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Flashcards in Financial Planning Deck (19)
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1
Q
What is a Static Budget?
A
Budget targeted for a specific segment of a company.
2
Q
What is a Maser Budget?
A
Budget targeted for the company as a whole

Includes budgets for Operations and Cash Flows

Includes set of budgeted Financial Statements
3
Q
How do Fixed Costs affect budgeting?
A
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
Q
How do Variable Costs affect budgeting?
A
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
Q
How are Material Variances calculated?
A
SAM:

Standard Material Costs
- Actual Material Costs
= Material Variance
6
Q
How are Labor Variances calculated?
A
SAL

Standard Labor Costs
- Actual Labor Costs
= Labor Variance
7
Q
How are Overhead Variances calculated?
A
OAT

Overhead Applied
- Actual Overhead Cost
= Total Overhead Variance
8
Q
How does Absorption Costing compare to Variable Costing?
A
Absorption Costing - External Use- Cost of Sales- Gross Profit- SG&A

Variable Costing - Internal Use- Variable Costs- Contribution Margin- Fixed Costs
9
Q
How is Contribution Margin calculated?
A
Sales Price (per unit)
- Variable Cost (per unit)
= Contribution Margin (per unit)
10
Q
How is Break-even Point (per unit) calculated?
A
Total Fixed Costs / Contribution Margin (per unit)
= Break-even Point Per Unit

Assumption: Total Costs & Total Revenues are LINEAR
11
Q
What is the focus in a Cost Center?
A
Management is concerned only with costs
12
Q
What is the focus in a Profit Center?
A
Management is concerned with both costs and profits
13
Q
What is the focus in an Investment Center?
A
Management is concerned with costs- profits- and assets
14
Q
What is the Delphi technique?
A
Forecasting technique where Data is collected and analyzed

Requires judgement/consensus
15
Q
What is Regression Analysis?
A
A forecasting technique where Sales is the dependent variable.

Simple Regression - One independent variable

Multiple Regression - Multiple independent variables
16
Q
What are Econometric Models?
A
Forecast sales using Economic Data
17
Q
What are Naive Forecasting Models?
A
Very Simplistic
- Eyeball past trends and make an estimate
18
Q
How does a Moving Average compare to Exponential Smoothing?
A
Both project estimates using average trends from recent periods

Difference: Exponential Smoothing weighs recent data more heavily
19
Q
What are the characteristics of Short-term Cost Analysis?
A
Uses Relevant Costs Only

Ignore Sunk Costs

Opportunity Cost is a Must