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