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105 Cards in this Set
- Front
- Back
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Cost that includes both variable costs and fixed costs.
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Mixed Cost
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Minor products of small value that resulted from the manufacture of the main product
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By–products
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Outputs with significant value that cannot be distinguished for each product in the manufacturing process, so common costs must be allocated by some arbitrary means.
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Joint products
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FIFO Equivalent Units
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Beginning WIP X % to be completed (1–%complete)
+units completed –units in beginning +WIP ending X % completed *Only use ending % complete |
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Weighted Avg Equivalent Units
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Beginning inventory X % completed
+FIFO equivalent units *Use beginning and ending inventory cost or Completed units +ending inventory X % completed |
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Joint Cost using quantity
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[Joint Cost
Less NRV of byproduct (end selling price X total qty)] X (quantity of product @ split off/ total of quantity at split off) |
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Prime Cost for DM
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Beginning DM+purchase+transportation–returns/allowance=materials available
Less end DM =materials used |
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Cost of goods transferred to finished goods (manufactured) COGM
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WIP beginning+DM (used)+DL+OH applied
=manufacturing incurred less WIP end |
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Calculate COGS
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Finished goods beginning
+COGM =COG available for sale Less finished goods end |
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Product costing for a sequentially moving manufacturing process. Used when few units are produced and each unit is unique.
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Job Order Costing
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Product costing that averages costs for large homogeneous items.
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Process Costing
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Manufacturing Cost Calculation
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DM (used) + DL + OH applied
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Calculate overhead under/over applied
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1.Total standard costs / total standard hours = application rate per hour
2. Total actual hours * application rate = budgeted amount 3. Actual – budgeted amount = over/under applied OH |
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Increase in the level of risk results in an increase in management's required rate of return. Higher expected returns to compensation for greater risk.
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Risk–Averse Behavior
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Increase in the level of risk does not result in an increase in management's required rate of return. Seek highest return
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Risk–Indifferent Behavior
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Increase in the level of risk results in a decrease in Management's required rate of return. Willing to settle for lower expected returns as the level of risk increases.
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Risk–Seeking Behavior
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Represents the portion of a single asset's risk that is associated with random causes and can be eliminated through diversification.
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Diversifiable Risk (nonmarket, unsystematic, or firm specific risk)
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Risk that affect all firms and cannot be eliminated through diversification. Ex: war, inflation, High IR, international incidents, and political evens, recessions.
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Nondiversifiable Risk (market or systematic risk)
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Foreign Currency chart of affects
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Foreign $ Domestic $ Net inflow net outflowDepreciation Appreciation Loss GainAppreciation Depreciation Gain Loss
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Cooperation amongst nations to address global issues
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Functional Interdependence
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Global issues, sharing earth. Actions of governments that adversely impact the climate or reduce safety impact all nations.
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Systemic Interdependence
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Requires an acknowledgement of the interdependence of nations and cooperation among nations consistent with shifts in the balance of power.
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Multipolarity
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Examples: U.S. sole economic & military superpower.
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Unipolar
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List prevention Costs
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1. Training
2. Inspection 3. Preventive maintenance 4. Redesign process/product 5. Search for vendors |
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List Appraisal Costs
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1. Testing
2. Inspection 3. Maintenance 4. Statistical quality checks |
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List Internal Failure Costs
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1. Rework
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List External Failure Costs
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1. Warranty costs
2. Cost of returning the good 3. Liability claims – complaints 4. Lost customers –complaints 5. Re–engineering an external failure |
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Define Vertical Linkage Analysis (Value Chain Analysis)
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Understanding the activities of the suppliers and buyers of the product
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Define Internal differentiation Analysis (Value Chain Analysis)
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Create value through differentiation, benefits are greater than cost.
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Perfect (pure) competition attributes
1. control over price and quantity 2. Elasticity 3. Profitability 4. Strategy |
1. Only controls quantity, price set by market
2. Perfectly elastic 3. no profit 4. maintain market share, responsive to market price |
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Monopolistic Competition attributes
1. control over price and quantity 2. Elasticity 3. Profitability 4. Strategy |
1. Controls quantity, primarily relies on market price
2. Highly elastic, adjust quantity w/o effecting price 3. no profit 4. Maintain market share, product diff, allocation of resources |
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Oligopoly attributes
1. control over price and quantity 2. Elasticity 3. Profitability 4. Strategy |
1. Control over price and quantity
2. inelastic, kinked demand curve 3. Positive 4. Maintain or enhance market share, proper spending, adapt to price changes and product volume |
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Monopoly
1. control over price and quantity 2. Elasticity 3. Profitability 4. Strategy |
1. Control over price and quantity
2. Inelastic 3. Positive 4. Ignore market share and focus on profitability from production levels that max profits |
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Supply Chain Operations Reference model process
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Plan, Source, make, deliver
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Workers routinely change jobs or from worker's being temporarily laid off.
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Frictional Unemployment
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Jobs available do not correspond to skills in the workforce or do not live in area where jobs are located. Possible changes in technology is a cause
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Structural Unemployment
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Seasonal changes n the supply and demand of labor.
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Seasonal Unemployment
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Amount of unemployment resulting from declines in real GDP during periods of a recession (contraction).
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Cyclical Unemployment
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Government Purchases of goods and services
Gross private domestic investment (fixed investments & change in inventories Personal consumption expenditures Net exports(exports minus imports) |
Expenditure Approach
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Describe Business cycles
1. Expansionary Phase 2. Peak 3. Contractionary Phase 4. Trough 5. Recovery |
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What happens with an increase in demand?
increase in supply? |
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What happens with an decrease in demand?
decrease in supply? |
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Calculate the Multiplier effect
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1 1
------------ or ----------- (1–MPC) 1 / MPS |
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Sequence of Events in an AIS (Accounting information System)
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1. Input sourch documents
2. file source documents 3. Record in journal and posted to GL and sub ledger 4. Trial balances are prepared w/ adj and accruals 5. Financials are generated. |
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Calculate WACC (weighted avg cost of capital)
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Cost of equity X % of equity
Add: weighted avg cost of debt X % of debt (% of debt = cost of debt x (1–Tax %)) *Lower WACC is better |
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Calculate a payment discount
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360 discount
------------------------------------- X ------------------------- pay period–discount per 100%–discount % |
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Calculate CAPM (Capital Asset Pricing Model)
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Risk free rate (krf) + risk premium (PMR)
or krf + (bi x (km–krf)) |
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Calculate degree of financial leverage
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% Change in EPS
--------------------------- % Change in EBIT |
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Calculate Return on investment
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Income --------------------------- or avg PP&E + avg Wcinvestment Capital
or Profit margin * Investment turnover Profit margin = income / sales Investment turnover = sales / avg investment |
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Calculate Residual Income
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Net income – required return
Required return = net book value * hurdle rate |
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Calculate Times Interest earned
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EBIT/ Total interest Expense
EBIT = Pretax income/ (1–T%) + interest |
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Calculate Net Present Value (NPV)
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1. After–tax Cash flows: Annual net $ inflow x (1–T%)
2. Add Depreciation benefit 3. X present value of annuity 4. – initial cash outflow |
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Payback Period
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Net initial investment / increase in annual net after–tax cash flow
*time value of money is ignored |
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Net initial outflow
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Invoice + shipping+installation
+ increase in working capital –proceeds on sale of old equipment |
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Explain how tax is used in the following NPV calculations: 1. annual depreciation shield
2. Annual savings 3. Salvage Value inflow 4. working capital |
1. Depreciation X Tax %
2. Savings per year X (1–tax%) 3. (salvage value – basis (includes depreciation if not fully depreciated)) x (1–tax%) 4. don't use. |
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Calculate Profitability Index
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PV of net future cash inflows / present value of net initial investment
or PV FCF – cost today *Greater than 1 means +NPV |
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Balanced Scorecard critical factors(FICA)
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1. financial
2. internal business processes 3. customer satisfaction 4. advancement of innovation and HR development |
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Strategic Business Unit's 4 financial measures (performance objectives) for managers from lowest to highest (CRPI)
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1. cost
2. revenue 3. profit 4. investment (return on assets) – independent |
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Flexible budget allow you to adjust which factors?
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1. production
2. sales |
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The order budgets must be prepared
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1. Sales
2. Production & SG&A 3. DM , DL, OH 4. COGS 5. Cash (all budgets needed for this) |
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Calculated Efficiency Variance (DL)
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Step 1: Actual hours X standard rate only
Step 2: Actual units X standard hours x standard rate Step 3: Step 1 – Step 2 = variance (+ unfavorable, –favorable) |
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Costs that are unavoidable because they have already occurred and cannot be recovered. Not a relevant cost.
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Sunk Costs
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The additional costs incurred to produce an additional amount of the unit over the present output.
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Incremental Costs
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Costs that can be authorized at a specific level of management.
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Controllable Costs
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Costs that were authorized at a different level. Not a relevant cost because they cannot be changed.
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Uncontrollable Costs
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Cost for a one–unit increase in activity. These include all variable costs and any avoidable fixed costs associated with decision.
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Marginal Costs
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Cushion, the excess of sales over break even sales. Expressed in $$$ or as a %.
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Margin of Safety
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Calculate Breakeven Sales
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Fixed costs / (CM / Sales)
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Calculate Margin of Safety
& Margin of Safey % |
1. Total sales – Breakeven sales
2. Margin of Safety in $ / Total sales |
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Contribution Margin
Contribution Margin % (ratio) |
1. Break even sales X CM ratio
2. CM/ Total Sales |
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Calculate Stockholder's Equity
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Total Assets – Liabilities
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Calculate Current Ratio
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Current Assets / Current Liabilities
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Calculate Return on Stockholder's Equity
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Net Income / Stockholder's Equity
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Calculate Breakeven point in $$$
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Total fixed costs / CM ratio
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Regression Analysis
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A method for studying the relationship between 2 or more variables. Predicts the value of dependent variable corresponding to given values of the independent variables (ie fixed cost, variable cost/unit). More accurate than high–low method
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Technique used to estimate the fixed and variable portions of cost, usually production costs. Used for flexible/performance budgets
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High–Low Method
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Step–by–step method of projecting costs when learning is a variable, often for repititve task. The rate is a percentage of the decrease in avg time (or total) as production doubles.
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Learning Curve
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Product costing for a sequentially moving manufacturing process. Used when few units are produced and each unit is unique.
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Job Order Costing
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Product costing that averages costs for large homogeneous items.
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Process Costing
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5 Components of COSO (CRIME)
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1. Control environment
2. Risk Asessment 3. Info. & Comm systems 4. Monitoring 5. Existing Control activities |
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Risk Response (is eaR aim)
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1. Avoidance
2. Reduction 3. Sharing 4. Acceptance |
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Inherent Risk
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Risk if management takes NO action
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Residual Risk
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Risk AFTER management takes action to mitigate adverse impacts of an event
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Fraud Risk
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1. Incentive/pressure
2. Rationalization 3. Opportunity |
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Internal Environment
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1. Risk Appetite
2. Organizational structure 3. Ethics 4. BoD 5. Authority and Responsibility |
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Avoidance (risk response)
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Avoids or terminates risk (disc ops)
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Reduction (risk response)
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Elect to reduce or mitigate risk (invest in inventory technology or closely monitor inventory)
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Sharing (risk response)
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Reduce risk by transferring (insurance)
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Acceptance (risk response)
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No action in risk response
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Monitoring (criMe)
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1. Ongoing monitoring – controls
2. Separate evaluations – fresh look at controls 3. Reporting deficiencies |
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Code of ethics (internal environment)
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1. Honest & ethical conduct
2. Full, fair, accurate, and timely disclosures in f/s 3. Compliance with laws, rules & regulations |
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Event Identification Techniques
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1. Event Inventories – List of potential events common to industry
2. Internal analysis – Analysis performed by staff 3. Escalation or threshold triggers – comparison of predefined criteria may identify events (var from std) |
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Objectives (ERM)
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1. Strategic – goals, mission, increase s/h value
2. Operations – effectiveness, efficiency & profitability 3. Reporting – reliable 4. Compliance – laws, rules, and regulations |
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The Business Judgement Rule (Fiduciary Duty)
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Directors must always act in the best interest of the Corporation
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Marketing for a single sale – lowest price (used car)
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Transaction Marketing
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Marketing for an ongoing relationship – loyalty
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Interaction – Based Relationship marketing
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Marketing for target markets
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Database marketing
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Marketing with the use of internet
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E–marketing
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Multilevel marketing with focus on relationships and referrals
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Network marketing
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Total Factor Productivity Ratios
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Output / Total Cost
Material & Labor costs (all inputs) |
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Partial Productivity Ratios
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Output / Specific Quantity
Material & Labor for specific quantity |
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Control Charts
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Plot comparison of actual results by batch to an acceptable (std) range.
Show trends toward improved quality conformance or deteriorating quality conformance (zero defects). |
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Pareto Diagrams (Histogram)
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Shows the frequency of quality issues (defects).
Determines the quality–control issues that are most frequent and often demand the greatest attention. |
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Cause–and–Effect Diagram (fishbone)
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Used to identify the sources of problems in process and take corrective action.
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Elements on a Cause and Effect Diagram (fishbone)
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1. Materials
2. Manpower 3. Machinery 4. Method |
