MAC PEV and PCR Revision Game
Comments
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That really was a tough one. I would panic too if I saw a question like that in the exam.
My answer to the A-Vic's Question: 1
efficiency ratio = budgeted hours / actual hours worked
capacity ratio = actual hours / budgeted hours, so if you multiply them they cancel out to 1. Right?
Q: How do you calculate 'value added'?0 -
A Vic
sdv's advice is good
I would not expect to see this in MAC June 2010
I took this from Elsdon Manufacturing - the mock for PCR
and included it because I feel that the December 2008 had scope to look at this.
Anyone taking the D08 PCR paper as a practice before 16 June could look at section 2
2 budgets one for 200,000 units with a labour overtime value of £315,000, the other for 250,000 with labour overtime of £945,000
On that occassion the following was one of the bullet points following the budgets:
• 175,000 of the chargeable hours can be worked in normal time (basic hourly rate). Up to this point no overtime costs will be incurred.
But I worked through this with a revision class recently, and wondered if the examiner might take the bullet point, as it could be calculated from the original data.
MAC has so much ground to cover in 3 hours, I'd not expect to see it appear there, but PCR could include this as a development of hi-lo.Sandy
sandy@sandyhood.com
www.sandyhood.com0 -
Yes and no its
Efficiency ratio x Capacity ratio = Activity ratio
Value added = sales revenue - (cost of materials and brought in services)
Q. what the interpritation of asset turnover ?0 -
A: Value added is the difference between sales revenue and the cost of materials and bought-in components used as cost of sales.
For my question, go back to the 200,000 and 250,000 example and
Q: calculate the overtime cost per unit produced during overtime.Sandy
sandy@sandyhood.com
www.sandyhood.com0 -
A: Efficiency ratio = standard hours produced*/actual hours worked
....Capacity ratio = actual hours worked/budgeted hours
*Standard hours produced = total units produced x standard hours per unitSandy
sandy@sandyhood.com
www.sandyhood.com0 -
Asset Turnover = Sales Revenue/Net Assets
This shows how much turnover is earned from each £1 of net assets invested in the business
This is not a high turnover good low turnover bad ratio, instead you need to relate it to the business.
Typically boutiques would have low asset turnover values, but high profit margins (mainly because the volume of sales is low but each is sold for a high profit)and
discounters would have high asset turnovers and low profit margins
But when I look back over past MAC and PEV papers asset turnover is often significant (even where it is not mentioned by name)
In one paper both products generate 13.5/13.6% net profit/sales turnover %s
but the RONA is then different 16.5% and 48.8%
The key to the difference in the RONA is due to the branded product having a much higher asset turnover ~ and yet the question doesn't list it in the ratios.
So it is well worth learning.Sandy
sandy@sandyhood.com
www.sandyhood.com0 -
I keep confusing these ratios and when to use budgeted and actual production. Thanks for this question, hopefully this will stick now.
My answer to the question in post 65:
The additional 50,000 units cost £945,000 - £315,000 = £630,000 in overtime payments. The cost per unit is then £630,000/50,000 = £12,60
I hope I got this one right.
If yes, here's my question:
Can you suggest non-financial indicators that can be used to measure performance for the quality of a service, say emptying bins?0 -
If yes, here's my question:
Can you suggest non-financial indicators that can be used to measure performance for the quality of a service, say emptying bins?
Number of complaints received from customers who've bin hasn't been emptied?
Q What is the aim of value analysis and what are the benefits?0 -
Value analysis: all the components of a product of service are examined in order to determine if they contribute to the value of the product and to find alternative and more cost effective ways to achieve the same value. It is used for existing products.
Q: What is the balanced scorecard and what are its perspectives?0 -
The balanced Scorecard looks at KPI's such as FInancial and Customer approaches
Q: What is Value Engineering?0 -
Binderbear wrote: »The balanced Scorecard looks at KPI's such as FInancial and Customer approaches
Q: What is Value Engineering?
Its the value analysis at the designing or planning stage of a new product or service.
Q What does the activity ratio tell us?0 -
The activity ratio tells us as a % how much more production we had compared to the budget. Actual production / budgeted production. This can also be in standard hours.
Q: What is the relationship between these ratios: ROCE, asset turnover and operating profit margin?0 -
The activity ratio tells us as a % how much more production we had compared to the budget. Actual production / budgeted production. This can also be in standard hours.
Q: What is the relationship between these ratios: ROCE, asset turnover and operating profit margin?
Asset turnover x operating profit = ROCE
Q How do you calulate stock turnover?0 -
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Stock turnover in days = average stock held for the period / cost of sales * 365
Q: What is the difference between a profit centre, cost centre and investment centre?
cost centre - an area of a business where costs are incurred that aren't attrubutable to cost units eg canteen
profit centre - an area of a busibess where cost can be ascertained and a profit/loss for a period can be determined
investment centre - an area of a business where costs and net assets can be assertained
Sama, please give your recommened answer as these are purely discriptions and I haven't actually answered you question.
Q - Give 2 reasons for an adverse labour efficienct variance0 -
Hi Jilt,
I was thinking about the difference in terms of whether you'd have expenses, income, etc there.
So cost centre has only expenses, no income, assets and therefor profit. A profit centre has expenses and recives income and so can calculate profit. The investment centre has all of these plus assets so this is the only one that can be measured on the basis of how well it manages investments.
To answer your question, an adverse labour efficiency variance may be caused by
- employees not receiving a scheduled training and then not being able to work efficiently
- using raw materials that are low quality requiring more effort for example repeatedly having to clean the machines.
Q: why would or would not be a good motivational tool an ideal standard?0 -
Hi Jilt,
I was thinking about the difference in terms of whether you'd have expenses, income, etc there.
So cost centre has only expenses, no income, assets and therefor profit. A profit centre has expenses and recives income and so can calculate profit. The investment centre has all of these plus assets so this is the only one that can be measured on the basis of how well it manages investments.
To answer your question, an adverse labour efficiency variance may be caused by
- employees not receiving a scheduled training and then not being able to work efficiently
- using raw materials that are low quality requiring more effort for example repeatedly having to clean the machines.
Q: why would or would not be a good motivational tool an ideal standard?
Thanks for that Sama, thats something else I've learn't today.
A - an ideal standard, I think, is usually a target that is hard to achieve, staff may be demotivated as it is very hard to reach the target and may give up even trying to reach it.
Q - Why do you deduct stock from current assets when calculating the acid test ratio?0 -
Q - Why do you deduct stock from current assets when calculating the acid test ratio?
Answer = stock is slower at converting to cash, so by deducting it from CA it gives a better indication of liquidity
Q. What is ZBB?0 -
mini_schnauzer wrote: »Q - Why do you deduct stock from current assets when calculating the acid test ratio?
Answer = stock is slower at converting to cash, so by deducting it from CA it gives a better indication of liquidity
Q. What is ZBB?
Zero based budgeting - budget for each cost centre is looked at from scratch rather than relying on historical costs
Q What is benchmarking?0 -
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A company takes a given market price for its product and a target cost is set to give them
a desired profit. Selling price - desired profit = target cost
Q What's 'just in time'?
A method a purchasing stock at thelast minute so as not to tie up too much cash for long periods of time?0 -
Hi Primble - No Question? I'll do one instead for you...
Question: Which is more appropriate for control - a fixed or flexed budget?0 -
A. I would say a flexed budget as it is a budget prepaired to the actual activity level that was achived in the period in order to show what the standard costs should have been at that activity level that then meaningful variances can be calculated.
Q, a business has a fixed overhead absorption rate of 10.50 per unit and a total budgeted fixed overhead of £231000 what is the budgeted activity level?0 -
but then actual levels where 20,000 what is the revised fixed overhead absorption rate?0
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a. I would say a flexed budget as it is a budget prepaired to the actual activity level that was achived in the period in order to show what the standard costs should have been at that activity level that then meaningful variances can be calculated.
Q, a business has a fixed overhead absorption rate of 10.50 per unit and a total budgeted fixed overhead of £231000 what is the budgeted activity level?
22,000but then actual levels where 20,000 what is the revised fixed overhead absorption rate?
11.55
Q - What perspectives does a balanced score card recognise?0 -
Answer: Financial, Customer, Innovation and Business
Question: What are the aims of TQM0 -
mini_schnauzer wrote: »Answer: Financial, Customer, Innovation and Business
Question: What are the aims of TQM
To continuously improve qaulity, productivity and efectiveness.
Q If fixed overheads are absorbed on an hourly basis, when calculating the F OH volume variance should you use standard or actual hours for the actual production?0 -
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A. Actual
What is a profit centre
Im afraid it's standard hours
A - a profit centre is an area of a business which has costs and income and therefore a profit/loss can be ascertained
Q - State which budget should be used to take account of deterioration of raw materials whilst in storage0
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