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Operations Management Flashcards

1
Q

What’s control chart & how is it used as a statistical quality-control total?

A
  • Statistical plot that helps to detect deviations before they generate defects
  • Used in statistical quality control and determine “zero” defects
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2
Q

What’s pareto diagrams used for?

A

How frequently a type of defect may occur

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3
Q

What’s fishbone diagram used for?

A
  • Used to analyze the source of potential problems and their location by cause and effect
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4
Q

What is the formula for cost of goods manufactured (COGM)?

A

Beginning WIP

+ DM, DL, OH

  • Ending WIP

= COGM

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5
Q

What is the formula for cost of goods sold (COGS)?

A

Beginning finished goods

+ COGM

  • Ending finished goods

= COGS

Beginning inventory

+ Purchases

  • Ending inventory

= COGS

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6
Q

What is difference between job order costing & process costing?

A
  • Job Order Costing: Expensive, heterogenous, tailor-made, unique
    • Ex: Aircraft, Printing, Industrial research projects
  • Process Costing: Continuous mass-produced, costs are determined by activity/process/department
    • Ex: Gas, Oil Steel, Ruber, Lamber
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7
Q

How are equivalent units calculated using FIFO?

A

Beginning WIP x % to be completed

+ Units completed - Beginning WIP

+ Ending WIP x % completed

= Equivalent units

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8
Q

How are total costs calculated using FIFO?

A

Current cost only/Equivalent units

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9
Q

How are equivalent units calculated using weighted average?

A

Units completed

+ Ending WIP x % completed

= Equivalent units

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10
Q

How are total costs calculated using weighted average?

A

Beginning cost + Current cost/ Equivalent units

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11
Q

Formula for absorption method

A

Sales

Less: Variable & Fixed COGS

Gross Margin

Less: Variable & Fixed SG&A

Operating Income

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12
Q

Formula for variable (contribution) method:

A

Sales

Less: Variable COGS, SG&A

Contrbution Margin

Less: Fixed OH, SG&A

Operating Income

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13
Q

Explain the difference between contribution & abosrption approach:

A

Treatment of Fixed OH

  • Abosorption: Product cost
  • Contribution: Period cost
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14
Q

Formula for contribution margin ratio

A

Contribution Margin / Revenue

* CM = Selling Price - Variable Costs

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15
Q

Formula for breakeven point in units

A

Fixed Cost + Pre-tax Profit

SP - VC [CM]

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16
Q

Formula for breakeven point in $

A

Fixed Cost + Pre-tax Profit

CM Ratio

* CM Ratio = Unit Price x Breakeven in Units

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19
Q

Formula for margin of safety in dollars:

A

Total Sales - Breakeven Sales in Dollars

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20
Q

Formula for setting selling prices based on assumed volume:

A

Fixed costs + Variable costs + Pretax profit

of units sold

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21
Q

Formula for fixed spending OH:

A

Spending Variance = Actual FOH – Budgeted FOH

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22
Q

Identify direct materials variances:

A
  • Price = AQ x (SP - AP)
  • Quantity (Usage) = SP x (SQ - AQ)

Actual < Standard (Favorable)

Actual > Standard (Unfavorable)

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23
Q

Identify direct labor variances:

A
  • Rate = AH x (SR - AR)
  • Efficiency = SR x (SH - AH)

Actual < Standard (Favorable)

Actual > Standard (Unfavorable)

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25
Q

Formula for sales price variance:

A

(Actual SP per unit - Budgeted SP per unit) x Actual units sold

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26
Q

Formula for sales volume variance:

A

(Actual sold units - Budgeted sold units) x Standard CM per unit

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27
Q

What’s cause-and-effect diagram?

A
  • Identify potential causes of failures/defects
  • Used to identify the reasons why a process goes out of control
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28
Q

Formula for free cash flow

A

Operating Income ‘After’ Taxes (NOPAT)

+ Depreciation & Amortization

< Capital Expenditures >

< Change in Net Working Capital >

= Free Cash Flow

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29
Q

What are the product costs?

A
  • Direct material
  • Direct Labor
  • Overhead
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30
Q

Formula for book value per share

A
  • C/S + Retained Earnings / Outstanding Shares
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31
Q

What’s cross-sectional analysis?

A

Comparing results and ratios with other firms in the same industry

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32
Q

What are the perspectives of balance scorecard?

A
  • Financial
  • Customer
  • Internal Business Process
  • Learning & Growth
33
Q

What’s customer perspective in balance scorecard?

A
  • Customer satisfaction
  • Customer retention
  • Targeted market segments
34
Q

What’s internal business process perspective in balance scorecard?

A
  • # of defects & cycle time
  • % of on-time deliveries
  • # of rejects
35
Q

What’s learning & growth perspective in balance scorecard?

A
  • Employee satisfication & retention
  • Hours of training per employee
  • Information technology expenditures per employee
36
Q

What’s the characteristic of capital budget?

A

Forecasts future purchases & disposals of PP&E

37
Q

What’s the characteristic of financial budget?

A

Plan to ensure that there are sufficient funds available for the company’s operation

38
Q

What’s the characteristic of supply chain management?

A

Focuses on the sharing of information with suppliers & customers

39
Q

Formula for production volume variance

A

Budgeted Fixed OH - Applied Fixed OH

  • Favorable: Applied > Budgeted
  • Unfavorable: Applied < Budgeted
40
Q

Issuing indirect materials to production increases which acct?

A

Manufacturing OH control

41
Q

Weighted-average using probabilities as weights is the

A

Expected value

42
Q

Equation of regression analysis and describe each symbol

A

y = a + bx

  • y = Dependent variable
  • z = y-axis
  • b = Slope
  • x = Independent variable
43
Q

In the cost of quality, spoilage is an example of

A

Internal failure costs

44
Q

What’s master budget?

A
  • Targeted for the company as a whole
  • For one year or less
45
Q

What’s include in master budget?

A
  • Operation budget
  • Financial budget
46
Q

Disadvantage of EVA

A

Fails to reflects all of the ways that value maybe created

47
Q

What are the period costs?

A
  • Abnormal spoilage
  • Freight-out
  • Marketing & re-handling costs
  • SG&A expenses
48
Q

Formula for times interest earned

A

EBIT / Interest Expense

49
Q

Formula for % of profit margin

A

Net Income / Net Sales

50
Q

Formula for production volume variance

A

Budgeted fixed OH - Applied fixed OH

51
Q

Which costing method results in the lowest inventory value?

A

Variable costing

  • Only includes variable costs
52
Q

Formula for reorder point

A

Lead time units + Safety stock

  • Lead time units = Lead time x Sales during lead time [Avg daily sales]
53
Q

Which covenant requires to maintain a minimum level of working capital?

A

Affirmative covenant

54
Q

What’s cost accounting?

A
  • GAAP
  • External focus
55
Q

What’s managerial accounting?

A
  • Not GAAP
  • Internal focus
56
Q

“True” rate of interst is same as:

A

Effective rate

57
Q

What’s a letter of credit?

A
  • Sale of goods by a foreign exporter to a domestic importer
  • Reduce risk to exporters
58
Q

What are the internal factors under SWOT?

A

SWOT

  • Strength: Patents, copyrights, highly trained people, product mix
  • Weakness
59
Q

What are the external factors under SWOT?

A

SWOT

  • Opportunities
  • Threats
  • Ex: Business cycle, competitor action, gov’t regulation
60
Q

Which costing method is for external use only?

A

Absorption (Full Costing)

61
Q

Which costing method is for internal use only?

A

Variable (direct costing)

62
Q

Who is responsible for direct material variance?

A
  • DM Price → Purchasing
  • DM Usage → Production
63
Q

Who is responsible for direct labor variance?

A
  • DL Rate → Personnel
  • DL Efficiency → Production
64
Q

ABC system implemented under which circumstance?

A

Produced products that heterogeneously consume resources

65
Q

The relationship between bond price and interest rate

A
  • Inversely related
  • ↑ bond prices, ↓ interest rate
66
Q

Types of budgets in the order

A
  • Sales
  • Production
  • DM purchases
  • Cash disbursements
67
Q

Formula for return on sales

A

Net income / Sales

68
Q

Which standard cost variance is least controlled by a production supervisor?

A

Overhead volume

69
Q

Formula for effective interest rate (EAR)

A

( 1 + i / n )n - 1

  • i = Stated interest rate
  • n = Compounding frequency
70
Q

Value-based management focuses on

A

Financial measures

71
Q

Indirect materials to a production department increases

A

Factory overhead control

72
Q

What’s default risk?

A
  • The risk that a debtor might not pay their debts
  • Creditor’s risk exposure
73
Q

What’s credit risk?

A
  • Inability to secure financing or not @ attractive interest rate
  • Debtor’s risk exposure

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