Module 47 Flashcards
(30 cards)
1
Q
COST VOLUME PROFIT ANALYSIS
A
- Provides managment with profitability estimates at all levels of production in the relevant range
- Function of sales, fixed costs, and variable costs
- Also known as breakeven analysis
2
Q
COST VOLUME PROFIT ASSUMPTIONS
A
- Selling price constant in range
- Sales mix is constant
- Costs can be seperated into fixed and variable
- Variable costs per unit are constant
- Total fixed costs are constant over the relevant range
- Productivity and efficiency are constant
- Units produced = units sold
3
Q
BREAKEVEN: MULTIPRODUCT FIRM
A
- Find composite contribution margin by weighting each product sales ratio
- Compute number of composite units to breakeven
- Multiply the composite units by the ratio of units for each product to determine total production needed
4
Q
VARIABLE (DIRECT) COSTING
A
- Not GAAP
- Used for internal decision making
- Treats Fixed Manufacturing OH as a PERIOD cost
Income Stmt:
Sales
- Variable Man. Costs
= Man. Cont. Margin
- Variable Selling/GA Costs
= Contribution Margin
- Fixed man., selling, and GA costs
= Net Income
5
Q
VARIABLE (DIRECT) COSTING NET INCOME RELATIONSHIP
A
- If Production > Sales, then EI increases and NI decreases
- If Production = Sales, EI same, NI same
- If Production is < Sales, the EI decreases and NI increases
INVERSE RELATIONSHIP BETWEEN EI AND NI
6
Q
ABSORPTION COSTING
A
- GAAP
- Used for external financial reporting
- Treats Fixed Manufacturing OH as a PRODUCT cost
Income Stmt:
Sales
- COGS (DM, DL, VMOH, FMOH)
= Gross Profit ot Gross Margin
- Period Costs (fixed and variable)
= Net Income
7
Q
ABSORPTION COSTING NET INCOME RELATIONSHIP
A
- If Production > Sales, then EI increases and NI increases
- If Production = Sales, EI same, NI same
- If Production is < Sales, the EI decreases and NI decreases
DIRECT RELATIONSHIP BETWEEN EI AND NI
8
Q
NET INCOME DIFFERENCE IN COSTING METHODS
A
- To calculate the difference in net income between the variable and absorption costing methods
= (Change in EI)*(FMOH/units)
9
Q
MASTER BUDGET
A
- A master budget summarizes the results of all the firms individual budgets into a set of projected financial statements and schedules. Two major budgets:
- Operational Budget
- Financial Budget
10
Q
OPERATIONAL BUDGET
A
- Consists of:
- Budgeted Income Statement
- Supporting Schedules
11
Q
FINANCIAL BUDGET
A
- Consists of:
- Capital Budget
- Cahs Budget
- Budgeted Balance Sheets
- Budgeted Stmt of Cash Flows
12
Q
BUDGET APPROACHES
A
- Top Down Approach - set by upper mgmt, passed down through org. Quick to establish, lower employees may veiw as dictorial.
- Participative (Bottom Up) Approach - involves lower mgmt. More acceptable, higher morale. Time comsuming.
- Companies usually blend both methods.
13
Q
BUDGET PROCESS
A
- Develop a sales forecast
- Develop a production schedule to calculate production costs and costs of goods sold
- Estimate other expenses and revenues
- Complete the pro forms financial statements and budgets
14
Q
QUALITATIVE FORECASTING
A
- Executive opinions
- Sales force polling
- Customer curveys
- Delphi Technique is used to form a consensus by using multiple questionaires
15
Q
QUANTITATIVE FORECASTING
A
- Historical Data
- Naive Models
- Moving Avg
- Exponential Smoothing
- Decomposition of Time Series
- Observed Associations
- Regression Analysis
- Econometric Models
- Consumer Behavior
- Markov technique
16
Q
FLEXIBLE BUDGETS
A
- A flexible budget is a budget adjusted for changes in sales volume
- Opposite of a Master Budget
17
Q
BASIC ELEMENTS OF A PROJECT
A
- The project leader must manage the four basic elements of a project
- Resources - people, equip, materials
- Time - task duration, critical path
- Money - costs, profit
- Scope - project size, goals
18
Q
PROJECT MANAGEMENT PROCESSES
A
- Initiation
- Planning
- Execution
- Monitoring and Control
- Closure
19
Q
PROJECT INITIATION
A
- Selection of best project given constraints
- Recognizing the benefits of the project
- Authorizing the project
- Assigning the PM
20
Q
PROJECT PLANNING
A
- Define the work requirements
- Define the quality and quantity of work
- Identify needed resources
- Schedule the tactivities and tasks
- Identify and assess risks
21
Q
PROJECT EXECUTION
A
- Negotiating for the team members
- Directing the work
- Managing the team memebers to improve performance
22
Q
PROJECT MONITORING AND CONTROL
A
- Tracking progress of the project
- Comparing actual outcomes to predicted outcomes
- Analyzing variances and their effects
- Making adjustments
23
Q
PROJECT CLOSURE
A
- Determining that all work has been completed
- Closure of the contract, financial charges, and paperwork
24
Q
ACTIVITY BASED BUDGETING
A
- A budgeting approach that focuses on the cost of activities required to produce and sell products. An extension of activity based costing
25
**BENCHMARKING**
- Requires that all products, services, and activities be continually measured against the best levels of performance either inside or outside the organization
26
**BUDGETARY SLACK**
- The practice of underestimated revenues and overestimating expenses to make profit goals easier to acheive
27
**MIXED COSTS**
- Costs that have a fixed and variable component. The components are sperated by use of a scattergraph, high-low, and linear regression models
28
**RELEVANT RANGE**
- The operating range of activity in which cost behavior patters are valid. Thus, it is the production range for which fixed costs remain constant.
29
**RESPONSIBILITY ACCOUNTING**
- Measures subunit performance based on the costs and/or revenues assigned to responsibility centers
30
**SUNK, PAST, UNAVOIDABLE COSTS**
- Committed costs which are not avoidable and therefore irrelevant to the decision making process
