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Flashcards in Financial Planning Deck (19):
1

Budget targeted for a specific segment of a company.

Financial Planning & Analysis

2

Budget targeted for the company as a whole

Includes budgets for Operations and Cash Flows

Includes set of budgeted Financial Statements

Financial Planning & Analysis

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

Financial Planning & Analysis

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

Financial Planning & Analysis

5

SAM:

Standard Material Costs
- Actual Material Costs
= Material Variance

Financial Planning & Analysis

6

SAL

Standard Labor Costs
- Actual Labor Costs
= Labor Variance

Financial Planning & Analysis

7

OAT

Overhead Applied
- Actual Overhead Cost
= Total Overhead Variance

Financial Planning & Analysis

8

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

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

Financial Planning & Analysis

9

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

Financial Planning & Analysis

10

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

Assumption: Total Costs & Total Revenues are LINEAR

Financial Planning & Analysis

11

Management is concerned only with costs

Financial Planning & Analysis

12

Management is concerned with both costs and profits

Financial Planning & Analysis

13

Management is concerned with costs- profits- and assets

Financial Planning & Analysis

14

Forecasting technique where Data is collected and analyzed

Requires judgement/consensus

Financial Planning & Analysis

15

A forecasting technique where Sales is the dependent variable.

Simple Regression - One independent variable

Multiple Regression - Multiple independent variables

Financial Planning & Analysis

16

Forecast sales using Economic Data

Financial Planning & Analysis

17

Very Simplistic
- Eyeball past trends and make an estimate

Financial Planning & Analysis

18

Both project estimates using average trends from recent periods

Difference: Exponential Smoothing weighs recent data more heavily

Financial Planning & Analysis

19

Uses Relevant Costs Only

Ignore Sunk Costs

Opportunity Cost is a Must

Financial Planning & Analysis