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Flashcards in Financial Planning Deck (47):
1

What is a Static Budget?

Budget targeted for a specific segment of a company.

2

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

3

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

4

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

5

How are Material Variances calculated?

SAM:

Standard Material Costs
- Actual Material Costs
= Material Variance

6

How are Labor Variances calculated?

SAL

Standard Labor Costs
- Actual Labor Costs
= Labor Variance

7

How are Overhead Variances calculated?

OAT

Overhead Applied
- Actual Overhead Cost
= Total Overhead Variance

8

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

9

How is Contribution Margin calculated?

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

10

How is Break-even Point (per unit) calculated?

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

Assumption: Total Costs & Total Revenues are LINEAR

11

What is the focus in a Cost/Revenue Center?

Management is concerned only with costs/revenues

12

What is the focus in a Profit Center?

Management is concerned with both costs and profits

13

What is the focus in an Investment Center?

Management is concerned with costs- profits- and assets

14

What is the Delphi technique?

Forecasting technique where Data is collected and analyzed

Requires judgement/consensus

15

What is Regression Analysis?

A forecasting technique where Sales is the dependent variable.

Simple Regression - One independent variable

Multiple Regression - Multiple independent variables

16

What are Econometric Models?

Forecast sales using Economic Data

17

What are Naive Forecasting Models?

Very Simplistic
- Eyeball past trends and make an estimate

18

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

19

What are the characteristics of Short-term Cost Analysis?

Uses Relevant Costs Only

Ignore Sunk Costs

Opportunity Cost is a Must

20

Target Cost Formula

Target Cost=Market Price-Required Profit

21

Kaizen Method

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

22

Sensitivity Analysis Slope

DIF TC/ DIF Volume

23

Simple Linear Regression Model

y=A+Bx
TC=FC+VC(U)

24

Y is the what is the regression model

Dependent variable

25

X is the what in the regression model

Independent variable

26

A is the what is the regression model

Y-intercept

27

B is the what in the regression model

Slope

28

-1 Coefficient of Correlation means?

Perfect Inverse Relationship

29

0 Coefficient of correlation means?

No relationship

30

1 Coefficient of correlation means?

Perfect direct relationship

31

Coefficient of correlations measures?

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

32

Coefficient of determination means?

(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.

33

Budgeted Production formula

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

34

Units of DM to be purchased for the period formula

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

35

Desired END, CASH Formula

Beg, Cash
+ Cash Collected

__________________
End, cash
< Cash Requirements>
__________________
Desired End, Cash

36

Sales Variance Includes?

1. Sales Price Variance
2. Sales Volume Variance

37

Sales Volume Variance Includes?

1. Sales Quantity Variance
2. Sales Mix Ratio

38

Sales Quantity Variance Includes?

1. Market Size Variance
2. Market Share Variance

39

Sales Mix Variance Formula

(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

40

Sales Quantity and Market Variances Formula

(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

41

Market Size Variance Formula

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

42

Market Share Variance Formula

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

43

Components of the Balanced Scorecard

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

44

F-inancial component of Balanced Scorecard means

Profits are pointed "At Us"

45

I-nternal business processes component of Balanced Scorecard means?

Efficient Production

46

C-ustomer Satisfaction component of Balanced Scorecard means?

Market Share

47

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

Retention of Key Employees: Learning and Growth