Cpa Canada- Core 2

Front 1

Contribution Margin

Back 1

SP- VC

Selling Price- Variance Cost

Front 2

A. Variable Cost:

B. What is not included:

Back 2

A. Direct Materials + Other Production Variable Cost + Labour and Overhead

B. Variable Selling Cost

Front 3

Business Corporate Act (Federal or Provincial)

Back 3

Provides basic corporate governance framework for businesses.

Front 4

Product Life Cycle

Introduction Stage

Back 4

Expensive

Market Size is Small

Sales are Low

High R&D, Testing, Marketing

Intellectual Property

Low Price- Build Market Share

High Price- to recover from R&D

Promos- Aimed to Innovators

Front 5

Product Life Cycle

Growth Stage

Back 5

Strong Growth in Sales & Profit

Possible Economics of Scale Start

Investment into promotions

Additional features are added

Price- Maintained

Distribution Channels are added

Promo- Aimed at broader audience

Front 6

Product Life Cycle

Maturity Stage

Back 6

Maintain The Market Share

Most Competitive Time Period

Invest Wisely in Marketing

Competitive Advantage: Product Improvements

Additional features are added

Pricing- may be lower because of new compet.

Promo- emphasizes product differentiation

Front 7

Product Life Cycle

Decline Stage

Back 7

Market for product will start to shrink

Market is Saturated (all customer that will buy the products have already purchased it already)

Switch to less expensive production methods

Could:

Maintain the product- however add new features.

Reduce cost

Discontinue product, liquidate.

Front 8

Implicit Collusion

Back 8

Allowing one company to act as a price leader with the others following suit.

Front 9

Explicit Collusion

Back 9

Working with competitors to set prices. This is illegal

Front 10

Boston Consulting Group Matrix

Dog

Get your money out.

Back 10

Low Market Growth Rate (Low Cash Usage)

Low Market Share (Low Cash Generation)

Front 11

Boston Consulting Group Matrix

Star

Second Best

Back 11

High Market Growth Rate (High Cash Usage)

High Market Share (High Cash Generation)

Front 12

Boston Consulting Group Matrix

Cash Cow

Best!!!

Back 12

Low Market Growth Rate (Low Cash Usage)

High Market Share (High Cash Generation)

Front 13

Boston Consulting Group Matrix

Question Mark

Third Best- Potential

Back 13

High Market Growth Rate (High Cash Usage)

Low Market Share (Low Cash Generation)

Front 14

Static Budget

Back 14

Fixed Budgets created on a planned level of sales and or/production. Not Adjusted to Actual Units or Activity Levels.

BPxBU

Front 15

Flexible Budget

Back 15

AQ x BP

Example:

BP= Price Per Case

AQ= Total Cases

Front 16

Flexible Budget Variance

Back 16

(AP-BP) x AQ

Or

Actual Total Amount

-

Budget Flex Total Amount

Front 17

Rate/Price Variance

Back 17

(AP-BP) x Actual Hours

Example:

BP= $4 Per Direct Labour Hour

AP= $4.50 Per Direct Labour Hour

*Note* Rate/Price Variance dives down in more detail then the Flexible budget Variance.

Front 18

Efficiency Variance

Back 18

(Actual Hours- Budget Hours) x BP

Actual Hours- (Actual Units x BDL Per Unit)

x BP

*Note* Once again this dives into more detail using hours or kilograms, instead of case by case.

Front 19

Yield Variance

Back 19

Actual Total Hours- Budget Total Hours

x (B Total Amount/Units)

Front 20

Mix Variance

Back 20

(A % Mix Product 1 - B % Mix Product 1)

x ADLH

x BR

*Note* Always Calculated Product by Product.

Front 21

Fast way to calculate

Cost of good manufactured (aka purchasing)

COGM

Back 21

COGS- BEG Inv + END Inv

Front 22

Fast way to calculate

Cost of good sold COGS

Back 22

COGM + BEG INV - END Inv

Front 23

The Green Shoe provision in IPOs

Back 23

Provision that allows the underwriter to sell investors more shares than originally planned by the issuer. Typically 15% more then the originally allotted amount.

Front 24

The Red Herring Prospectus

Back 24

Preliminary document filed to the SEC which contains information about the companies operations, but does not include list price or the number of share being offered. The purpose is to gain interest. Usually the company offering the preliminary docs will get bids. Based on the bids they will collate the data and arrive at the offer price.

Front 25

Calculating WACC

Back 25

(Bond Yield % x (LTD$/LTD$+PS$+CS$))

+

Cost of PS % x (PS$/LTD$+PS$+CS$)

+

Cost of CS % x (CS$/LTD$+PS$+CS$)

*Note* Current Debt needs to be eliminated

Front 26

Calculating Required Rate of Return

CAPM=

Back 26

Rf + B(Rm-Rf)

Rf= Risk free rate

B= Beta

Rm= Market Return

Average Market Risk Premium= (Rm-Rf)

Front 27

Participating Preferred Stock

Back 27

Dividend is paid to PS before CS. In the event of liquidation the PS will be paid out prior to CS.

Front 28

Core Competency

Back 28

Are resources and capabilities that serve as a source of competitive advantage.

Characteristics:

1. Allow a company to expand into new markets.

2. Provide a significant benefit to customers.

3. Hard for competitors to replicate.

Front 29

Distinctive Competency

Back 29

Occurs when a company performs a core competency better than their rivals.

Characteristics:

1. Derives value to the organization

2. is rare

3. hard to imitate

4. the organization is able to exploit it

Front 30

Contribution Forgone

Two Sub Companies.

Example Questions IC W4 11-12

Back 30

1. Calculate Variable cost for Telecommunication, using the cost from both PTL and CI. Do no use CI division selling price of chips.

2. Compute Budget CM Using (Current SP of Telecommunications - VC calculated in 1) x budget volume current.

3. Convert Tele units into MH, then covert back into computer units.

4. Revised CM - Forgone Computers Produced.

Revised CM= (New Price- VC) x Revised Sales

Forgone Comp= SP Comp- VC Comp x number in 3.

Front 31

Code of Conduct should contain....

Back 31

Breaches of the code

Conflicts of Interest

Handling Confidential Info

Dealing with Suppliers

Front 32

Sunk Cost

Back 32

Cost that has already been incurred and cannot be recovered.

Front 33

Discretionary Cost

Back 33

Is a cost or capital expenditure that can be curtailed or even eliminated in the short term without having an immediate impact.

Examples: Advertising, Building Maintenance, Contributions, Employee Training, Equipment Maintenance, R&D, quality control, Conferences, Management Consulting, Executive Training.

Front 34

Committed Costs

Back 34

Obligated cost that a company can typically not get out of. Usually involves some kind of long term agreement.

Front 35

Benchmarking

Back 35

Compare compare compare

Comparing your companies strategy, product, or process with those of the best-in-class organization.

Front 36

Kaizen Theory

Kaizen Budeting

Back 36

Japanese philosophy of small continuous improvement.

Continuous improvement is built into the budget figures.

Front 37

Hybrid Costing System

Back 37

Includes feature of both job costing and process costing

Front 38

Collusive Pricing

Back 38

companies work together to keep the price of a product or service at an elevated level with the goal of receiving large profits or cornering the market.

Front 39

Predatory Pricing Aka Dumping

Back 39

When a company sells a product in a foreign country at the price below the market value in its home country.

Front 40

Discriminatory Pricing

Back 40

Price discrimination occurs when a business charges a different price to different groups of consumers for the same good or service.

Front 41

Margin of Safety Formula

Back 41

(Current Total Sales- Breakeven in Sales $)

/Breakeven in Sales $

Example Week 3 Question 68

Front 42

Opportunity Cost

Back 42

(New Order Units- Capacity in Units)

x

200