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Flashcards do conjunto (50)
- 1The Master Budgetthe cash budget + the budgeted profit + loss account and the budgeted balance sheet
- 2The Rolling Budgetcontinually updated to a new budget period
- 3The cash budgetAn estimation fo the cash flows of a business over a specific period of time
- 4Target costing (Price Takers)- not unique products, lots of competition
look at revenue & markets price , also look at market share and then decide for your desired profit
- then target cost
1) determine the target price that the consumer will be willing to pay
2) deduct a target profit margin
3) estimate actual cost
4) if cost exceeds the target cost --> investigate ways of driving down the actual cost to target cost
-> most accurate for non customised, high sales volume products - 5Cost plus pricing (Price Setters)- little or no competition
- total cost + desired profit
- may a firm to predict prices of other firms
criticism: ignores demand, price is set by adding a mark up, no relationship to price and demand - 6Plant wide rate formulaPlant wide rate x units of the selected allocation base
- 7Difference profits variable vs absorption costing(Ending inventory x beginning inventory) x manufacturing fixed overhead absorption rate
or
(Production - sales volume) x Manufacturing fixed overhead absorption rate - 8Operating leveragea measure of the sensitivity of profits to changes in sales
formula: CM/Profit
higher degrees of OL -> greater profits when sales are increasing, but also decrease by greater amount when sales are declining
also higher OL leads to higher risk arising from greater volatility - 9Optimised production technologyapproach: profits are expanded by increasing the throughput of the plant by identifying bottlenecks (an operation that is already producing at maximum capacity)
- 10Under and over recovery of overheads1) allocated to products - included in the inventory valuation, recorded as expense in the next accounting period
2) underalloacted - recorded as period cost - profit statement - 11Payroll accountingthe computation of the gross pay for each employee and calculation of payments to be made to employees, government, pension funds
- 12Accept or reject projects -- based on short term- deal should not affect future prices
no better offers will be received in the given time period
- the deal will use unused capacity in the short term that will be available for more portable opportunities in the long run - 13The relevant rangeThe output range at which an organisation expects to be operating with a short term planning horizon
- assume that selling price is constant over the relevant range - 14Contribution margin= Sales - Variable Costs
Selling Price - VC
tells you how much an additional unit will contribute to FC & Profit - 15Variable Costing- assigns only variable costs to products
- only variabel costs are included in the inventory valuation (avoids that fictitious profits are reported)
if sales > production = profit higher under variable costing
P: Sales - Variable Manu COGS - all FC - Non Manu VC - 16Arbitrary allocationthe allocation base of costs using a cost base that is not significant
- price setter firms are able to set arbitrary prices - 17Absorption costing- required for external reporting
- a share of the fixed production overheads are allocated to individual products and included in their production cost
- fixed overheads are assigned to products by establishing overhead absorption rates
- COGS = units sold - 18Integrated vs Interlocking cost accounting systemIntegrated: an accounting system in which the cost and financial accounts are combined in one set of accounts
Interlocking: the cost and financial accounts are maintained independently
--> Integrated usually preferred - 19Cost Behaviour How do FC and VC vary with increase in activityVC per unit: constant
TVC: increases or decreases
FC per unit: increases or decreases
TFC: constant
within the relevant range fixed costs depend on the amount of resources acquired - 20Backflushing costingused in Just in time production
- aims to eliminate detailed accounting transactions
Therefore only accounts for costs when products are finished - 21FIFO Process CostingEU: Completed - Opening % + Closing %
Inputs: Completed - Opening + Closing
Completed Units value: EU * Price + Opening Stock
Cost of Closing work = Closing Inventory * Price EU * % - 22Weighted Average Process CostingEU: Completed + WIP closing %
Cost of Closing: Completed + % closing
Total Costs /EU
or split up in two groups:
completed + % conversion
Unit cost = cost conversion/EU
WIP% completed * unit cost conversion - 23Normal Costing Systemallocated indirect costs based on the budgeted indirect cost rates * actual quantity of the cost allocation bases
- 24Relevant costs1) no sunk costs & have to be differential, affect future decision
Direct Labour:
if labour can be recruited: labour rate per hour
if labour cannot be recruited: contribution + variable labour cost
Direct Material:
relevant cost = paid cost
cannot be replaced = lost contribution + VC material
materials are not in use = net scrap value - 25The Reciprocal method- keep on reallocating to other support departments until nothing left
- highlights recognition of services rendered by support departments to other support departments
- complete reciprocal costs = budgeted amounts support departments + interdepartmental cost - 26Budgeting Purposes1) planning annual operations
2) coordinating the activities of the various parts of the organisation and ensuring the parts are in harmony with each other
3) communications plans to the various responsibility centre managers
4) motivating managers to strive to achieve the organizational goals
5) controlling activities
6) evaluating the performance of managers - 27Purposes of standard costing:1) providing a prediction of future costs that can be used for decision making purposes
2) providing a challenging target which individuals are motivated to achieve
3) assisting in setting budgets and evaluating managerial performance
4) acting as control device -> alert managers in case something goes wrong
5) simplifying the task of tracing costs to products for profit measurement & inventory valuation - 28Standard costing:generally applied to manufacturing activities and non manufacturing activities are NOT incorporated within the standard costing system
Standard cost: target costs that are predetermined and should be incurred under efficient operating systems
Standard costs are used in organisations that have repetitive operations - 29a price taking firm facing long run product mix decisionsin the longer term a firm can adjust the supply of resources committed to a product
- sales volume should exceed the cost
- need to be checked periodically - 30Price skimming Policyattempts to exploit sections in the market that are relatively insensitive to price changes
HOWEVER: should not be adopted when a number of close substitutes are already being on the market, also setting a high price before competitors come in the market, when competitors come price needs to be reduced - 31Penetration policycharging low prices initially when the intention of gaining rapid acceptance of the product
when? appropriate when close substitutes are available or when market is easy to enter - 32COGSbeginning merchandise inventory + purchase of merchandise during the period - closing merchandise inventory
- 33Semi fixed costsCosts that remain fixed within specified activity levels for a given amount of time, but which eventually increase or decrease by a constant amount at critical activity levels
- 34Semi variable costsCosts that vary in direct proportion to the volume of activity
- 35Conversion costsDirect Labour + Manufacturing Overhead Costs
- 36Product costsDirect Material + Direct Labour & Overheads
- 37Period Costscosts that are not included in the inventory valuation of goods, treated as expense for the period in which they incurred
- 38Prime CostsDirect Material + Direct Labour Costs
- 39BudgetA financial plan for implementing the decision that management has been made - budgets are expressed in therms of OUTFLOWS, SALES REVENUES, CASH FLOW STATEMENTS
- 40MERCHANDISING COMPANY VS SERVICE ORGANISATIONSMC: sell tangible products that it have previously purchased in the same basic from suppliers
- wal mart
SO: provide tasks or activities for customers, do not have goods in inventory - 41Break Even PointFixed Costs/ CM
- 42Margin of Safety(expected sales - BEP) / sales
higher margin of safety = less risk - 43ProfitSales revenue * CM margin - FC
- 44Denominator Levels used in absorption costingBudgeted capacity
Practical capacity
Normal capacity
Theoretical minimum capacity SHOULD never be used - 45Mark upRev - COGS / COGS
FC + Target / CM - 46How to price with excess capacityonly variable cost have to be considered such as
DIRECT MATERIALS
DIRECT LABOUR
MANUFACTURING SUPPORT - 47ENGINEERING METHODanalysis of inputs to judge the cost of the output of a process
- 48Cost volume profit assumptions1) all other variables remain constant
2) a single product or constant sales mix
3) total costs and total revenue are linear functions of output
4) profits are calculated on a variable costing basis
5) costs can be accurately divided in their fixed and variable elements
6) the analysis applies only to the relevant range
7) the analysis applies only to short term time horizon - 49Traditional costing systemfirm characteristics:
low levels of competition
non volume related indirect costs that are a low proportion of the total indirect costs
a fairly sophisticated product range, all resources in similar proportions - 50Activity based costing System ABCintensive competition
non volume related indirect costs that are a high proportion of total indirect costs
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- FlashCards sobre Sem título, criado por Helena Back em 05-01-2022.
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- Helena Back
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