6. Planning, Control, Analysis Flashcards
Strategic planning vs Tactical
Strategic = long term Tactical = short term
Master budget parts
Master = summary, all parts together, static budget for whole corp incl: Operating = income stmt Financial = other fin stmts, B/S, etc
Flexible budget vs Static
Static = planning, specific level of activity, usually a single division Flexible= can change with input changes
Master budget steps
Order of budget creation:
- Sales budget
- Production
- DM/Raw mat purch
- CASH! LAST
Basic difference between master and flexible budget is:
- Flexible can be prepared at any production level in a relevant range, master is static
- Flexible is only used after the budget period, master is before
-Flexible can be prepared at any production level in a relevant range, master is static
Budget data:
COGS= $300k, AP 1/1= 20k
Inv- 1/1 - 30k, Inv-12/31- 42k
Purchases will be made in twelve equal monthly amounts and paid the following month. What are the budgeted cash pmts?
$306,000 PAID IN THE FOLLOWING MONTH: Beg + Purch = Avail - End = COGS 30 + P = 342 (from->) - 42 = 300 P = 312 div by 12 mth = 26 But have 20 a month from old AP as Jan. So (20 x 1) + (26 x 11) = $306,000
Correlation Analysis
Find best cost driver
Range between 1 and -1, pos = strong direct relationship ($/dates) (superior/normal good), then neg = strong inverse relationship (study/fun) (inferior good), Zero is no relationship
Coefficient of Determination
Used for line of best fit after Correlation Analysis
Zero to 1, closer to 1 is line works better
Responsibility Accounting
Cost Center = manage cost incurred by them
Profit Center = manage cost, revenue
Invest Center= manage costs, revenues, capital investments
Activity based costing
Accumulate costs by activity, not dept
Groups activities as costs: employee costs, OH type costs
Reduce non-value added cost
Service Dept Costs
ex) support center, not adding real revenues
1. Direct allocation- allocate all service dept costs directly to production depts
2. Step method- trickle down, service to service to production
Probability analysis
Revenue ($) x Probability (%) = Weighted value ($)
Probability sections must total 100%
Sum of weighted values is your est value of the project
When production levels increase with a flexible budget what would the effect be on these costs:
1) Fixed per unit, 2) Var per unit:
- down, down
- no change, no change
- no change, down
- down, no change
-down, no change
Production increases = more units to spread cost over so fixed per unit goes down since var/unit, variable per unit stays same cuz its fixed per unit
Negative sloping line graph has what type of correlation coefficient?
a) -9
b) -.93
c) +.93
d) +9
b) -.93
Indirect relationship, between 1 and -1, but indirect relationships are on the -1 side
Controllable revenue would be included in a performance center report for: (I, II, neither, both)
I. Cost center
II. Profit center
II. Profit center only
cost only deals with cost, profit is cost and revenue
In ABCosting cost reduction is accomplished by identifying and eliminating: (I, II, neither, both)
I. All cost drivers
II. Non-value adding activities
II. Non-value adding activities
It increases cost drivers actually, by grouping activities instead of just using depts
It tries to remove non-value added activities to lower cost
