CI - Session 5 Flashcards
(32 cards)
Activity Based costing (ABC) (Budget setting)
assigns overhead and indirect costs to specific activities related to the production of goods or services.
Benefits: Activity based costing enables segmentation based on true profitability and helps to determine customer value more accurately.
Negatives: it does not assess efficiency of the productivity of activities, even though this may be extremely important for improvement.
Flexible Budgeting (budgeting)
financial plan that adjusts expenses based on changes in actual revenue or activity levels.
Need to think of Fixed costs, Variable costs and semi-variable costs
Pro: Enhanced accuracy, better resource allocation
Con: Complexity, dependent on forecast accuracy
Fixed Costs
Expenses that remain constant regardless of activity levels, such as martech overheads or salaries.
Variable Costs
Expenses that change directly with activity levels, like advertising spend or creative costs
Semi-Variable Costs
Also known as mixed costs, these have both fixed and variable components eg agency costs with retainer plus activity based fees.
Bottom-Up Approach (budgeting)
In a bottom-up scenario, individual departments or units provide detailed input on their expected activity levels and associated costs
Top-Down Approach
Top-down budgeting is a method where senior management sets high-level financial targets and goals for the organization, which are then allocated to various departments and teams.
Incremental budgeting
Incremental budgeting builds upon the previous period’s budget with minor adjustments, for factors such as inflation, market conditions, or changes in organisational priorities.
Advantages: Ease of implementation, time efficiency, predictability,
Disadvantages: Encourages unnecessary spending, lack of innovation
Priority based budgeting (PBB)
Priority-Based Budgeting promotes strategic allocation of resources by focusing on funding programs and services that align with an organisation’s highest priorities.
Advantages: Enhanced Transparency, Improved Resource Allocation, Increased Accountability
Challenges: Implementation Complexity, Data Requirements, Potential Resistance”
Zero based budgeting
Zero-based budgeting (ZBB) is a budgeting method where all expenses must be justified for each new period, starting from a “zero base
Forecasting
Forecasting provides quantified estimates that can form the base for marketing objectives and plans
Quantitative forecasting
Quantitative forecasting relies on numbers or raw data and attempts to conclude from these future trends and the probability of event happening.
Qualitative forecasting
Qualitative forecasting is used where there is no data available and relies mainly on human judgement and expert opinions to provide a likely v of the future.
Trend extrapolation
Trend extrapolation is a statistical technique that examines past trends in the market and extrapolates them into the future.
Predictive Modeling
Predictive modeling is a statistical technique used to forecast future outcomes by analyzing historical data and identifying patterns.
Time Series Analysis(predictive modeling)
This method involves analyzing data points collected or recorded at specific time intervals to identify patterns, trends, and seasonal variations. It helps in making forecasts based on historical data.
Exponential Smoothing (predictive modeling)
This technique applies weighted averages to past observations, with more recent data given more weight.
Moving Averages (predictive modeling)
This method calculates the average of a specific number of past data points to smooth out short-term fluctuations and highlight longer-term trends.
Regression analytics
“A statistical technique used to identify, quantify, and analyze the relationship between one dependent variable (outcome) and one or more independent variables (predictors)
e.g. plant growth and sunlight
Key features of regression analysis
Relationship analysis:
Determines the strength and direction of the relationship between variables.
Prediction:
Estimates the value of the dependent variable based on given values of the independent variables.
Quantification:
Provides coefficients that quantify the effect of each independent variable on the dependent variable.
Optimisation:
Helps optimize decisions by identifying the most impactful factors and their optimal levels
Linear Regression (type of regression analysis)
Models the relationship between variables as a straight line. (e.g. BCG Matrix)
Multiple Linear Regression (type of regression analysis)
Includes multiple independent variables
Logistic Regression (type of regression analysis)
Used when the dependent variable is categorical (e.g., yes/no, purchase/no purchase). (e.g. looking at churn).
Polynomial Regression (type of regression analysis)
Models non-linear relationships by fitting a polynomial curve.
