Exam

Question 1

Expected Value

Answer 1

Multiply possibilities by outcome to get weighted amount.

Add to get EV.

Question 2

Range

Answer 2

Difference between largest and smallest value.

Question 3

Probability of independent combined events

Answer 3

probability of 2 events that don’t relate but occur at same time.
Multiply them together.

Question 4

standard deviation

Answer 4

(expected profit - expected value) squared * by probability.
Add all weighted amount.
Square root total answer.

Question 5

Coefficient of variation

Answer 5

CV = SD / EV

Question 6

decision tree

Answer 6

used to clarify alternative course of actions

Question 7

maximin

Answer 7

the worst possible outcome will occur so select the largest payoff under this assumption

Question 8

maximax

Answer 8

the best possible outcome will occur so select the largest payoff under this assumption

Question 9

regret criteria applied where:

Answer 9

it’s not possible to assign meaningful probabilities.

Question 10

standard cost is

Answer 10

target costs for each operation built up to produce standard cost

Question 11

budget

Answer 11

cost for total activity

Question 12

standard

Answer 12

relates to cost per unit

Question 13

purpose of standard costing system

Answer 13

prediction of future costs for decision making
assist in setting budgets
challenging target
trace costs

Question 14

sales margin price

Answer 14

(AP-SP) x Actual sales volume

Question 15

sales margin volume

Answer 15

(AV-BV) x standard unit contribution

Question 16

Direct Materials Price

Answer 16

(SP-AP) x AQ

Question 17

Direct Materials usage

Answer 17

(SQ-AQ) x SP

Question 18

Variable overhead rate

Answer 18

(SP-AP) x AH

Question 19

Variable overhead efficiency

Answer 19

(SH-AH) x SP

Question 20

fixed overheads

Answer 20

budget overheads - actual fixed overheads

Question 21

interest rate

Answer 21

multiply by NBV

Question 22

statement layout

Answer 22

Rev - costs = NCF
NCF - dep = Profit
Profit - Int rate = RI

Question 23

profit statement

Answer 23

DM+DL+vo/hd
Contribution = selling price - above answer
* sales
answer
- fixed o/hd
profit

Question 24

Variances needed for Budgeted profit

Answer 24

SMP, SMV
DMP, DMU
LBR, LBE
Vo/hd rate, V o/hd efficiency
fixed o/hd

Question 25

Return on income

Answer 25

net operating income / average operating assets (profit/NBV)

Question 26

Residual income

Answer 26

controllable profit - cost of capital charge on investment controllable by manager

Question 27

Economic Value added

Answer 27

divisional profit +/- accounting adj - cost of capital charge on divisional assets

Question 28

NPV

Answer 28

FV/ 1 + interest rate

Question 29

measuring managerial performance

Answer 29

only controllable assets to be included in investment base

Question 30

measuring economic performance

Answer 30

all assets and an allocation of corporate assets should be included

Question 31

advantages of divisionalisation

Answer 31

improved quality of decisions speedier decisions increase managerial motivation

Question 32

disadvantages of divisionalisation

Answer 32

costly structure | loss of control by top management

Question 33

functional organisational structure

Answer 33

organisation = investment centre | activities placed under departmental head

Question 34

divisionalised structure

Answer 34

organisation divided into separate IC or PC | functional structure below this

Question 35

differences between MA and FA

Answer 35

``` legal requirements individual focus Framework Time dimension Report frequency ```

Question 36

High low method

Answer 36

difference in £ / difference in activity = | VC per unit

Question 37

breakeven

Answer 37

total fixed costs / contribution per unit

Question 38

contribution per unit

Answer 38

selling price - variable costs

Question 39

target profit

Answer 39

fixed costs + TP / contribution per unit

Question 40

contribution margin | PV ratio

Answer 40

contribution per unit / | sales price per unit

Question 41

margin of safety

Answer 41

exp sales - breakeven sales | / exp sales

Question 42

traditional costing +

Answer 42

easy to use | useful for large quantities

Question 43

traditional costing -

Answer 43

not accurate | assumes indirect costs related to volume of measure

Question 44

ABC +

Answer 44

detailed info | more accurate

Question 45

ABC -

Answer 45

timely costly to implement difficult

Question 46

ABC step 1

Answer 46

Total o/hd cost | cost pool / price (%) / COST/ (divide) driver / RATE

Question 47

ABC step 2

Answer 47

use the rate to allocate it to the product

Question 48

ABC extra steps

Answer 48

if you need to reallocate do so using percentage but then get the rate by dividing again by the budgeted figure

Question 49

Labour Rate variance

Answer 49

(SP - AP) x AQ

Question 50

labour efficiency variance

Answer 50

(SH - AH) x SP