MyBECNotes Flashcards
(238 cards)
1
Q
Direct cost?
A
DM and DL
2
Q
Indirect Cost?
A
Indirect M, Indirect L and Factory O/H
3
Q
prime cost and conversion cost?
A
DM (purchased,freight-in,(returns)) plus DL. DL plus O/H applied (could be used when furnishing material used in manufacturing a product)
4
Q
When is depreciation, rent, taxes, utilities and insurance part of inventory cost?
A
part of other indirect cost that are related to the factory. may go either way (B/S or G/A)
5
Q
How many and what are the ERM components?
A
RISK CONTROL. 4 objectives and 8 components(criteria to evaluate effectiveness). internal environment (authority and responsibility)/control activity (policies and procedures)/ info and communication(identification of info)/ monitoring (addresses deficiencies).
6
Q
Control environment component suggest stronger controls by
A
financial reporting competency retaining qualified personnel to handle financial reporting
7
Q
Issuer must have a financial expert or if not then
A
disclose the existence of financial expert or reasons why not
8
Q
To be considered a financial expert must have the following requirements:
A
understand GAAP and FS’s, assess application of principles, experience compared to other similar entities, understand internal controls and audit committee.
9
Q
Public companies are required to establish an
A
audit committee that addresses problems related to inadequate board oversight
10
Q
SEC standards for code of ethics includes
A
provisions of internal control and accountability. Not required by SOX
11
Q
Mgt is not required to disclose
A
Any disagreements b/w mgt and auditor, if any.
12
Q
SOX focuses more on issues like
A
audit committee competence, ethical behavior and adequacy of internal controls
13
Q
Communication from external auditor to mgt and BOD regarding achievement of internal control objectives complies w/ principle of
A
external communication
14
Q
COSO (Treadway) was established by
A
private sponsoring organizations on 1992. issued the integrated framework to help business develop EFFECTIVE INTERNAL CONTROLS
15
Q
insuring against losses or entering in a joint venture to address risk is known as
A
risk sharing
16
Q
Method for identifying risks from an event from a specific industry is called
A
event inventory. mgt brainstorm is called a facilitated workshop
17
Q
Residual risk is
A
the risk that remains after management responds to such risk
18
Q
control activity is the method used to implement
A
response to risk
19
Q
Evaluation of EE’s for competence is linked w/
A
HR policies and financial objectives
20
Q
The BOD has the responsibility to act on behalf and in the best interest of the Co. as a
A
fiduciary in relation to the Co.
21
Q
Co.’s will not go beyond risk appetite, but it is exceeded if
A
negative events exceeds residual risks(still negative after procedures performed)
22
Q
Strategic objective refers to
A
broad company-wide, to produce a service in top quartile. related objectives are more specific prepared in support of broader strategic.
23
Q
Does a Co. director follow info provided by mgt?
A
No. Director may or may not follow info provided by corporation officers(mgt)
24
Q
If a director has conflict of interest in a certain transaction, then is consider
A
a void transaction unless it can be prove it was fair to the Co.
25
The business judgment rule refers to
principle that protects directors (and not shareholders) for acting in good faith and having such power to take action
26
Some ERM goals are
provide assurance of objectives and that goals are achieved, achieve financial and performance target. considers both negative (risks) and positive (opportunities) events
27
Change controls considers
how mgt monitors and authorizes change in info tech manners
28
Data integrity requires
data to be accurate and complete
29
Change mgt refers to
outside individuals who specialized in providing expertise to Co. undergoing significant changes as new system implementations
30
ERM is define as a
process effected by BOD, mgt and other personnel
31
Effective internal controls should not fail if
design changes as process changes. should adapt to such change
32
Benchmark is when
a Co. compares financial info to the one published
33
Total Productivity Ratio/ partial productivity ratio considers
all inputs and prices of those inputs calculated as qty produced in period divided by cost of inputs/ concerned only w/ qty of single input calculated as output produces divided by qty of single input
34
Effective performance measures should
balance both long and short term issues
35
performance feat that managers understand and can manage easier than financial performance are
nonfinancial measures
36
Tool used to evaluate error (individual and cumulative) rates and process that combines both histogram and line graph is
Pareto diagram
37
Net sales value at split-off is defined as
sales price less the cost to complete(deductible cost). does not equal to joint costs
38
Changing acct from by-product to joint product affects overall gross margin?
Yes. by-product net's the selling cost to COGS thus causing a lower gross margin. joint product selling expense is subtracted from gross margin after computed thus not affecting the prior formula.
39
Managerial acct focuses on internal/external users, future or historical costs?
internal users (mgt) and future profits. FS and other financial reports, historical cost is focused the financial accounting.
40
If under applied O/H procedures should be to,
closed out to COGS. If consider material then it will be allocated to ending WIP, FG and COGS
41
What's costing by activity base costing?
collects financing and operating data on nature of cost drivers. uses either job costing or process costing. the production process assumes activity based resources. multiple cause and effect may exist which is not acceptable for external reporting but helpful for internal. emphasizes LT product analysis. normally results in greater unit cost for low volume than traditional and greater cost pool
42
Would the issue of indirect materials increase O/H control?
It would decrease store controls thus increase O/H controls
43
Non value added cost can be
moving, handling and storing a product are considered one of the most significant activities
44
Joint cost will must likely be allocated based on
unit volume, sales at spin off and NRV
45
Cost driver is defined as
casual factor that increases the total cost of a cost objective. causes cost to increase as activities increases
46
Cost that varies in total but is fixed in unit
A variable cost
47
Spoilage allocation will considered
normal spoilage to product cost and abnormal spoilage to I/S
48
Cost that bears an observable and known relationship to a quantifiable activity base
engineered cost
49
Target cost
a predetermined standard cost that should be attained
50
Process costing
method of allocating production costs to products and services, usually accumulated by department rather than job
51
One purpose of cost allocation is to
measure income and assets for external reporting
52
Departmental rate rather than plant-wide rate would be use if
manufactured products differs in resources consumed from departments
53
Can cost allocation analysis explain why sales increase?
No. ex: whether manager deserves bonus, product line discontinued, particular dept expanded
54
What cost base should be used for more than one product produced and not uniformly consume
Activity base costing. Limitation to ABC, expense of obtaining cost data is high
55
When is absorption costing income greater than variable costing income?
When production is greater than sales causing inventory to increase. When production is less than sales, inventory declines causes lower net income. GAAP use for external reporting purposes
56
Analysis that assumes all variable cost and revenues are constant on a per unit basis and linear over a range.
Breakeven analysis. Total fixed cost are assume to be constant
57
How is fixed manufactured O/H treated under variable cost and under absorption(full cost)?
as period cost and expensed and as product cost and inventoried.
58
Is contribution margin a better measure of profit than gross profit?
Yes. gross profit includes COGS but excludes other variable costs
59
Which costing base produces lower inventory value?
variable cost. other cost base includes fixed cost resulting in greater value than variable cost
60
Cost volume profit assumptions
total variable cost are directly proportional to volume over range
61
Relevant range/ relevant cost
range of activity where relationship of fixed cost and variable cost are valid/ expected future cost that vary w/ the action taken
62
What is opportunity cost?
Potential benefit lost by taking an action. Cost that would have been saved or profit earned if another decision had been taken. Financial acct does not incorporates opportunity cost. Ex. implicit cost (not explicit). value of next best use. Not possible if excess capacity is available
63
What is the lowest unit price that Co. may accept when producing?
Total variable cost (DM,DL,VO/H,V/expense)
64
Coefficient of determination is
R-squared, proportion of total variation in dependent variable explained by the independent variable. independent variable not explained by dependent variable. statistical measure use to evaluate results of regression analysis
65
Statistical model that estimates the dependent variables based on changes in independent variables
Regression equation. best that separates costs into fixed and variable
66
Independent variable is assumed in regression analysis based on
activity rather than cost
67
Point at which independent variable in terms of dependent variable intercepts y axis
intercept value
68
Delphi method
forecast method that relies most on judement. use multiple teams in remote locations
69
Learning curve method
increases efficiency by experience gained, typically better for long production runs. as qty doubles avg cost decreases by percentage of previous cost. Continues probability uses trial and error
70
Positive coefficient of correlation measures
Strong relationship were VC increases w/ volume. negative indicates VC decreases as volume increases. 0 indicates no relationship (as expected for FA not VC). Strongest number from 1 to -1
71
Last budget to produce is
Financial budget as cash and pro forma derived from operating budgets which are done first. (selling exp). sales volume is first step in budgeting development.
72
Static budget
Includes budget costs and outputs not adjusted for actual performance
73
Adjust budget amt for various activity levels
Flexible budget
74
Does inflation rates impact expenses?
Yes. except depreciation exp (historical value) and fixed costs
75
Standards imposed by mgt w/o EE input is called?
Authoritative standards
76
Budget based on sales w/ +/- inventory levels
Production budget
77
Master budget vs flexible budget
Master is overall budget based on one specific level of production. Flexible budget based on dif activity within relevant range.
78
Expected value statistic
Most useful when risk is priority since it assigns probabilities to potential outcome and single value outcome
79
Flexible budget
Budget based on dif activity within relevant range. good for any activity w/ variable cost. provides adj for dif levels of activities
80
Order of budget preparation
Sales, production, DM purchase, cash disbursements, I/S and B/S
81
Manufacturing industries as well as service industries may use what type of cost system
Standard cost
82
Balance scorecards
Measurement tool to evaluate multiple view of business outcomes from critical success factors such as HR innovation (learning and growth), business process, customer satisfaction(low values & target mkt) and financial reporting.
83
Return on investment
Evaluates business performance in terms of revenues, expense and investment
84
Controllable margin
Margin net of controllable fixed cost(cost that mgrs impact in less than 1 yr)
85
What affects a decision process?
disposal price, cost of new equip, operating cost of new equip.
86
Which method considers compounding returns?
NPV method. uses cash basis, reinvest positive cashflows measures capital in $ and time value of money. focuses on cashflows
87
Depreciation tax shield
When depreciation protects income from being taxable and may result in after tax inflow
88
NPV calculation is
PV inflow - PV outflow
89
Payback period calculation
Initial investment / annual inflow. relies on future data forecast
90
Profitability index
Use for capital rationing. variation of NPV. ratio to calculate PV of inflows compared to PV of outflows. Requires long term forecasts of project's
91
Internal rate of return
Uses PV concepts to value investment and CFlow's. called time adjusted rate of return
92
How many committees and which are they?
4 committees. executive, nominating, compensating, audit (3 which 1 should be consider expert)
93
Operating leverage
When Co uses fixed cost instead of VC to magnify results of dollars in sale
94
Financial leverage
Co uses debt to finance itself
95
Combined leverage
Co uses both fixed operating and fixed financing
96
Debt financing benefits compared to equity financing
int are tax deductible (hipotecas) so high taxes and high int will benefit debt financing. debt commands lower return than equity
97
Cost of debt most frequently used
int rate minus tax savings
98
WAC of capital
Maximizes the shareholders equity. optimal capitalization is determined by minimizing/lowering total WACC.
99
How capital investment increases value of the firm
if rate of return exceeds rate associated w/ Co. beta factor
100
Cost of capital considers all types of funds?
Yes. whether long term, short term, new or old.
101
Capital asset pricing model (CAPM)
method use to calculate rate of return on R/E's
102
Disadvantage of ROI vs RI
ROI may lead to rejecting projects that return positive CF. No more nor less capable of being manipulated than other performance measures. Mgt should not decide to delay or avoid investing in new PPE. does not balance b/w long term and short term. May focused mgrs. on maximizing short term
103
How does investment of new asset @ yr end affects ROI and RI?
It decreases both since investment increases
104
Economic value added
Residual income in excess of the cost of capital
105
Technique which delays outflow of cash is called
draft. delays cash outflow and increases payable. lock box system accelerates inflow of funds
106
Mkt rate of int on treasury bill is
sum of risk free rate and inflation premium
107
If Co becomes conservative w/ capital, which ratio will increase?
current assets/ noncurrent assets
108
Average collection measures
to evaluate liquidity of the Co. through calculation of cash
109
Material requirement planning (MRP)
mgt technique to project and plan inventory level to control usage of RM and WIP in production process
110
Safety stock increases if
risk of running out increases
111
Economic order quantity increases if
carrying cost decreases or sales increases and cost per order increases. Anticipates order where carrying cost are near restocking cost. demand is known for formula
112
Why would a Co. finance temp assets w/ short term?
Matching maturities of assets and liab reduces risk. policy to minimize risk by matching maturity dates b/w assets and liab.
113
Just in time inventory model
reduces lag time b/w inv arrival and usage.
114
Kanban inv control model
prevents oversupply or interruption of process from lack of material
115
What it means to have a higher current ratio?
More liquidity
116
Cash conversion cycle is
inventory conversion period plus A/R collections less payable deferral.
117
Disadvantage of symmetric encrypt
Both sender and receiver must have private key for encryption to work
118
Asymmetric encryption
private key not shared which other half will have to obtain key to encrypt/decrypt. is use as public key to encrypt and private key to decrypt. anyone can encrypt only intended user can decrypt
119
Son, father, grandfather are what type of backups?
backups son is called for most recent backup, father second recent and so on. steps are to read previous file, record transactions and create new master file.
120
Public key infrastructure (PKI)
represents mechanism use to issue asymmetric keys and digital certificates
121
End user files running separately from mainframe may cause
problems w/ undetected errors
122
Program modification control
controls over the modification program being used, attempts to prevent changes and track changes for record. includes mgt tool and request tracking tool
123
Supply chain mgt concerned w/ 4 elements:
what, when and where of sales/transactions
124
CRM system
provide sales automation and services in order to increase customer satisfaction and customer revenue
125
Electronic data interchange (EDI) benefits
transmit data using standard controls all the time since its done by the system instead of a person (meaning transaction would need to be complete in order to work). exchange of info b/w two Co. (externally, never internally). requires organizations to enter into a contract and have prior relationship. uses same standard for same industries
126
E-cash (digital cash) benefits
web site that maintains financial privacy ex. paypal
127
Enterprise resource planning (ERP)
integrates multiple functional areas in business operations. coordinates info to ensure timely responsive reporting data support of decisions. cross functional system that is design to integrate data from all aspects of an organization activities. meant for mgrs not executives
128
Ad hoc report
report that does not exist but needs to be created under demand for specific requirements w/o having to get a software involved
129
Distributed processing environment most beneficial when
large volumes of data at dif locations and fast access is required
130
Sequence of events in an AIS
1. data from source doc entered into AIS 2. original doc file 3.transactions recorded in appropriate journal 4.tranx posted to GL and subs 5.TB prepared 6. FS reports (best to solve problems to certain and clearly defined reporting requirements). customized to needs of particular Co. set up to handle large volume of tranx
131
Business info system (BIS)
general term for info tech that includes hardware, software, network, people and data. allows for data to be: collected, process, store, transform and distribute
132
Individual tranx cycles are for
numerous but similar and processed identical
133
Group codes
includes intelligence into identification numbers
134
Transaction logs
includes all tranx against master files. includes identification of personnel making the tranx. usually for large numbers.
135
Database management system
system used by others to store and manage data
136
Relevance
defines quality of data and info that has greater impact in mgtm decision making
137
Reasonableness
cks and edit for math errors
138
Online analytical system
allows users to retrieve data and perform analysis
139
Firewall
electronic device that maintains control of two networks. user id and authorization that prevents unauthorized users from gaining access a network. do not protect or prevent against viruses
140
Application control
specific to particular process that controls what websites can be viewed
141
System programmers
work with operating system and compilers. when developed internally a lot of money will be put on maintenance. maintenance is not simple. should not be combined w/ application programmers
142
Application programmers
should not be given full write off access only testing. should not be combined w/ system programmers. apply approved changes
143
Can data admi and network admi be the same person?
Yes, although not likely since very specialized skills are required
144
Decision support system (DSS)
computer based info system that provides interactive support to managers or others during decision-making
145
Executive information system (EIS)
provides strategic info tailored to the needs of top mgmt. designed to obtain data from dif sources, to combine, integrate data. provides immediate access to executives. NOT widely used throughout and organization.
146
MIS Steering committee
formed to guide and oversee system development and acquisition
147
Data elements
should always be included in system specification document
148
Control Objective for Information Related Technology (COBIT) framework
7 info criteria's: Integrity, Confidentiality, Efficiency, Reliability, Availability, Compliance and Effectiveness.
149
COBIT five focus areas for IT governance
value delivery, strategic alignment, resource mgmt, risk mgmt, performance measure
150
System analyst
responsible for adapting and integrates new system w/ old system. trains EE to use it.
151
Emphasis on disaster restoration is
operating functionality
152
Factors for a disaster plan:
Alternate processing site, backup and offsite storage procedures, identification of critical applications, test of plan
153
Business continuity plan compared to disaster recovery plan
continuation of all areas of the business not just information system. daily bakups does not ensure a timely recovery.
154
Incremental backups
copies only data items that changed since last bakup
155
Off site mirror web servers
server that takes over almost immediately over a disaster
156
Redundant Array of Independent Disks (RAID)
use for disk storage
157
Intranets
connects separate LAN's in dif. locations to and organization. generally use psswd and firewall. same web browser as internet browser
158
Database management System (DMS) advantages
data independence, one time entry, reduce data redundancy, ability to expand data fields, accessibility increases timeline/effectiveness/availability.
159
Database management System (DMS) disadvantages
more highly tech personnel required, audit trails obscured bz movement of data from one file to the other, breakdown in hardware more severe than having separate files.
160
Virtual memory
where portions of a program not being executed are stored but NOT real memory
161
Processing power measured in
(MIPS) millions of instructions per second
162
Multiprocessing factor
efficiency loss when multiple computers and processes at the same time
163
Ex. of program languages
C, C+, Java (can be included in web pages and downloaded in web browser
164
Pattern recognition
used to identify data trends and possible useful info
165
Extranet
network that links intranet of Co to other Co or individuals. not a software
166
Distributed database
database distributed on dif pieces on local or remote
167
Unix
runs interactive, time sharing, online applications divided in two pieces (kernel, allocation, security, access and shell, input, runs commands)
168
Concurrent data control
control that addresses conflicts when users simultaneously attempt to access data
169
Trough of business cycle
economic low point w/ no positive indicators in the future. caused by unused productive capacity and unwillingness to risk new investment
170
Recession can be caused by
period of falling GDP and rising unemployment. decrease in demand and in aggregate supply
171
Expansionary fiscal policy
increase gvt purchases (investment) or decrease taxes. int rates to decrease, increase inv and increase demand. increase in money supply ex. of monetary policy not fiscal.
172
A tax cut at the peak level will cause
price level to rise and inflation
173
An increase in payroll wages will cause
price level to increase and real GDP to decrease (shift to the left)
174
At the peak level capacity constraints and labor shortage will cause
pressure on overall price level
175
What industry is not affected by business cycles?
Healthcare industry. medical service will always be needed.
176
Real GDP per capita
standard use to compare economy across countries or time
177
GDP includes
total monetary value of all final goods and services produced in 1 yr
178
Cyclical unemployment
not consistent when economy is operating at full employment
179
Cost inflation (push)
shift left in supply. increase in cost ex. increase oil price
180
Demand inflation (pull)
shift right in demand
181
Frictional unemployment
can occur during good season. refers to time needed to match qualified job seekers w/ available jobs. moving b/w jobs
182
Structural unemployment
mismatch b/w EE skills and available EEment
183
GDP expenditure approach
gvt expenditures, capital investment, consumption & net exports
184
Discount rate
rate charged by federal reserve for loans to banks
185
How can federal reserve increase money supply?
purchasing or selling gvt securities, raising or lowering discount rates, changing reserve ratio
186
What will cause the selling gvt sec on the mkt, increase discount rate and increase reserve ratio?
it will decrease the money supply
187
Real interest rate
nominal int rate - inflation rate
188
Inflation measures
rate at which overall price increases
189
Stagflation
combination of rising unemployment and price level
190
Deflation
decline in overall price level (inflation rate negative). increase money supply will cause overall price level to rise
191
Consumer price index (CPI)
compares relative price change over time. monthly data that measures rate of inflation by cost of mkt of specific goods commonly purchased by consumers. concentrates on past data not future data
192
Disposable income
personal income net of personal taxes
193
On a perfectly competitive mkt, consumers
have goods and services produce at the lowest cost in the long term
194
Perfect competition assumptions
customers can buy from any Co, level of Co output is small related to industry total output, freedom of in and out of the industry. a "price taker" cannot change price.
195
Co's maximizes its profit by producing at
marginal revenue = marginal cost and price exceeds both
196
Natural monopoly
when economic and technical conditions permit only one efficient supplier
197
Barrier to entry
prevents Co's from entering the mkt to compete against existing Co.
198
Characteristics of monopolistic competition
numerous Co w/ dif products, easy entry- few barriers, Co influence over price and mkt, non-price competition frequent and critical. large sellers dif products. horizontal demand curve
199
Oligopoly
few sellers w/ dif products, high barriers to entry, dif products, fixed prices, kinked demand curve
200
Under perfect condition strategic plans focus on
maintaining mkt share and being responsive to mkt conditions related to sales price.
201
Under monopoly competition, strategic plans focus on
maintaining mkt shares and planning for enhanced product differentiation
202
Under monopoly, strategic plans focus on
profitability from product level that maximize profits
203
Under oligopoly, strategic plans focus on
production volume and price change
204
Elasticity of demand or supply
measure of how sensitive the demand for or supply of product is to change in its price
205
Value chain analysis
starts w/ supplier, then Co, then value created by customers and lastly w/ disposal and recycling of material. part of the strategic plan
206
Vertical linkage analysis
understanding the activities of suppliers and buyers
207
Competition becomes a stronger force by
mkt not growing fast. several equal firms, no brand preferences, cost of exiting exceeds cost of continuing, profits from making moves, dif strategy plans
208
Dif advantage occurs when Co
builds mkt share or increases prices
209
SCOR model
deliver- managing A/R and collections
plan- ability of supplier to supply resources
make- implements changes in engineering
source- collecting and processing vendor payments
210
What can determine elasticity?
number of substitutes for the product
211
Inelastic supply curve
vertical representing is insensitive to the change in price
212
SWOT analysis
evaluates internal and external factors
213
Theory of Constraints (TOC) analysis
evaluates techniques for optimizing throughput time
214
Economies of scale
for larger production process, process becomes more efficient causing productivity to increase. diminishing return is the exact opposite
215
Law of diminishing return
increase past some point causes less proportionate increase in production (ex. excess of pizza)
216
Microeconomic analysis of supply
in the long run all supply inputs are variable
217
Factors that contribute to economies of scale:
1. labor/managerial specialization
2. utilization of by products
3. efficient use of capital
4. volume discount purchasing
218
Michael Porter 5 forces that affects profitability:
1. existence of substitute product
2. barriers to mkt entry
3. bairganing power of customers
4. mkt competitiveness
5. bargaining power of suppliers
219
Collusive pricing
maintains higher prices to external customers than it would be to competitive mkt
220
Game theory
study of mathematical models b/w rational decision makers
221
Inter industry competition
Co of dif industries competing one another
222
Quality control program includes:
1. prevention (maintenance)
2. appraisal (product testing)
3. internal failure (rework)
4. external failure (product repair-warranty)
223
Just in time purchase systems
reduces number of suppliers and very close relationship developed
224
Appraisal cost ex. of quality control
product testing, statistical sample, inspection
225
Total quality management (TQM)
organizational commitment to customers focused on performance that emphasizes quality and continuous improvement
226
Theory of constraints
maximized throughput(units of goods produced and sold) by alleviating constraints
227
Globalization
represents increased dispersion and integration of the world economies. growth in world as a % in GDP. increase specialization for individual economies
228
International monetary fund
stabilizes exchange rates but does not regulate currency values
229
Sourcing requirements
value added limits on the percentage of labor. compliance w/ limits results in tariff reductions
230
Foreign trade zone
delays tariff until products leave certain location
231
Unipolar
power concentrated in one nation
232
Global sourcing implications
use of worldwide supply chain
233
Floating rates
maintains constant mkt value
234
Internal auditing define by Institute of Internal Auditors (IIA) as
independent objective assurance and consulting activity that adds value and improve Co operations
235
Effective mgmt on internal audits must meet the following:
international standards, code of ethic and international professional practice framework,
236
Categories of risk
1. diversifiable
2. Unsystematic (non-mkt/Co specific)
3. Nondiversifiable
4. Systematic (mkt)
237
Call options
allows but not requires purchaser of call to acquire the currency at a specified time. 71
238
High low method advantage and disadvantages
easy and inexpensive to used but least accurate method
