Financial Planning

Question 1

What is a Static Budget?

Answer 1

Budget targeted for a specific segment of a company.

Question 2

What is a Maser Budget?

Answer 2

Budget targeted for the company as a whole

Includes budgets for Operations and Cash Flows

Includes set of budgeted Financial Statements

Question 3

How do Fixed Costs affect budgeting?

Answer 3

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

Question 4

How do Variable Costs affect budgeting?

Answer 4

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

Question 5

How are Material Variances calculated?

Answer 5

SAM:

Standard Material Costs
- Actual Material Costs
= Material Variance

Question 6

How are Labor Variances calculated?

Answer 6

SAL

Standard Labor Costs
- Actual Labor Costs
= Labor Variance

Question 7

How are Overhead Variances calculated?

Answer 7

OAT

Overhead Applied
- Actual Overhead Cost
= Total Overhead Variance

Question 8

How does Absorption Costing compare to Variable Costing?

Answer 8

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

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

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 Fixed Costs / Contribution Margin (per unit)
= Break-even Point Per Unit

Assumption: Total Costs & Total Revenues are LINEAR

Question 11

What is the focus in a Cost/Revenue Center?

Answer 11

Management is concerned only with costs/revenues

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 where Data is collected and analyzed

Requires judgement/consensus

Question 15

What is Regression Analysis?

Answer 15

A forecasting technique where Sales is the dependent variable.

Simple Regression - One 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 average 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

Question 20

Target Cost Formula

Answer 20

Target Cost=Market Price-Required Profit

Question 21

Kaizen Method

Answer 21

The product may have to be redesigned to provide for the reduction of costs throughout the life cycle of a product.

Question 22

Sensitivity Analysis Slope

Answer 22

DIF TC/ DIF Volume

Question 23

Simple Linear Regression Model

Answer 23

y=A+Bx

TC=FC+VC(U)

Question 24

Y is the what is the regression model

Answer 24

Dependent variable

Question 25

X is the what in the regression model

Answer 25

Independent variable

Question 26

A is the what is the regression model

Answer 26

Y-intercept

Question 27

B is the what in the regression model

Answer 27

Slope

Question 28

-1 Coefficient of Correlation means?

Answer 28

Perfect Inverse Relationship

Question 29

0 Coefficient of correlation means?

Answer 29

No relationship

Question 30

1 Coefficient of correlation means?

Answer 30

Perfect direct relationship

Question 31

Coefficient of correlations measures?

Answer 31

(r) Measures the STRENGTH of the linear relationship between the independent variable(x) and the dependent variable(y).

Question 32

Coefficient of determination means?

Answer 32

(r^2) the PROPORTION of the total variation in the dependent variable(y) explained by the independent variable (x) Higher(R^2)=greater proportion of the total variation in y that is explained by x. The higher the(r^2) the better the fit of the regression line.

Question 33

Budgeted Production formula

Answer 33

``` Budgeted Sales + Desired ending inventory < Beg, Inventory> ______________________ Budgeted production ```

Question 34

Units of DM to be purchased for the period formula

Answer 34

Units of DM for production period + Desired End, INV at the end of the period < Beg, INV at the start of the period> ___________________________________ Units of DM to be purchased for the period

Question 35

Desired END, CASH Formula

Answer 35

Beg, Cash + Cash Collected ``` __________________ End, cash < Cash Requirements> __________________ Desired End, Cash ```

Question 36

Sales Variance Includes?

Answer 36

1. Sales Price Variance | 2. Sales Volume Variance

Question 37

Sales Volume Variance Includes?

Answer 37

1. Sales Quantity Variance | 2. Sales Mix Ratio

Question 38

Sales Quantity Variance Includes?

Answer 38

1. Market Size Variance | 2. Market Share Variance

Question 39

Sales Mix Variance Formula

Answer 39

(Ac. product sales mix ratio- Budg. Product sales mix ratio) X Actual sold units X Budgeted CM per unit of that product _____________________________________________ Budg. CM per unit of that product

Question 40

Sales Quantity and Market Variances Formula

Answer 40

``` (Ac. Sold product- Budg. sales product) X Budg. product sales mix ratio X Budg. CM per unit of that product ______________________________ Budg. CM per unit of that product ```

Question 41

Market Size Variance Formula

Answer 41

(Ac. Market size U's- Budg. Market size U's) x Budg. market share % X Budg. CM per unit Weighted Average) __________________________________ Market Size Variance

Question 42

Market Share Variance Formula

Answer 42

``` (Ac. Market Share % - Budg. market Share%) X Ac. Industry U's X Budg. CM per unit(Weighted Average) ___________________________________ Market Share Variance formula ```

Question 43

Components of the Balanced Scorecard

Answer 43

1. F-inancials 2. I- nternal 3. C-ustomer satisfaction 4. A-dvancement of innovation and HR development

Question 44

F-inancial component of Balanced Scorecard means

Answer 44

Profits are pointed "At Us"

Question 45

I-nternal business processes component of Balanced Scorecard means?

Answer 45

Efficient Production

Question 46

C-ustomer Satisfaction component of Balanced Scorecard means?

Answer 46

Market Share

Question 47

A-dvancement of innovation and human resources development component of Balanced Scorecard means?

Answer 47

Retention of Key Employees: Learning and Growth