Fichas
BDM EXAM
Fichas del conjunto (73)
- 1Criteria an item must meet to be included in a marginal costing analysis1. Be cash (including opportunity costs)
2. be in the future
3. Change between alternatives - 2Opportunity costs vs sunk costs regarding previous purchase of car $10,000 and a chance to sell for $12,000$10,000 irrelevant, sunk cost
$12,000 relevant, is in future, cash flow, changes between alternatives - 3Incremental costcost increases if option is chosen
e.g. purchaser wants more expensive packaging. packaging is incremental - 4Avoidable costCan avoid a cost if certain option is chosen
e.g. inventory purchased, customer doesn't want packaging - 5Relevant costs exclude?Overhead fixed costs such as rent for a factory making shoes
- 6Special order considerations? (2)1. Will this increase profit?
2. Non-financial aspect, will other customers hear of this deal? Effects of this on profit - 7Contribution marginRevenues - Variable costs
- 8Business plan key components (5)1. business description - products, structure, objectives. 2. Marketing plan - evidence of demand products, competition, product differentiation, advertising. 3. Operating plan - day to day, identify key processes. 4. Envrmnt mngmnt plan - reduce negative impact. 5. Financial plan - capital,cashflow budget
- 9Research start ups need to doindustry averages as they have no data to rely on
- 10Variable costscosts that change in proportion to changes in volumes of activity
- 11Fixed costscost doesn't change, constant rate
- 12Relevant rangeactivity levels for which its valid to predict costs
- 13Cost function (equation)total cost = fixed costs + (VC * activity level)
- 14Unit Contribution Marginselling price - variable costs
- 15Total contribution marginUCM * units sold
- 16Break even point$0 profit/loss
= fixed costs/ UCM
=# units - 17Target incomeSales in units= fixed costs + target income/ UCM
- 18Imprtance of behavioural factorsbe able to make better decisions, provide better advice
- 19How do humans interpret new informationSo prior conclusions stay intact
- 20System 1operates automatically and quickly, no sense of voluntary control
- 21System 2Responsible for thoughts and actions that require attention. Examples include calculations and analysis of arguments. These don't come naturally and require effort.
Reviews system 1 - 22When is system 1 good? Danger of it?Familiar situations, has biases
- 23Positive test strategyCall to mind evidence which supports pre-existing beliefs
- 24Confirmation biasDecision makers either ignore or downplay information which does not support their initial impression
- 25Halo effectsTendency for an impression created in one area to influence opinion in another area
- 26Anchoringindividuals depend too heavily on initial piece of information offered when making decisions. Use this to make subsequent judgements
e.g. holding onto shares until they reach purchase cost - 27Affect HeuristicMental shortcut people make in making decisions emotionally
- 28Planning Fallacyunderestimate time money
- 29Pre-mortemsway to deal with overconfidence. Assume imprtnt decison was made and its a year into the future. It failed, write why
Purpose: legitimises doubts, reduces risks - 30Sunk costsexpenditures already made. Must be neglected when making future decisions. Instead rely on only relevant information.
SC fallacy arises when decision makers incorporate sc's in decisions - 31Disposition effectrelates to the tendency of investors to sell assets that have increased in value, while keeping assets that have dropped in value.
Pain of selling shares for loss is greater than joy of selling winners. - 32Incremental BudgetingBudget builds upon previous year's budget. Accepts previous figures and adjusts them according to manager's expectations regarding growth
- 33Zero based budgeting Why use it? Weakness?Start budget from zero. Managers argue why their area (sales, production, marketing) should be allocated $x.
This imposes a tighter control over budgeting process. More current focused rather than past.
Time consuming, increased tensions - 34Budgeting purposes (5)Adds discipline, quantifies plans, highlights problems, motivates managers, enhances control
- 35Cash management involves keeping an eye on the business' cash balance to make sure that... (3)1. There is enough cash on hand to pay for planned operations during the current period (obligations)
2. Cash buffer for normal, but unexpected events e.g. more sales therefore more inventory
3. Not too much cash on hand, is a waste, not productive - 36Cash Budget shows...expected cash receipts and payments and how they affect the business' cash balance
- 37Cash budget for external userspotential lender (bank) mauy want to evaluate the cash budget to see how the business planned to use borrowed cash, and anticipate ability to repay loan
- 38Cash budget also known asprojected cash flow statement as it shows expected cash receipts (inflows) and cash payments (outflows)
- 39Cash receipts come from which budget?sales budget
- 40Cash payments come from which budget?Purchases, selling expenses, general and administrative
- 41Main function of recording and accounting for business activitiesprovide financial information that is useful for making decisions
- 42When is sales on credit goodWhen you are reasonably sure that credit customers will pay their bills
- 43GAAPGenerally accepted accounting principles.
collection of commonly-followed accounting rules and standards for financial reporting. - 44Entity conceptonly record transactions and events that relate to the entity aka relevant business. Don't mix personal stuff in.
- 45TransactionsExchange of property or service by a business with another entity
- 46Source documentsOriginal documents we rely on when recording transactions & events
- 47Monetary unit concepteverything shown in terms of money
- 48Historical cost conceptInitially measure asset at cost
- 49Asseteconomic resource the business has control over
- 50LiabilitiesObligations (debts)
- 51OEOwner's investment into business
- 52Accounting equationA = L + OE (Balance sheet)
- 53Expensesusing up, wsating or consuming of an asset
- 54Dual effect of transactionevery transaction has at least two effects in order to keep acc equation in balance
- 55Net income= Revs - exps for time period
- 56Revenuesamounts earned by a business when it charges customers for sales of goods/ services
- 57Matching principlereport an expense on its income statement in the period in which the related revenues are earned
- 58Going concernAssumption that entity will stay in business indefinitely, state if otherwise
- 59Accrual Accountingrecognise expenses when we incure them and recognise income when we earn it
- 60Income statement summarises...results of a business' operating activities
- 61Perpetual vs periodic inventory systemperpetual keeps continuous record of cost of inventory. Periodic doesn't and needs a stock take
- 62Gross profitnet sales - COGS
- 63Transaction 1 Cash sales+ 1200 cash
- 600 inventory
+ 1200 revenues
+ 600 expenses (COGS) - 64Transaction 2 Credit purchase payment- cash
- AP - 65Transaction 3 credit purchase+ inventory
+ AP - 66Transaction 4 Sale on credit+ AR
- Inventory
+ rev
- exp - 67Transaction 5 Receiving credit payment for equipment+ Cash
- AR - 68Transaction 6 Cash withdrawal- cash
- capital
(+ drawings) - 69T7 Advertisement payment- cash
+expenses - 70T8 Purchase supplies- Cash
+supplies - 71T9 Salaries payment- cash
+tax payable
+ Exp - 72T10 payment electricity- Casch
+exp - 73T11 Depreciation expenseassets
(item depreciating) $$$
less: accumulated depreciation +
Expense +
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- Descripción
- Fichas sobre BDM EXAM, creado por James Willington el 17/05/2020.
- Creado por
- James Willington
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