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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