Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Management accounting techniques > Short term decisions > Flashcards

Short term decisions Flashcards

(52 cards)

Start Studying
1
Q

What is meant by short term decisions ? P269

A
  • Actions effect costs and revenue
  • maximum of one year ahead
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the two types of short-term decisions ? P269

A
  • Break-even analysis
  • Marginal costing
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is the break-even analysis ? P269

A
  • Break even point = output level
  • Sales revenue - covers all the costs
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is marginal costingused forv ? P269

A
  • Fixed and variable costs identified
  • make a product/ provide a service
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What information is needed for decision making ? p269

A
  • relevant (avoidable) costs
  • irrelevant (unavoidable costs
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the definition of relevant/irrelevant costs ? P269

A
  • Changed by decision
  • not affected by decision
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What further information about costs and revenue , other than relevant and irrelevant costs, would be needed ? P269

A

future costs and revenues
differential costs and revenues

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are future costs and revenues ? P270

A
  • Relevant
  • past useful = guide
  • sunk costs = irrelevant
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is differential costs and revneue ? P270

A
  • alter result of decision making = relevant and avoidable
  • Sames costs for alternatives = irrelevant and avoidable
  • changing costs when decisions made = relevant
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are exmaples of relevant costs and revenue that will change as a result of decision making ? P270

A
  • Selling prices
  • variable costs / variable of semi variable
  • contribution per unit
  • marginal costs
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are all costs, in relation to decision making, in the long term ? P270

A

Relevant and avoidable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

How must costing information be present to mamagement/ appropriate person ? P270

A

With professional competence

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is the definition of professional competence ? P270

A
  • Ethical principle
  • maintain professional knowledge and skill
  • competent and professional service
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What should the information within the costing info presented to management include ? P270

A
  • Reccomendations
  • well-presented reasoning
  • professional competence
  • little technical accounting terminology
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What are the methods of presenting cost information ? 271

A
  • Verbal presentation -.e.g Zoom presentation
  • written reports/emails
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What should written reports regarding cost information include ? P271

A
  • Introduction - tasks and probem
  • content - step towards solution & accounting calculation
  • conclusion - reccomendations of decision
  • appendix - full accounting calculation explanation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What should verbal presentations in the context of costing information include ? P271

A
  • form of hnadouts
  • computer presentations
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is break even ? P272

A
  • Neither profit/loss made
  • revenue just covers cost
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Why is break even referred to as CVP ? P272

A
  • cost, volume , proift
  • costs of output
  • volume of output
  • profit made
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is the break-even formula: calculating number of units to break even P272

A

Fixed costs/ contribution per unit = number of units to break even

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is the formula for break-even in sales revenue ? p272

Study These Flashcards
A

Break-even point (units of output) * selling price unit

22
Q

What do you need to know to use the break-even analysis ? P273

Study These Flashcards
A
  • Selling price ( per unit)
  • costs of the product :
  • variable costs (materials and labour)
  • overhead costs - fixed/ variable
  • Limitations - maximum production capacity and maximum sales
23
Q

What does the additional contribution form , once the breaking even point has been reached P276

24
Q

What is the margin of safety ? P276

Study These Flashcards
A
  • Amount sales exceed break-even point
25
How can the margin of safety be expressed ? P276
* A number of units * A sales revenue amount * A percentage
26
How can the percentage within the margin of safety be expressed in formula ? P277
* current output - break even output / current output * 100 = percentage of margin of safety
27
Why is the margin of safety important in the time of recession ? P277
* The cushion - beyond break even point * comparisons with two products * product = highest margin of safety = most favourable
28
How do you calculate the slaes revenue needed to achieve the target profit ? P277
Number of units of output (inc target profits) * sales revenue per unit (£) = target sales revenue
29
How do you calculate the sales revenue to achieve the target profit ? P277
Number of units of output * sales revenue per unit (£) = target sales revenue
30
What does the profit-volume ratio analyse ? P278
* Relationship: * amount of contribution * amount of value of sales
31
How is PV ratio calculated ? P278
Contribution (£) / selling price (£)
32
What can the ratio/ percentage of the profit-volume ratio be calculated on the basis of ? P278
* Single Unit * Production * Whole business * Higher PV = better for business
33
What can we use PV ratio to find , if the fixed costs are known ? P278
* Sales revenue - business breaks even * sales revenue - target profit
34
When are the times when break-even analysis is often used ? P279
* Before starting a new business * When making changes * Measure profit and losses * Answer 'what if?' questions
35
Why should the break-even analysis be considered when starting a new business ? P279
* cover costs/ make profit * Feasibility of break even - bank manager/ other parties (banks)
36
Why should you consider the break-even analysis when making changes ? P279
* Costs of major change * e.g.increase in productuion = balance of fixed and variable * Break even planning = profitability
37
Why should the break-even analysis be taken into consideration when measuring profit and losses ? P279
* Limitations of break-even analysis * profit/ loss = Different levels of output * new output - close to current levels * no change to structure
38
What else can the break-even analysis help with ? P280
Choice of production method
39
How can break-even anlysis help with a choice in production ? P280
* Relationship : high break even points and low break even points * sales revenue * money availability
40
What is special order pricing ? P280
* Spare capacity -extra sales * lower price
41
When is special order pricing used ? P280
* Business profitable = reached break even * additional sales (special orders) - selling price - above marginal costs but below absorption costs
42
What can happen if additional slaes at special order prices are made (above marginal costs but below absorption costs ) ? P280
* profit increase- additional sales at spare capacity
43
How do you increase the profit from additional sales ?
* Contribution to profit - special order
44
What can the principles of marginal costing also be used to establish ? P282
* Effect of changes - costs and revenues - profit of busiiness
45
What do changes in the costs and revenues on the profit of the business include ? P282
* Reduction in selling price - greater units / profit * increase in selling price - increase profit
46
What are the points to consider when using marginal costs principles in decision making ? P286
* Fixed period costs must be covered * separate markerts for marginal cost * effect on customers * problems of product launch on marginal basis * special edition products * 'last minute' sales
47
What must be remebered about fixed costs when using marginal costing principles ? P286
* Balance- above marginal costs and sold at absorption costs * high enough price * contribution =/> fixed costs
48
Why must separate markets be used for marginal costs ? P286
* Separate markets * E.g. Not different costs - if same town
49
How does marginal costing affect the customer ? P286
* persuasion - absorption costs later * Squeeze profit = too widely
50
What are the problems of product launch on marginal cost basis ? P286
* Setting below absorption / above marginal * collaspe - older products * most sales = marginal costs * increase to absorption difficulty
51
What are special edition products within marginal costing ? P286
* Sell of older products * e.g. old model car * low price ( above marginal costs )
52
What are last minute sales under marginal costing ? P287
* Products = no value = opportunity to sell gone * deadline aproaches * marginal for lowest * small contribution - fixed costs

Management accounting techniques (9 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions