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Flashcards in Financial Planning Deck (19):
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 Center?

Management is concerned only with costs

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"