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CORE 2 😬 CPA > WEEK 1 > Flashcards

WEEK 1 Flashcards

1
Q

Relevant Costing - Leve; B

A

Incremental costs and revenues
Qualitative ?s.. how reliable are future operating costs?
demand on mgmt? laws n regulations? social or env. consequences.
Short term goal: MAXIMIZE PROFITS

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2
Q

Make or Buy

A

Quantitative: depreciation on equipment is a sunk cost

State how to implement the change
Prepare a correct quantification of the costs of the dog crates if they are manufactured and if they are purchased from an overseas manufacturer.
Consider at least 2 qualitative factors associated with the diversification of the product line and provides a recommendation
(Repeat pros that are in line with the alternative)

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3
Q

Outsourcing Benefits

A

lack of capacity in future
lack of raw materials
product is outside company’s competencies
==higher quality, low cost and easy delivery

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4
Q

Outsourcing Cons

A

reliance on third party

Can space where item is made be used for something else?

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5
Q

Special Order

A
  • Need excess capacity
  • costs less than revenue for order (duh)
  • consider if any opportunity costs
  • Consider future impact if u accept this order
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6
Q

Constraints

A

Find Cm, then find the CM/hr (divide by DL hours) and then rank and allocate
also look at how it affects sales as a whole after quant.

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7
Q

Add or Drop

A

incremental costs/revenue
drop
Does this increase net income?

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8
Q

Cost-Volume-Profit

A 
Break even 
fc/cm = units
fc/ratio = $
fc+target profit/cm ratio = target profit
finding cost function:
base the levels on activity
find vc/hr average
total costs = X$vc/unit * FC
cost function after findinf FC
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9
Q

Product Costs

A

DM+DL+MOH

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10
Q

Prime Cost

A

DM + DL

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11
Q

Period costs

A

anything not product cost

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12
Q

COGM

the purchases version of manufacturing

A

Beginning WIP + DM used + DL used + OH applied – Ending WIP

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13
Q

Job Costing

A

customized

uniquely identified items

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14
Q

Process costing

A

mass produced

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15
Q

Job costing: Variable vs Absorption

A 
Variable
only include variable costs
i/s impact
Absorption/full
all costs
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16
Q

Job costing: Variable vs Absorption

A 
Variable
only include variable costs
i/s impact
Absorption/full
all costs
17
Q

Transfer Price

A 
Minimum transfer price
=
Variable costs up to the point of transfer
\+
Opportunity cost to the selling division
18
Q

Capacity

A

If selling dept has no idle capacity, the min. price is the market price
If selling dept has idle capacity, the min. price is the variable costs (since no op cost)
If buying, max price is ALWAYS external selling price

19
Q

cost-based transfer pricing

A
  • transfer prices are based on a formula applied to some measure of the product’s c
20
Q

market-based transfer pricing

A

transfer prices are based on external market conditions such as the prices of external suppliers or the prices charged to external customers.

21
Q

negotiated transfer pricing

A

seller and buyer work together to come up with an internal transfer price for the product or service

22
Q

negotiated transfer pricing

A

seller and buyer work together to come up with an internal transfer price for the product or service

23
Q

Process costing = EU

A

DM is added at the beginning of the process, while conversion costs (that is, DL and OH) are incurred throughout the process.
both different

24
Q

Two methods for EU outputs

A

weighted average
Completed_+ WIP equivalents

FIFO
0 of the beginning and the started n completed and fhe wip equivalents

25
Q

transfer pricing

A

SELLER:
Minimum selling price =
Variable cost + Opportunity cost

BUYER:
Maximum price = External selling price

26
Q

market based optimal DM conditions

A

The immediate market must be perfectly competitive and information readily available.

Interdependencies between the departments must be minimal.

There must be no additional costs or benefits to the organization as a whole in using the external market instead of transacting internally.

27
Q

Qualitative - transfer pricing

A

look at decentralization/centralization?
any invcentives for depts>?
time consuming if negotiating

28
Q

suboptimal decisions

A

Negotiated transfer prices are less likely to encourage suboptimal decisions compared to cost-based or market-based transfer prices.

29
Q

Pricing

Cost based - 
market pricing - 
demand based pricing
target based pricing
life cycle based pricing
A 
Cost based - VCs and allocated FC
market pricing - 
demand based pricing 
target based pricing - knows price it wants to charge, costs are targeted
life cycle based pricing -
30
Q

Six Sigma

A

ix Sigma involves measuring and analyzing business processes to improve quality for the customer through reduced cycle time, reduced defects, and improved customer satisfaction.

CORE 2 😬 CPA (5 decks)

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