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Accounting > management > Flashcards

management Flashcards

1
Q

what is management accounting

A 
generating informartion needed by management 
elements;
planning
directing and motivating
controlling decision making
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2
Q

name the elements of management accounting

A

no requirement
internal to company; unplublished + confidential
used to plan budget and forecast any period
flexible timely and aproximate
focus on one area of a company
no presribed rules
any time period

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3
Q

name the elments of financial acccounting

A 
legal requirement
external to company; published + registered
focuses on historic performance
accurate and audited 
focuses on whole company 
must comply with regulations
annualy done
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4
Q

what are the thics to accounting

A 
integrity
objectivity
proffessional competance/ due care
confidentiality 
professional behaviour
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5
Q

what are direct materials

A

materials that become integregal part of the cost unit and can be conviently tradced direct to it

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6
Q

what is manufacturing overhead mean

A

it is the cost of manufacturing that cant be traced directly to specific with produced

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7
Q

what is a cost object

A

something for which seperate cost information is desired

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8
Q

what is cost unit

A

individual unit of production or service for cost information desired

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9
Q

what is a cost centre

A

production or service location a function an activity or an item of equipment for which costs are accumulated

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10
Q

what is prime cost made up of

A

direct cost
+
direct materials

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11
Q

what is the relevant range

A

range of activity within which assumptions about variable + fixed costs are valid

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12
Q

what is the formula for semi variable costs

A

y = a + bx

y= semi variable cost
a= fixed cost
b=unit veriable cost

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13
Q

how to do high low method (step by step)

A

highest and lowest activity leveks with corresponding total costs
unit variable cost = change in costs/ change in units
then implement y=a+bx

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14
Q

how to work out unit variable costs

A

change in cost/change in units

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15
Q

disadvantages of high low method

A

only uses two data points

uses most extreme values may be anomalous

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16
Q

what is residual

A

distance each point on scatter diagrams and line of best fit

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17
Q

what are the methods of inventory valuation

A

AVCO
LIFO
FIFO

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18
Q

what is AVCO formula

A

total cost of inventory in store/ number of items in store

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19
Q

closing inventory formula

A

opening inventory + purchases of inventory - issues of inventory

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20
Q

what is full/absorption cost

A

total resources used to achieve a given objective

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21
Q

what is OAR

A

cost centre overhead/ absorbtion basis

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22
Q

how to workout overhead applied

A

POHR * actual activity

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23
Q

formula for POHR

A

predetermined overhead rate =

estimate total manufacturing overhead cost coming period / estimated total units in allocation basis for coming period

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24
Q

when is item underabsorbed

A

overhead absorbed - actual absorbtion

<0

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25
Q

when is it overabsorbed

A

overhead absorbed - actual absorbtion

>0

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26
Q

name types of costing systems

A

marginal costing
Activity Based Costing
absorbtion/total costing

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27
Q

what is a cost driver

A

activity thats a root cause of why a cost occurs

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28
Q

contribution formula

A

selling price - variable costs

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29
Q

profit formula

A

contribution - fixed costs
or
margin of safety * contribution

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30
Q

what is breakeven point and formula

A

it is the point at which no profit or loss is made so fixed costs equal to contribution
total fixed cost/contribution per unit

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31
Q

formula for magin of safety units

A

budgeted sales unit - breakeven sales unit

32
Q

formula margin of safety %

A

(budgeted sales unit - breakeven sales unit)/budgeted sales unit

33
Q

difference between marginal and absorbtion cost

A

fixed cost overhead is put in product cost for absorbtion where as for marginal its included in period cost

34
Q

how to allocate scarce resources

A 
identify limiting factor 
calculate contributions per unit 
calculatre contributions per limiting factor 
carry out ranking on previous step 
dtermine scarce resources required 
allocste scarce resources
determine optimal mix of resources
determine optimal product mix
35
Q

full cost pricing advantages and disadvantages

A 
adv 
price easy quick calculate 
ensure cover all costs
price increase costs rise
dis 
no reflection impact prices of sales demand 
reduce initative for cost control
36
Q

marginal cost plus pricing advantages and disadvantages

A 
adv 
simple to use
avoids abitrary apportionkent and absorb
good decision making short term 
dis 
doesnt gurantee recovery of full cost
not reflect any impact price on sales demand
37
Q

gross profit margin formula

A

gross profit/ (cost of sales +gross profit)
OR
gross profit/sales

38
Q

gross profit mark up formula

A

gross profit /(sales-gross profit)
OR
gross profit/cost of sales

39
Q

what is gross profit formula

A

cost of sales

40
Q

what is net profit formula

A

expenses

41
Q

what is a budget

A

a detailed plan for acqusition and use of financial and other resources over a specified time period

42
Q

what is budgetting

A

the act of preparing a budget

43
Q

why have budgets

A 
to define goals and objectives 
communicate ideas and plans
improve allocation of resources 
goals and objectives serve as benchamrks for performance evaluation
establishing a system of controls
motivate employees
means of performance evaluation
co ordinates activities whole organisation by integrating plans different parts
44
Q

what is the master budget and what does it include

A

comprehensive expression of managements plan for future and how to acomplish these in a acash budget SOP/L budgeted SOFP

45
Q

types of budgets and explain them

A

Incremental
zero based
rolling

46
Q

what is responsibility accounting

A

holding management accountable for only what they can control to a significant extent

47
Q

what is top down budgetting

A

top management prepare budget with little input from operations

48
Q

what are the adv and dis of top budgetting

A

advantages
use top management big picture awareness
enhance coordination between areas of budget
quicker to draw up and implement

disadvantages
demoralising for staff esp targets too tough
reduce initative for lower management
ignores knowledge those doing day to day jobs

49
Q

what is bottum up budgetting

A

developed by lower managers who fed upwards to senior managers

50
Q

whata re the adv and dis of bottum up budgetting

A 
adv 
based knowledge employees familiar with work
plus knowledge together various sources 
better for morale/motivation
maybe more realistic 
dis
employees introduce budget slack 
more time consuming 
any changes senior management make demoralising
51
Q

what is required production formula

A

sales + closing stock - opening stock

52
Q

what are the measures of correlation

A

coefficent of correlation r perfect negative is -1 and posotive perfect + 1if r=0 then not correlated

coefficent of determination r^2 mesasure proportion of change one variable explained variation in value of other variables; values between 0 and 1

53
Q

what is the difference between interpolation and extrapolation

A

interpolation is independent variabke c within range of sample data so reliable
extrapolation where independent variable x outside range of sample data not reliable

54
Q

what is working capital

A

amount that can be used to measure both a company operational efficency and its short term financial health
–> DIFFERENCE CURRENT ASSETS AND CURRENT LIABILITIES

55
Q

what is formula for current ratio

A

current asset/ current liabiltiies

56
Q

what is quick ratio formula

A

(current asset-inventories)/current liabiltiies

57
Q

what is the formula for inventory turnover period

A

inventory/cost of sales *365

58
Q

what is the formula for rate of inventory turnover

A

cost of sales/ avergae inventory

59
Q

what is the formula for recievables collection period

A

average recievables/annual sales revnue *365

60
Q

what is the formula for payables payment period

A

average payables/annual purchases *365

61
Q

why hold cash

A

transactions
precautionary
investment
finance

62
Q

what are standard costs

A

benchmark for measuring performance

63
Q

what is a materials price variance

A

actual quantity(actuap price-standard price)

64
Q

what is the formula for materials quanity variance

A

standard price (actual quantity - standard quantity)

65
Q

what is the formula for labour rate variance

A

actual hours(actual rate-standard rate)

66
Q

what is the formula for labour efficency variance

A

standard rate (actual hours-standard hours)

67
Q

what is the formula for variable overhead spending variance

A

actual hours(actual rate - standard rate)

68
Q

what is the formula for variable overhead efficency variance

A

standard rate(actual hours-standard hours)

69
Q

examples of an unfavourable efficency variance

A 
poorly trained employeed 
poor quality materials 
poorly maintained equipemtn
poor supervision of workers
insufficent demand to occupy workers
70
Q

when is a variance unfavourable

A

when actual cost exceeds standard costs

71
Q

what is the formula for return on investment ROI

A

operating profit/ average operating assets

72
Q

what is the formula for avergae operating assets

A 
                       2
73
Q

how to improve ROI

A

increase sales reduce assets reduce expenses

74
Q

what are criticisms of ROI

A

focus on short term peformance
evaluate ROI reject profitable investment opputunities
managers inherit commited costs over which no control

75
Q

how to work out residual income RI

A

controllable dividional profit x
imputed interst cost of capital (x)
residual income

76
Q

what are the capital budgetting techniques

A

screening decisions

preference decisions

77
Q

what is discounting formula

A

x = v / (1+r)^n

Accounting (17 decks)

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