Fin'l Plann. & Analysis

Question 1

What is a Static Budget?

Answer 1

Budget targeted for a specific segment of a company.

Question 2

What is a Master Budget?

Answer 2

• Budget targeted for the company as a whole
• Includes budgets for Ops and CFs
• Includes set of budgeted F/S

Question 3

How do Fixed Costs affect budgeting?

Answer 3

Costs independent of the level activity within the relevant range

• Property Tax = same _{regardless of units produced}

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

• Fewer units, fixed costs _{per unit} increase (_{less units to spread the cost over})

Question 4

How do Variable Costs affect budgeting?

Answer 4

The more DM or DL used, the more VC _{per unit}

However VC _{per unit} don’t change with the level of activity like FC _{per unit}

Question 5

How are Material Variances calculated?

Answer 5

S - A = M

Standard Material Costs

- Actual Material Costs

= Material Variance

Question 6

How are Labor Variances calculated?

Answer 6

S - A= L

Standard Labor Costs

- Actual Labor Costs

Labor Variance

Question 7

How are Overhead Variances calculated?

Answer 7

O - A = T

OH Applied

- Actual OH Cost

= Total OH Variance

Question 8

How does Absorption Costing

compare to Variable Costing?

Answer 8

Absorption Costing Variable Costing

• External Use - Internal Use
• Cost of Sales - VC
• Gross π - Contribution Margin
• SG&A - FC

Question 9

How is Contribution Margin calculated?

Answer 9

Sales Price _{per unit}

- Variable Cost ^{per unit}

Contribution Margin _{per unit}

Question 10

How is Break-even Point _{per unit} calculated?

Answer 10

Total FC

Contribution Margin _{per unit}

Assumption= Total Costs & Total Revenues are LINEAR

Question 11

What is the focus in a Cost Center?

Answer 11

Management is concerned

only with costs

Question 12

What is the focus in a Profit Center?

Answer 12

Management is concerned with

both costs and profits

Question 13

What is the focus in an Investment Center?

Answer 13

Management is concerned with

costs, profits, and assets

Question 14

What is the Delphi technique?

Answer 14

• Forecasting technique
• Data is collected & analyzed
• Requires judgement/consensus

Question 15

What is Regression Analysis?

Answer 15

• A forecasting technique
• Sales is the dependent variable
• Simple Regression - _{1 independent variable}
• Multiple Regression - _{Multiple independent variables}

Question 16

What are Econometric Models?

Answer 16

Forecast sales using Economic Data

Question 17

What are Naive Forecasting Models?

Answer 17

• Very Simplistic
• Eyeball past trends and make an estimate

Question 18

How does a Moving Average

compare to Exponential Smoothing?

Answer 18

Both project estimates using avg trends from recent periods

Difference: Exponential Smoothing weighs recent data more heavily

Question 19

What are the characteristics of Short-term Cost Analysis?

Answer 19

• Uses Relevant Costs Only
• Ignore Sunk Costs
• Opportunity Cost is a Must