B2: Strategic Planning

Question 1

What is the absorption approach equation?

Answer 1

Revenue
- COGS (DM + DL + F&V O/H)
Gross Margin
- Operating expenses (SG&A F&V)
Net Income

Question 2

What is the contribution (variable costing) approach equation?

Answer 2

Revenue
- Variable costs (DM + DL + V O/H + V SG&A)
Contribution margin
- Fixed costs
Net Income

Question 3

What is the difference between the absorption and contribution approach?

Answer 3

treatment of fixed factory O/H
A: product cost
C: period cost, expensed in period incurred (of all units produced even if not sold)

Question 4

When is income lower under absorption costing? higher?

Answer 4

Sales > production

Production > sales

Question 5

When is income lower under absorption costing? higher?

Answer 5

Sales > production

Production > sales

Question 6

What is the breakeven point in units?

Answer 6

Total fixed costs / contribution margin per unit

Question 7

How do you calculate breakeven point in dollars?

Answer 7

Contribution margin per unit:
unit price x breakeven point (units)

or

Contribution margin ratio:
Total fixed costs / contribution margin ratio

Question 8

What are the 4 critical success factors in the balanced scorecard?

Answer 8

FICA
Financial
Internal business processes
Customer satisfaction
Advancement of innovation and HR development

Question 9

What is Controllable margin?

Answer 9

contribution margin net of controllable costs

Controllable costs represent those fixed costs that managers can impact in less than one year

Question 10

When are costs relevant in marginal analysis?

Answer 10

The relevance of a particular cost to a decision is determined by potential effect on the decision.
Relevant costs are expected future costs that vary with the action taken

Question 11

What is Controllable margin?

Answer 11

contribution margin net of controllable costs

Controllable costs represent those fixed costs that managers can impact in less than one year

Question 12

What info does a cash budget provide?

Answer 12

availability of funds for:
investment
repayment
distribution

Question 13

What is the first step in the budget development process?

Answer 13

Forecast sales volume

Question 14

What is the first step in the budget development process?

Answer 14

Forecast sales volume

Question 15

When are flexible budgets appropriate?

Answer 15

When we have any variation of activity with variable costs

Question 16

When are flexible budgets appropriate?

Answer 16

When we have any variation of activity with variable costs

Question 17

When are flexible budgets appropriate?

Answer 17

When we have any variation of activity with variable costs

Question 18

Why is an annual cash budget developed?

Answer 18

Anticipate cash flows to avoid troubles with interim financing and figure out how best to invest money

Question 19

Why is an annual cash budget developed?

Answer 19

Anticipate cash flows to avoid troubles with interim financing and figure out how best to invest money

Question 20

What is margin of safety?

Answer 20

total sales - breakeven sales

margin of safety $ / total sales = margin of safety %

Question 21

How do we calc budgeted production?

Answer 21

budgeted sales
+ desired ending inventory
- beginning inventory

Question 22

How do we calc DM purchases for the period?

Answer 22

DM needed for production period
+ desired ending inventory
- beginning inventory

Question 23

How do we calc DM usage for the period?

Answer 23

beginning inventory
+ purchases
- ending inventory

Question 24

How do we calc COGS?

Answer 24

COGM
+ beginning FG inventory
- ending FG inventory

Question 25

DM price variance

Answer 25

actual quantity purchased x (actual price - standard price)

Question 26

DM quantity usage variance

Answer 26

standard price x (actual quantity used - standard quantity allowed)

Question 27

DL rate variance

Answer 27

actual hours worked x (actual rate - standard rate)

Question 28

DL efficiency variance

Answer 28

standard rate x (actual hours worked - standard hours allowed)

Question 29

VOH rate spending variance

Answer 29

actual hours x (actual rate - standard rate)

Question 30

VOH efficiency variance

Answer 30

standard rate x (actual hours - standard hours allowed for actual production volume)

Question 31

FOH budget spending variance

Answer 31

actual FOH - budgeted FOH

Question 32

FOH volume variance

Answer 32

budgeted FOH - standard FOH cost allocated to production (=actual production x standard rate) (actual production - budgeted production) x per unit standard FOH rate

Question 33

Sales price variance

Answer 33

(actual SP/unit - budgeted SP/unit) x actual units sold

Question 34

Sales volume variance

Answer 34

(actual units sold - budgeted sales units) x standard contribution margin per unit

Question 35

What is flexible budget variance?

Answer 35

Difference between actual amounts and flexible budget amounts for the actual output achieved

Question 36

Which costs are relevant in a make/buy decision?

Answer 36

variable materials, variable labor, and avoidable fixed costs

Question 37

What is budgetary control?

Answer 37

process of developing plans for expected operations and controlling operations to help carry out those plans

Question 38

What is cost based pricing associated with?

Answer 38

price stability price justification fixed cost recovery

Question 39

How do we calc market share variance?

Answer 39

(actual MS - budgeted MS) x actual mkt size x budgeted CM