP focusus on how costs are affected by what 5 elements
1) Prices of products
2) volume or level of activity
3) per unit variable cost
4) total fixed cost
5) mix of products sold
break even point
the level of sales at which profet is zero
CM Ratio
CM/Sales
variable expense ration
ve/sALES
CM Ratio
CM/Sales, or 1-Variable expense ratio
operating incomee formula
unit cm(q)-fixed
incremental analysis
shows how revenue, cost, and volume change as a result of a decision
break even analysis
a aspect of CVP that answers questions such as how far sales can drop before we lose money
break even point in units sold
fixed expense/unit contribution margin
margin of safety
the excess of budgeted or actual sales minus the break even point
operating leverage
how sensitive operating income is to a change in sales
degree of operating ;leverage formula
cm/operating income
formula for the relationship change in operating income
degree of operating leverage x %change in sales
how do I find the indifference point
divide the difference in fixed costs but the difference in CM of the 2 alternatives
margin of safety percentage
margin of safety in dollars/total sales
how to calculate dollar sales required for target profit
(fixed expense+target profit)/CM ratio
after tax target profit in units sold
fixed expense+ target profit/1-tax rate
absorbtion costing (full costing)
all unit vosts, fixed and variable, are assigned to units of product
process costing
unit product cost=total cost for a period of time/total units produced
allocation
predetermined overhead rate
overhead rate for a particualr job= predetermined overhead rate X actual direct-labor hours
