Strategic Planning (Ch 2) Flashcards Preview

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Flashcards in Strategic Planning (Ch 2) Deck (46):
1

What is a Static Budget?

Budget targeted for a specific segment of a company.
Budgeted Costs for Budgeted Output

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

20

Relevance of a particular cost to decision

Potential Effect on the decision

21

Relevant Costs to Decision Making

Incremental Cost
Avoidable Cost
Opportunity Cost

22

Throughout Costs

Conversion of resources

23

Margin of Safety

Current Sales - Breakeven Sales

24

Discontinuation of Product

Relevant Costs

25

Break Even Sales

Fixed Costs/(Contribution Margin Ratio)

26

To maximize profit at full capacity

Contribution Margin per household should be maximized

27

Minimal Acceptable Price

Incremental Costs associated with order

28

Usefulness of External Benefits Reporting

Absorption Costing/GAAP

29

CM(Contribution Margin)

Fixed Costs+Operating Income

30

Break Even In Units

Fixed Costs/Contribution Margin Per Unit

31

Learning Curve Analysis

Best Method to estimate the cost of competitive bid

32

Expected Value Analysis

Long Term Average of repeated Trials

33

Based on Judgement

Delphi

34

Overall Budget Consisting of smaller budgets, based on specific level of Production

Master Budget

35

Series of Budget based on different activity levels within relevant range

Flexible Budget

36

Non Current Assets, PP&E

Capital Budgets

37

Over Head Rate

Budgeted Overhead Costs/Estimated Cost Driver

38

Applied Overhead

Std. Cost Driver for Actual level of Activity X Over Head Rate

39

Financial Scorecard

Accurate, Timely, Understandable, and Accountability

40

Balance Scorecard

FICA(Financial, Internal Business unit, Customer Satisfaction, Advancement of Innovation), gather information in multiple dimensions of organization's performance

41

Responsibility Accounting

Decision based on Managers

42

Cash Budget

Anticipate Cash Flows so that excess cash can be invested
and to minimize the need for interim financing

43

Market Share Variance

Actual Market Share (-) Budgeted Market Share (X) Actual Industry Units (X) Budgeted Contribution Margin

44

Employee Satisfaction and Retention

Learning and Growth/ Balance Score Card

45

SBU(Strategic Business Unit)

Decentralized

46

Contribution Margin

Net of Controllable Costs, that managers can impact less than one year