._Financial Planning (B2)

Question 1

What is a Static Budget?

Answer 1

Budget targeted for a specific segment of a company.

Question 2

What is a Master Budget?

Answer 2

Budget targeted for the company as a whole

Includes budgets for Operations and Cash Flows

Includes set of budgeted Financial Statements

Question 3

How do Fixed Costs affect budgeting?

Answer 3

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

Question 4

How do Variable Costs affect budgeting?

Answer 4

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

Question 5

How are Material Variances calculated?

Answer 5

SAM:

Standard Material Costs
- Actual Material Costs
= Material Variance

Question 6

How are Labor Variances calculated?

Answer 6

SAL

Standard Labor Costs
- Actual Labor Costs
= Labor Variance

Question 7

How are Overhead Variances calculated?

Answer 7

OAT

Overhead Applied
- Actual Overhead Cost
= Total Overhead Variance

Question 8

How does Absorption Costing compare to Variable Costing?

Answer 8

Absorption Costing - External Use- Cost of Sales- Gross Profit- SG&A

Variable Costing - Internal Use- Variable Costs- Contribution Margin- Fixed Costs

Question 9

How is Contribution Margin calculated?

Answer 9

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

Question 10

How is Break-even Point (per unit) calculated?

Answer 10

Total Fixed Costs / Contribution Margin (per unit)
= Break-even Point Per Unit

Assumption: Total Costs & Total Revenues are LINEAR

Question 11

What is the focus in a Cost Center?

Answer 11

Management is concerned only with costs

Question 12

What is the focus in a Profit Center?

Answer 12

Management is concerned with both costs and profits

Question 13

What is the focus in an Investment Center?

Answer 13

Management is concerned with costs- profits- and assets

Question 14

What is the Delphi technique?

Answer 14

Forecasting technique where Data is collected and analyzed

Requires judgement/consensus

Question 15

What is Regression Analysis?

Answer 15

A forecasting technique where Sales is the dependent variable.

Simple Regression - One independent variable

Multiple Regression - Multiple independent variables

Question 16

What are Econometric Models?

Answer 16

Forecast sales using Economic Data

Question 17

What are Naive Forecasting Models?

Answer 17

Very Simplistic

- Eyeball past trends and make an estimate

Question 18

How does a Moving Average compare to Exponential Smoothing?

Answer 18

Both project estimates using average trends from recent periods

Difference: Exponential Smoothing weighs recent data more heavily

Question 19

What are the characteristics of Short-term Cost Analysis?

Answer 19

Uses Relevant Costs Only

Ignore Sunk Costs

Opportunity Cost is a Must

Question 20

How do you calculate Budgeted Production?

Answer 20

Budgeted Sales
+ Desired ending inventory
- Beg. Inventory
= Budgeted production

Question 21

How do you calculate the # of DM units to purchase for a production budget?

Answer 21

Units of DM needed for a production period
+ Desired EI at the end of the period
- BI at the start of the period
= Units of DM to be purchased for the period

Question 22

How do you calculate the Cost of DM to be purchased?

Answer 22

Units of DM to be purchased for the period
x Cost per unit
= Cost of DM to be purchased for the period

Question 23

How do you calculate DM usage?

Answer 23

Beg. inv at cost
+ Purchases at cost
- End. inv at cost
= DM usage (cost of materials used)

Question 24

How do you calculate Direct Labor budget?

Answer 24

Budgeted production (in units)
x Hours (or fractions of hrs) required to produce each unit
= Total # of hours needed
x Hourly wage rate
= Total wages

Question 25

How do you calculate COGM and COGS budget?

Answer 25

COGM
+ Beg. FG inventory
- End. FG inventory
= COGS

Question 26

DM Price Variance Calculation?

Answer 26

Actual Qty Purchased x (Actual price - Standard price)

Question 27

DM Quantity Usage Variance?

Answer 27

Standard price x (Actual Qty used - Standard qty. allowed)

Question 28

DL Rate Variance?

Answer 28

Actual Hrs. Worked x (Actual Rate - Standard Rate)

Question 29

DL Efficiency Variance?

Answer 29

Standard Rate x (Actual Hrs. Worked - Standard Hrs. Allowed)