Flashcards in B2 Financial Planning Deck (22):

1

## What is a Static Budget?

### Budget targeted for a specific segment of a company.

2

## What is a Master Budget?

###
Budget targeted for the company as a whole

Includes budgets for Operations and Cash Flows

Includes set of budgeted Financial Statements

3

## How do Fixed Costs affect budgeting?

###
Costs independent of the level activity within the relevant range

Property Tax is the same whether you produce 100,000 units or zero units

However - Fixed Costs per unit vary given the amount of activity

If you produce fewer units- fixed costs per unit will be greater than if you produce more units - i.e. less units to spread the cost over

4

## How do Variable Costs affect budgeting?

###
The more Direct Materials or Direct Labor used- the more Variable Costs per unit

However - Variable Costs per unit don't change with the level of activity like Fixed Costs per unit

5

## How are Material Variances calculated?

###
SAM:

Standard Material Costs

- Actual Material Costs

= Material Variance

6

## How are Labor Variances calculated?

###
SAL

Standard Labor Costs

- Actual Labor Costs

= Labor Variance

7

## How are Overhead Variances calculated?

###
OAT

Overhead Applied

- Actual Overhead Cost

= Total Overhead Variance

8

## How does Absorption Costing compare to Variable Costing?

###
Absorption Costing - External Use- Cost of Sales- Gross Profit- SG&A

Variable Costing - Internal Use- Variable Costs- Contribution Margin- Fixed Costs

9

## How is Contribution Margin calculated?

###
Sales Price (per unit)

- Variable Cost (per unit)

= Contribution Margin (per unit)

10

## How is Break-even Point (per unit) calculated?

###
Total Fixed Costs / Contribution Margin (per unit)

= Break-even Point Per Unit

Assumption: Total Costs & Total Revenues are LINEAR

11

## What is the focus in a Cost Center?

### Management is concerned only with costs

12

## What is the focus in a Profit Center?

### Management is concerned with both costs and profits

13

## What is the focus in an Investment Center?

### Management is concerned with costs- profits- and assets

14

## What is the Delphi technique?

###
Forecasting technique where Data is collected and analyzed

Requires judgement/consensus

15

## What is Regression Analysis?

###
A forecasting technique where Sales is the dependent variable.

Simple Regression - One independent variable

Multiple Regression - Multiple independent variables

16

## What are Econometric Models?

### Forecast sales using Economic Data

17

## What are Naive Forecasting Models?

###
Very Simplistic

- Eyeball past trends and make an estimate

18

## How does a Moving Average compare to Exponential Smoothing?

###
Both project estimates using average trends from recent periods

Difference: Exponential Smoothing weighs recent data more heavily

19

## What are the characteristics of Short-term Cost Analysis?

###
Uses Relevant Costs Only

Ignore Sunk Costs

Opportunity Cost is a Must

20

## Regression Analysis Formula

###
Y = A + Bx

Y = total cost

A = total fixed costs

B = slope

x = volume

21

## Budgeted Production Formula

###
Budgeted Sales

+ desired EI

- BI

= Budgeted Production

22