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