MGMT Acc Final
PDOHR
(est fixed o/h + est var o/h) / est activity Est total fixed mf oh / Est Activ est var o/h = variable rate x est activity
residual income
- Net Operating Income - (Average Operating Assets x Minimum Required Rate of Return) Pro: better measure for performance evaluation because it encourages managers to make investments that are profitable for the entire company Con: Cannot be used to compare the performances of divisions of different sizes
ROI
- Net Operating Income / Average Operating Assets - margin x turnover
Acid-test (quick) ratio
- a more rigorous test of a company's ability to meet its short-term debts than the current ratio - Acide test ratio = (cash + marketable securities + accounts receivable) / current liabilities
throughput time
- the amount of time required to turn raw materials into completed products = process time + inspection time + move time + queue time
Delivery Cycle Time
- the elapsed time from receipt of a customer order to when the completed goods are shipped to the customer = wait time + throughput time
Value Added Time
- the time in which useful work is actually being done on the unit - process time - If the value added time increases and the throughput time decreases, then the manufacturing cycle efficiency (MCE) will always increase.
Financial (disadvantage) of discontinuing a product
1. (Lost) contribution margin 2. Take away fixed costs/expenses that can be avoided 3. CM - fixed costs = advantage or (disadvantage)
Canedo Incorporated reported the following results from last year's operations: Sales$ 9,600,000Variable expenses7,170,000Contribution margin2,430,000Fixed expenses1,470,000Net operating income$ 960,000Average operating assets$ 4,000,000 At the beginning of this year, the company has a $700,000 investment opportunity with the following characteristics: Sales$ 2,310,000 Contribution margin ratio 60% of salesFixed expenses$ 1,201,200 If the company pursues the investment opportunity and otherwise performs the same as last year, the combined turnover for the entire company will be closest to:
1. Combine the sales 2. Combine assets (avg operating plus the investment opportunity) 3. Complete turnover = sales/assets
average collection period
365 days / AR turnover
Average sale period
365 days / inventory period
Materials price variance
= AQ(AP-SP) = (AQ x AP) - (AQ x SP)
Minimum required return
= Average operating assets x Minimum required rate of return
Margin
= Net Operating Income / Sales
Turnover
= Sales / Average Operating Assets
materials quantity variance
= Standard Price (Actual Quantity - Standard Quantity) = (AQ x SP) - (SQ x SP)
current ratio
= current assets / current liabilities - a company's working capital is frequently expressed in ratio form
Pre-determined overhead rate
= estimated total MOH costs / estimated total amount of allocation base Y = a +bX y = estimated total MOH cost a = est total fixed MOH cost b = est variable MOH cost per unit of the allocation base x = the estimated total amount of the allocation base
Return on equity
= net income / avg stockholders' equity = net profit margin percent x total asset turnover x equity multiplier
Accounts receivable turnover
= sales on account / avg accounts receivable balance
Activity-based costing (ABC)
A method of allocating overhead based on each product's use of activities in making the product.
Which of the following would be an argument for using the gross cost of plant and equipment as part of operating assets in return on investment (ROI) computations?
It eliminates the age of equipment as a factor in return on investment (ROI) computations.
Reducing the costs of quality
Making additional investments in prevention activities with the goal of realizing even larger reductions in external failure costs.
cash equivalents
Short-term, highly liquid investments that can be readily converted to a specific amount of cash and which are relatively insensitive to interest rate changes. ex; treasury bills, commercial paper, and money market funds
Balance scorecard
The four categories of measures in a balance scorecard are linked to one another in a cause-and-effect fashion as follows: a company's employees need to continuously learn in order to improve internal business processes; improving business processes is necessary to improve customer satisfaction; and improving customer satisfaction is necessary to improve financial results.
Investing activities
These activities generate cash inflows and outflows related to acquiring or disposing of noncurrent assets such as property, plant, and equipment, long-term investments, and loans to another entity.
Financing Activities
These activities generate cash inflows and outflows related to borrowing from and repaying principal to creditors and completing transactions with the company's owners, such as selling or repurchasing shares of common stock and paying dividends.
Overall Equipment Effectiveness (OEE)
Utilization rate x efficiency rate x quality rate
Efficiency rate
actual run rate / ideal run rate
Utilization rate
actual run time / machine time available
Simple rate of return
annual incremental net operating income / initial investment
Operating cycle
average sale period + average collection period
Increases efficiency rate
avoiding minor work stoppages
Inventory turnover
cost of goods sold / average inventory balance
quality rate
defect free output / total output
Gross Margin Percentage
gross margin / sales
Payback period
investment required/annual net cash inflow
Return on Total Assets (ROA)
net income + (interest expense (1-tax rate)) / avg total assets
Annual Net Cash Flow
net income + depreciation
net profit margin percentage
net income / sales
Four Types of Quality Costs
prevention, appraisal, internal failure, external failure
Manufacturing Cycle Efficiency (MCE)
process time / throughput time
required purchases of raw materials
raw materials needed to meet the production schedule + desired ending inventory of raw materials - beginning inventory of raw materials
favorable labor rate variance indicates
standard rate exceeds actual rate
Operating activities include
these activities generate cash inflows and outflows related to revenue and expense transactions that affect net income