Quantitative Analysis in Budgeting Flashcards Preview

ACCA F5: Performance Management > Quantitative Analysis in Budgeting > Flashcards

Flashcards in Quantitative Analysis in Budgeting Deck (10)
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1

What is the learning effect theory?

As cumulative output doubles, the average time to produce a unit falls by a given rate.

2

What is the formula for the learning effect?

Y = ax^b

Where b = log r / log 2

3

What is the high low method?

Used to calculate the amount of variable and fixed cost within a semi-variable cost

4

What are the 4 steps for the high-low method?

1. Take the highest and lowest output levels
2. Find the difference
3. Calculate the variable cost per unit
4. Calculate the fixed cost.

5

What conditions must be present for the learning effect to hold?

All must apply:
1. Significant manual element
2. Repetitive Task
3. Early stage of production
4. Consistent workforce
5. No breaks in production
6. Motivated workforce

6

What is the steady state of the learning effect?

The steady state is reached when no further improvements can be made

The time taken per unit is constant.

7

What is the experience effect?

The experience effect applies to other costs which may also reduce as the workforce gains experience;
- materials
- variable overheads
- fixed overheads

8

What are the problems with the learning effect?

- How to calculate the rate
- Is the rate really constant?
- When will production reach a steady state.

9

What is the formula to reverse engineer the learning rate?

batch total hours = first batch hours x r^x x number of batches made

where r^x is the rate to the power of an indice of 2.

10

How do we find the nth batch?

use y = ax^b

for the nth batch and the n-1 batch and calculate the difference.