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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?

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?

SAL

Standard Labor Costs
- Actual Labor Costs
= Labor Variance

8
BEC

How are Overhead Variances calculated?

OAT

Overhead Applied
- Actual Overhead Cost
= Total Overhead Variance

9
BEC

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

10
BEC

How is Contribution Margin calculated?

Sales Price (per unit)
- Variable Cost (per unit)
= Contribution Margin (per unit)

11
BEC

How is Breakeven Point (per unit) calculated?

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?

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?

Very Simplistic

“Eyeball” past trends and make an estimate

19
BEC

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

20
BEC

What are the characteristics of Short-term Cost Analysis?

Uses Relevant Costs Only

Ignore Sunk Costs

Opportunity Cost is a Must