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Budgeting and Forecasting Flashcards

1
Q

A detailed quantitative plan for acquiring and using financial and other resources over a specific period.

A

Budget

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2
Q

Involves developing objectives and preparing various budgets to achieve those objectives.

A

Planning

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3
Q

A management function that ensures the attainment of the company’s goals.

A

Control

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4
Q

The period for which a budget is prepared and used.

A

Budget period

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5
Q

It ordinarily covers a one year period corresponding to the company’s fiscal year.

A

Operating Budgets

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6
Q

It is a collection of instructions governing the responsibilities of persons and the procedures.

A

Budget Manual

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7
Q

Person who prepares sales budget.

Manager

A

Sales Manager

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8
Q

Person who prepares production budget.

Manager

A

Production Manager

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9
Q

Person who prepares direct materials budget.

Manager

A

Purchasing Manager

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10
Q

People who prepare their individual production, administration, and distribution cost center budgets for cost centers.

Manager

A

Cost Center Heads

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11
Q

Person who consolidates all the budgets and then prepares the cash budget, budgeted income statement, and budgeted balance sheet.

Manager

A

Finance Manager

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12
Q

Responsibilities of the budget committee

A

Budget Coordination and Administration

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13
Q

It is often assisted by a budget officer, typically an accountant.

A

Budget Committee

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14
Q

A budget of income and/or expenditure applicable to a particular function.

A

Departmental/Functional Budget

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15
Q

Parts of a Functional Budget

A

Production Budget
Sales Budget
Purchasing Budget
Personnel Budget

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16
Q

Step-by-step budgeting procedures

A
  1. Identify Principal Budget Factor (typically sales)
  2. Prepare a Sales Budget
  3. Prepare an Ending Inventory Budget
  4. Prepare a Production Budget
  5. Prepare a Direct Materials, Direct Labor, and Overhead Budget
  6. Prepare the Cash Budget
  7. Prepare the Master Budget
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17
Q

It sets the limit for an organization.

A

Sales Volume

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18
Q

Factors that must be considered when preparing a sales budget

A

Past Sales Performance
Seasonal Fluctuations
Market Trends
Market Research on sales price of the industry

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19
Q

Additional Resources that must be considered in a sales budget

A

Production capacity
Availability of raw materials
Financial capacity to support capital expenditures and raw materials

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20
Q

What should be considered when preparing the production budget?

A

Existing inventory level

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21
Q

It is usually based on the current inventory level.

A

Beginning Inventory

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22
Q

It will be used to compute the number of units produced.

A

Finished Goods Inventory

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23
Q

It will be used to compute the number of materials to be purchased.

A

Raw Materials Inventory

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24
Q

It determines the number of work hours to produce or manufacture the items.

A

Direct Labor Budget

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25
It depends on the sales budget since it dictates how many units should be produced.
Production and Direct Materials Budget
26
Estimated every planned expense incurred while producing the goods or services.
Overhead Budget
27
Refers to managing a company's cash inflows and outflows over a specified period.
Cash Budget
28
Determines if the organization has enough cash and cash equivalents to cover its operating requirements in the short term.
Cash Budget
29
A key planning tool that summarizes the company's financial situation.
Master Budget
30
Used to prepare sales, production, materials, labor, and overhead budgets.
Forecasting Techniques
31
What to do before using Forecasting Techniques?
Assess the past data for accuracy and appropriateness for its intended purpose.
32
What to do to make a good forecast?
Methods of data collection must be fair.
33
Three types of Forecasting Techniques
1. High Low Method 2. Linear Regression 3. Time Series Analysis
34
Linear Equation in the High-Low Method
y = a + bx ## Footnote y = total cost a = fixed cost b = variable cost x = output
35
It requires information on costs incurred at various levels.
WHigh-Low Method
36
What graph could be used to show the relationship between two variables?
Scatter Graph
37
It is also known as Method of Least Squares
Regression Analysis
38
It is a more accurate technique to estimate the line of best fit.
Regression Analysis
39
Formula for the value of b in the straight-line expression
b= ((n∑xy) - (∑x)(∑y)) / (n∑x^2) - (∑x)^2
40
Formula for the value of a in the straight-line expression
a = ȳ - bx̄
41
It can be used to evaluate the strength of the relationship.
Linear Regression
42
It is also known as the line of best fit
Regression Line
43
It is the determining of how close the plotted dots are to the line.
Degree of Correlation
44
It can be measured by computing the correlation coefficient (r)
Degree of Correlation
45
If the value r is closer to -1 or 1, what relationship is there?
Stronger Relationships
46
If the value r is near 0, what relationship is there?
Weaker Relationships
47
It is using a line of best fit to predict a value within two extreme points of a given range.
Interpolation
48
It uses a line of best fit to predict a value outside two extreme points.
Extrapolation
49
What is the general rule in the interpolation and extrapolation?
Interpolation is generally considered safer than extrapolation.
50
It records a series of figures or values over time.
Time Series
51
It is the graph of a time series.
Histogram
52
Four Components of a Time Series
Trend Seasonal Variations or Fluctuations Cyclical Variations or Cycles Random Variations
53
Formula of Additive Model as Time Series
TS = T + SV ## Footnote TS = actual Time Series T = trend series SV = seasonal component
54
Three Ways to Find the Trend
High Low Method Linear Regression Moving Average
55
It is an average of the results of a fixed number of periods.
Simple Moving Average
56
Companies use it to build business models to assist the forecasting and planning process.
Spreadsheet
57
It is performed to see the impact of changes in assumptions.
'What If' Analysis or Sensitivity Analysis
58
Performed to quantify risks of an organization as part of its risk measurement exercises.
Stress Test
59
It refers to the information that societies generate each year.
Big Data
60
Four Vs of Big Data
Variety Velocity Veracity Volume
61

Management Reporting (8 decks)

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