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Flashcards in Financial Planning Deck (19)
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What is a Static Budget?

Budget targeted for a specific segment of a company.


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


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


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


How are Material Variances calculated?

SAM: Standard Material Costs - Actual Material Costs = Material Variance


How are Labor Variances calculated?

SAL Standard Labor Costs - Actual Labor Costs = Labor Variance


How are Overhead Variances calculated?

OAT Overhead Applied - Actual Overhead Cost = Total Overhead Variance


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


How is Contribution Margin calculated?

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


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


What is the focus in a Cost Center?

Management is concerned only with costs


What is the focus in a Profit Center?

Management is concerned with both costs and profits


What is the focus in an Investment Center?

Management is concerned with costs- profits- and assets


What is the Delphi technique?

Forecasting technique where Data is collected and analyzed Requires judgement/consensus


What is Regression Analysis?

A forecasting technique where Sales is the dependent variable. Simple Regression - One independent variable Multiple Regression - Multiple independent variables


What are Econometric Models?

Forecast sales using Economic Data


What are Naive Forecasting Models?

Very Simplistic - Eyeball past trends and make an estimate


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


What are the characteristics of Short-term Cost Analysis?

Uses Relevant Costs Only Ignore Sunk Costs Opportunity Cost is a Must