IMA

Question 1

Where does most of the cost occur?

Answer 1

in Research & Development
-> overengineering affects all the other steps of the value chain

Question 2

What is really important for informed decision-making?

Answer 2

Transparency

Question 3

What information is required for informed decision-making?

Answer 3

• Cost types
• Value chain performance
• Efficiency & Productivity
• Strategy company composition
• Profitability (Customer & Product)
• Profit Center Performance (Performance of a department that contributes revenue)

Question 4

Higher complexies in MNCs

Answer 4

• Cost structure comparisons
• Site comparisions (differences in infrastructure,….)
• Overhead cost allocation (Shared Service Centers,…)
• Intercompany charging -> Transfer pricing

Question 5

Managerial Accounting

Answer 5

process of developing, structuring, measuring, analyzing and reporting financial and non-financial information related to revenues and costs

Question 6

Towards what is MA oriented?

Answer 6

Towards the future

Question 7

Managerial Accounting Processes

Answer 7

-Cost Types
- Cost Centers
- Cost Objects
- Budget/ Forecast
- Actual/ Performance Analysis

Question 8

On what is MAs performance analysis based?

Answer 8

Budget
Forecast
Actual Revenues
Costs

Question 9

Tasks for IMA

Answer 9

• Global Cost Management
• Global budgeting and forecasting
• Global performance evaluation
• Transfer Pricing
• Global Risk Management
• Global Investment Valuation

Question 10

Four functions of management & the need for MA

Answer 10

• Strategic Management
• Planning and decision-making
• Management & operational control
• Preparation of financial statements (MA does inventory valuation)

Question 11

Contemporary business aproaches because of business environment

Answer 11

• Cost Efficiency
• Quantity
• Time as a weapon
• Innovation
• Continuous improvement

Question 12

MA reaction to current business environment

Answer 12

• Value chain analysis
• acitivity based costing and management
• business analytics
• target costing
• benchmarking
• continuous process improvement
• sustainability accounting
• enterprise risk management
• balanced scorecard

Question 13

Keytrends in MA

Answer 13

• Integration with enterprise performance management (EPM) -> EPM embedded analytics
• Use of business intelligence software
• Operational Analytics
• Predictive forecasting
• Use of ratio analysis

Question 14

Cost

Answer 14

a monetary measure of the resources sacrificed or forgone to achieve a specific objective

Question 15

Important considerations with cost

Answer 15

• Cost Drivers
• Relevant Range
• Relationships between types of costs

Question 16

Relevant costs

Answer 16

• are relevant to a certain decision
• future costs and revenues that will be changed by a decision

Question 17

Sunk costs

Answer 17

Cost that have been made in the past and cannot be is by any decision (not relevant for decision-making)

Question 18

Opporunity Costs

Answer 18

measures the opportunity that is lost or sacrificed when the choice of one course of action requires that an alternative course of action is given up

Question 19

Short-term decision making process

Answer 19

• Cost-Volume-Profit Analysis
• Incremental or differential analysis
• Pricing Decisions
• Profitability Analysis

Question 20

Long-term decision-making process

Answer 20

• Capital Investment Decisions and appraisal methods

Question 21

CVP analysis

Answer 21

Studies relationship among sales volume, revenue, costs and profits in the short-term with changes occurring in number of units sold, selling price, output level/ capacity utilization level, variable or fixed costs

Question 22

Benefits of CVP analysis

Answer 22

• Sets target prices to achieve a certain operating income
• Determine sales volumes to achieve break even or target income
• Understand effects on profits from price and cost changes (-> including changes on customer purchasing behavior)
• Decides measures on revenues and costs

Question 23

Operating Income

Answer 23

= Net cash Selling Price - Variable COGS - Rixed COGS - Period fixed costs

Question 24

Break-even Point

Answer 24

sales volume at which all variable and fixed costs are covered by the revenues = sales volume at which the operating income equals to zero

Question 25

Fixed Cost of the period

Answer 25

= Fixed Cost of units sold + overhead period cost

Question 26

Incremental analysis

Answer 26

allows to identify cashflows that change under alternative courses of action

Question 27

Examples of incremental analysis

Answer 27

- Special pricing decisions - Product mix decisions at capacity constraints - Optimization or replacement of equipment - Outsourcing and make or buy decisions - Discontinuation decisions

Question 28

Summary of keys for decision-making

Answer 28

- Relevant and irrelevant revenues and costs need careful evaluation - Both, variable and fixed costs can be irrelevant - Qualitative factors can be decisive - Only the contribution per unit of limiting factor (s) is relevant in case of capacity constraints - Opportunity costs arise with capacity constraints and must be considered - Book values and past expenses are irrelevant

Question 29

Benefit of customer profitability analysis

Answer 29

- helps managers to understand and analyze customer level costs, especially with regard to resource allocation such as customer engagement, number of physical interactions such as number of visits, shipments and or emergency deliveries

Question 30

Cost management

Answer 30

the systematic process of planning, monitoring, and controlling expenses across an organization to ensure that resources are allocated efficiently, waste is minimized, and financial goals are achieved, ultimately contributing to improved profitability and sustainability

Question 31

Cost management challenges for MNC

Answer 31

- Currency exchange rate fluctuations - Cross border transfer pricing - Regulatory compliance - Complex Organization strcutures - Supply Chain Complexity

Question 32

Operational Cost Management Practices

Answer 32

- Cost Analysis and Cost Control - Cost-cutting and cost reduction initiatives - Working Capital Management

Question 33

Strategic Cost Management Practices

Answer 33

- Life-cycle cost management - Target Costing - Total Cost of Ownership Benchmarking - Value chian analysis - Quality Cost Management - Overhead cost value analysis - Cost sensitive culture

Question 34

Working Capital Management -> Working Capital Optimization

Answer 34

- Optimizing inventory cost - Optimizing receivables cost - Accounts payable management

Question 35

Techniques of Target costing

Answer 35

Reverse engineering, value chain analysis and process improvements

Question 36

What does TCO focus on?

Answer 36

focuses primarily on the financial aspects of asset ownership across its entire lifecycle

Question 37

Benchmarking

Answer 37

Allows to compare a company´s performance, processes, or products against industry standards or best practices

Question 38

6-step benchmarking process

Answer 38

1. Identify area for improvement 2. Identify key drivers of costs and revenues 3. Measure performance of activities of organizations 4. Compare performances 5. Identify and implement measures for improvement 6. Monitor improvement

Question 39

Best in class

Answer 39

= optimized processes, delivering maximum value with low wastages

Question 41

Assumptions of the CVP Analysis

Answer 41

- All variables remain constant - Single product or const sales mix - Total costs and total revenue are linear functions of output - Costs can be accurately divided into their fixed and variable elements - Analysis only applies to the relevant range - Analysis only valid for the short-term horizon