B2: Strategic Planning

Question 1

What is a master budget?

Answer 1

an overall budget, consisting of many smaller budgets, that is based on a specific level of production

Question 2

What is a flexible budget?`

Answer 2

a series of budgets based on different activity levels within a relevant range.

Question 3

What can be used to seperate fixed and variable components?

Answer 3

regression analysis

Question 4

What is a regression analysis?

Answer 4

statistical model that estimates the dependent variables based on changes in the independent variable

Question 5

What is learning curve analysis?

Answer 5

used to predict increases in efficiency/production as experience is gained

Question 6

What is expected value analysis?

Answer 6

long-term average of repeated trials and is found by multiplying the probability of each outcome by its payoff and then summing the results.

Question 7

What is the coefficient of determination?

Answer 7

The coefficient of determination (R2) is the proportion of the total variation in the dependent variable (y) explained by the independent variable (x).

Question 8

What is the balanced scorecard method?

Answer 8

using both financial and nonfinancial measurements

Question 9

Sales volume variance can be divided into which two additional variances?

Answer 9

sales quantity variance, sales mix variance

Question 10

SBU stands for?

Answer 10

strategic business units

Question 11

Critical success factors generally included in the balanced scorecard are:

Answer 11

innovation, customer satisfaction, internal business processes and finance. (FICI)

Question 12

What is an investment center responsible for?

Answer 12

revenues, expenses, and invested capital

Question 13

What is a profit center responsible for?

Answer 13

revenue and expenses

Question 14

What is the internal business process perspective of a balanced scorecard concerned with?

Answer 14

low costs supported with low prices

Question 15

The customer perspective of a balanced scorecard is concerned with

Answer 15

target markets

Question 16

The financial perspective of a balanced scorecard is concerned with

Answer 16

the captures of increased market share

Question 17

The learning and growth (advanced learning and innovation) perspective of a balanced scorecard is concerned with

Answer 17

linking strategy with reward and recognition

Question 18

What is the learning and growth perspective on the balanced scorecard concerned with?

Answer 18

productivity, employee effectiveness, and retention

Question 19

What are “critical success factors”

Answer 19

financial and non-financial features of an organization that contribute to its success in achieving strategy

Question 20

What are “authoritative standards”?

Answer 20

standards imposed by management w/out employee input

Question 21

What is “controllable margin”?

Answer 21

contribution margin net of controllable costs

Question 22

What are “controllable costs”?

Answer 22

fixed costs that managers can impact in <1 year

Question 23

What are the types of responsibility segments?

Answer 23

CRPI - cost, revenue, profit (accountable for revenues and costs), and investment

Question 24

What are the critical success factors of the balanced scorecard?

Answer 24

FICA - financial, internal business processes, customer satisfaction, advancement (learning and growth)

Question 25

When is the cash budget created?

Answer 25

after all other are

Question 26

What is gross profit?

Answer 26

sales - cogs

Question 27

What is included in the financial budget process?

Answer 27

1. cash/capital purchases budgets 2. balance sheet and statement of cash flows

Question 28

What is included in the operating budget process?

Answer 28

1. all budgets except cash/capital purchases 2. pro forma income statement

Question 29

What is a strategic plan?

Answer 29

process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy

Question 30

What are the four perspectives of a balanced scorecard?

Answer 30

CIFIp

1. ) Customer satisfaction
2. ) Innovation
3. ) Finance.
4. ) Internal business Processes

Question 31

What is regression analysis?

Answer 31

used to estimate relationships among variables.

Question 32

What is sensitivity analysis?

Answer 32

Sensitivity analysis uses a trial and error method in which the sensitivity of the solution to changes in variables is calculated

Question 33

What is target pricing?

Answer 33

taking the price you want the unit to cost and then determining production costs based off that

Question 34

What is multiple regression?

Answer 34

a statistical technique that predicts values of one variable on the basis of two or more other variables.

Question 35

What is the Delphi method of forecasting?

Answer 35

multiple teams in geographically remote locations. Information is shared and gathered in a central point and compiled and then redistributed for comment

Question 36

What is Regression analysis?

Answer 36

dependent variable and one or more independent variables. More specifically, regression analysis helps one understand how the typical value of the dependent variable changes when any one of the independent variables is varied

Question 37

What are time-series models?

Answer 37

examine historical data to predict future

Question 38

What’s the difference between financial and operating budgets?

Answer 38

The financial budget process includes:

• Cash and capital purchases budgets.
• Balance sheet and statement of cash flows.

The operating budget process includes:

• All budgets except cash and capital purchases.
• The pro forma income statement.

Question 39

Difference between a Strategic Plan and a Performance Report?

Answer 39

a strategic plan is broad-based and long-term in nature; a performance report is more specific and shorter term

Question 40

What does “net of” mean

Answer 40

minus

Question 41

What is a Controllabe Margin?

Answer 41

contribution margin - controllable fixed costs (can be changed in under one year like advertising)

Question 42

What is trade credit?

Answer 42

agreement between businesses to buy goods or services on account (ex: pay within 30 days)

Question 43

What is Standard Costing?

Answer 43

production costs are compiled and compared with actual costs

Question 44

What is Cost of Capital?

Answer 44

rate of return that covers costs associated with the funds employed

Question 45

How do you calculate the Weighted Average Cost of Capital?

Answer 45

% amount financed * % cost of capital

for example $35 at 8% cost and $15 at 6% cost – will be (.07 * .08) + (.3 * .06) = 7.4% cost of capital

Question 46

Define Residual Income.

Answer 46

amount you have left after all debts are paid