Flashcards in BEC- Financial Planning Deck (19)

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2

BEC

## What is a Static Budget?

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

3

BEC

## What is a Maser Budget?

###
Budget targeted for the company as a whole

Includes budgets for Operations and Cash Flows

Includes set of budgeted Financial Statements

4

BEC

## 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

5

BEC

## How do Variable Costs affect budgeting?

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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

6

BEC

## How are Material Variances calculated?

###
SAM:

Standard Material Costs

- Actual Material Costs

= Material Variance

7

BEC

## How are Labor Variances calculated?

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SAL

Standard Labor Costs

- Actual Labor Costs

= Labor Variance

8

BEC

## How are Overhead Variances calculated?

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OAT

Overhead Applied

- Actual Overhead Cost

= Total Overhead Variance

9

BEC

## How does Absorption Costing compare to Variable Costing?

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

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

10

BEC

## How is Contribution Margin calculated?

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Sales Price (per unit)

- Variable Cost (per unit)

= Contribution Margin (per unit)

11

BEC

## How is Breakeven Point (per unit) calculated?

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Total Fixed Costs / Contribution Margin (per unit)

= Breakeven Point Per Unit

Assumption: Total Costs & Total Revenues are LINEAR

12

BEC

## What is the focus in a Cost Center?

### Management is concerned only with costs

13

BEC

## What is the focus in a Profit Center?

### Management is concerned with both costs and profits

14

BEC

## What is the focus in an Investment Center?

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

15

BEC

## What is the Delphi technique?

###
Forecasting technique where Data is collected and analyzed

Requires judgement/consensus

16

BEC

## What is Regression Analysis?

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A forecasting technique where Sales is the dependent variable.

Simple Regression - One independent variable

Multiple Regression - Multiple independent variables

17

BEC

## What are Econometric Models?

### Forecast sales using Economic Data

18

BEC

## What are Naive Forecasting Models?

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Very Simplistic

“Eyeball” past trends and make an estimate

19

BEC

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

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Both project estimates using average trends from recent periods

Difference: Exponential Smoothing weighs recent data more heavily

20

BEC