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Flashcards in Fin'l Plann. & Analysis Deck (19):

What is a Static Budget?

Budget targeted for a specific segment of a company.


What is a Master Budget?

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


How do Fixed Costs affect budgeting?

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)


How do Variable Costs affect budgeting?

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


How are Material Variances calculated?

S - A = M

 Standard Material Costs

-     Actual Material Costs

= Material Variance


How are Labor Variances calculated?

S - A= L

Standard Labor Costs

- Actual Labor Costs

 Labor Variance


How are Overhead Variances calculated?

O - A = T

OH Applied

- Actual OH Cost

= Total OH Variance


How does Absorption Costing

compare to Variable Costing?

Absorption Costing                      Variable Costing

- External Use                               - Internal Use

- Cost of Sales                               - VC  

- Gross π                                        - Contribution Margin

- SG&A                                           - FC



How is Contribution Margin calculated?

Sales Price per unit 

-    Variable Cost per unit

Contribution Margin per unit


How is Break-even Point per unit calculated?

               Total FC               

Contribution Margin per unit 


Assumption= Total Costs & Total Revenues are LINEAR


What is the focus in a Cost Center?

Management is concerned

only with costs


What is the focus in a Profit Center?

Management is concerned with

both costs and profits


What is the focus in an Investment Center?

Management is concerned with

costs, profits, and assets


What is the Delphi technique?

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


What is Regression Analysis?

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


What are Econometric Models?

Forecast sales using Economic Data


What are Naive Forecasting Models?

  • Very Simplistic
  • Eyeball past trends and make an estimate


How does a Moving Average

compare to Exponential Smoothing?

Both project estimates using avg trends from recent periods

Difference: Exponential Smoothing weighs recent data more heavily


What are the characteristics of Short-term Cost Analysis?

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