ACC222 Exam 1

What is Data Analytics?

The process by which a company utilizes various amounts and types of data (quantitative, qualitative, textual, old, new) to connect strategy to key goals and improve decision making across the organization.

What is the goal of data analytics?

Improve decision making

What are the 4 types of data analytics?

1. Descriptive

2. Diagnostic

3. Predictive

4. Prescriptive

What question is descriptive analytics answering?

What is happening?

What is the focus on descriptive analytics?

Historical data

What is an example of descriptive analytics?

Creating a Profit & Loss analysis of products to see if the company is making or losing money on past financial points.

What question is disgnostic analytics answering?

Why is it happening?

What is the focus on diagnostic analytics?

Historical data, identifying causes/drivers

What is an example of diagnostic analytics?

Analyzing drivers of customer preferences or revenue/cost to understand why a trend is occurring.

What question is predictive analytics answering?

What is likely to happen?

What is the focus on predictive analytics?

Future-oriented, forecasting

What is an example of predictive analytics?

Forecasting the financial impact of opening new product lines or the lost revenue if a competitor innovates first. Often involved pilot testing.

What question is prescriptive analytics answering?

What do I need to do to optimize performance?

What is the focus on prescriptive analytics?

Optimization (maximize revenue, minimize cost, optimal quality defects)

What is an example of prescriptive analytics?

GPS navigation apps providing the optimal route by analyzing real-time traffic data. Requires advanced modeling and simulations, often leveraging AI.

What are the 7 questions of accounting and data analytics

1. What am I measuring?

2. Why am I measuring?

3. How am I going to measure?

4. Where can I get the data?

5. Which tool/method will I use?

6. When is my analysis complete?

7. Who in the business needs to understand?

Financial Accounting

Externally Focused

Financial Accounting Purpose

Create financial statements (Income Statement, Balance Sheet, Cash Flows) for external use (investors, lenders)

Financial Accounting Rules

Governed by Generally Accepted Accounting Principles (GAAP); allows for comparability

Financial Accounting Time Horizon

Historical data (rear view mirror)

Financial Accounting Objectivity

More objective

Managerial Accounting

Inwardly focused

Managerial Accounting Purpose

Measure and analyze information to help internal managers make better decisions

Managerial Accounting Rules

No GAAP rules - companies can measure what they want, how they want, to best serve internal decision making

Managerial Accounting Time Horizon

Future oriented

Managerial Accounting Information Types

Uses both financial and non-financial information (customer satisfaction, employee loyalty, ethics)

Managerial Accounting Creativity

encourages creative approaches to measurement

Managerial Accounting Importance

The quality of managerial accounting strategies and measurements is critical for a company’s success and ability to differentiate itself.

Cost

An amount of cash or cash equivalent sacrificed for goods or services, expected to bring a current or future benefit

Cost Object

Any item for which a specific measurement of cost is required for decision-making (product, service, geographic region, new store, project)

Cost Object Strategic Link

Should link to strategy to ensure time and effort are spent on relevant cost analysis

Cost Driver

A causal factor that measures the output of an activity that leads (or causes) cost to change

Cost Drive Purpose

Understanding cost drivers allows for cost control and reduction

Cost Driver Example

Reducing quality defects can drive down associated costs like inspection and rework

Direct Cost

A cost that can be traced directly to its cost object in an economically feasible manner

Direct Cost Example

denim for jeans, assembly worker’s time

Indirect cost

A cost that cannot be trace to its cost object in an economically feasible manner (Also know as overhead or support costs)

Product Cost

Any cost that is necessary in the production or acquisition of a product for sale

Total Product Cost

Direct Materials + Direct Labor + Manufacturing Overhead

Prime Cost (costs of inputs)

Direct Materials + Direct Labor

Conversion Cost (cost of processing)

Direct Labor + Manufacturing Overhead

Period Cost

Any cost that is not a product cost (not necessary for production)

Period Cost Examples

Marketing, Advertising, R&D, shipping, customer service, CEO salary

Value Chain

The entire process from research and design to customer service

Upstream Cost

Anything that happens before manufacturing/production

Upstream Cost Examples

Research and design, prototyping, development

Downstream Costs

Anything that happens after manufacuting/production

Downstream Cost Examples

Warehousing, storage, shipping, marketing, installation, customer service, warranty

Full Cost Perspective

Important to consider costs across the entire value chain, not just production

Cost Behavior

Describes whether and how a cost changes when the level of output volume changes. Foundational for accurate cost estimation and forecasting

Fixed Cost

A cost that in total does not change as the level of output volume changes. *Manage on a total basis, not per unit)

Fixed Cost Graph

Fixed Cost Example

Leasing sanding equipment for $100,000/month for boat manufacturing; this cost is fixed whether 0 boats or 10,000 boats are produced

Variable Cost

A cost that on a per-unit basis does not change as output volume changes, but in total varies in direct proportion to changes in output volume.

Variable Cost Graph

Variable Cost Example

Steel props for boats costing $300 each. Total prop cost increases with the number of boats, but the cost per prop remains $300.

Mixed Cost

A cost that has both a fixed and variable component

Mixed Cost Graph

Mixed Cost Examples

Airbnb: Fixed cleaning/service fee + variable cost per night

Cost Behavior Qualifications: Linearity

Assumes variable and fixed costs can be approximated using a straight line within the relevant range