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Management Reporting > Budgeting and Forecasting > Flashcards

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
Q

It depends on the sales budget since it dictates how many units should be produced.

A

Production and Direct Materials Budget

26
Q

Estimated every planned expense incurred while producing the goods or services.

A

Overhead Budget

27
Q

Refers to managing a company’s cash inflows and outflows over a specified period.

A

Cash Budget

28
Q

Determines if the organization has enough cash and cash equivalents to cover its operating requirements in the short term.

A

Cash Budget

29
Q

A key planning tool that summarizes the company’s financial situation.

A

Master Budget

30
Q

Used to prepare sales, production, materials, labor, and overhead budgets.

A

Forecasting Techniques

31
Q

What to do before using Forecasting Techniques?

A

Assess the past data for accuracy and appropriateness for its intended purpose.

32
Q

What to do to make a good forecast?

A

Methods of data collection must be fair.

33
Q

Three types of Forecasting Techniques

A
  1. High Low Method
  2. Linear Regression
  3. Time Series Analysis
34
Q

Linear Equation in the High-Low Method

A

y = a + bx

y = total cost
a = fixed cost
b = variable cost
x = output

35
Q

It requires information on costs incurred at various levels.

A

WHigh-Low Method

36
Q

What graph could be used to show the relationship between two variables?

A

Scatter Graph

37
Q

It is also known as Method of Least Squares

A

Regression Analysis

38
Q

It is a more accurate technique to estimate the line of best fit.

A

Regression Analysis

39
Q

Formula for the value of b in the straight-line expression

A

b= ((n∑xy) - (∑x)(∑y)) / (n∑x^2) - (∑x)^2

40
Q

Formula for the value of a in the straight-line expression

A

a = ȳ - bx̄

41
Q

It can be used to evaluate the strength of the relationship.

A

Linear Regression

42
Q

It is also known as the line of best fit

A

Regression Line

43
Q

It is the determining of how close the plotted dots are to the line.

A

Degree of Correlation

44
Q

It can be measured by computing the correlation coefficient (r)

A

Degree of Correlation

45
Q

If the value r is closer to -1 or 1, what relationship is there?

A

Stronger Relationships

46
Q

If the value r is near 0, what relationship is there?

A

Weaker Relationships

47
Q

It is using a line of best fit to predict a value within two extreme points of a given range.

A

Interpolation

48
Q

It uses a line of best fit to predict a value outside two extreme points.

A

Extrapolation

49
Q

What is the general rule in the interpolation and extrapolation?

A

Interpolation is generally considered safer than extrapolation.

50
Q

It records a series of figures or values over time.

A

Time Series

51
Q

It is the graph of a time series.

A

Histogram

52
Q

Four Components of a Time Series

A

Trend
Seasonal Variations or Fluctuations
Cyclical Variations or Cycles
Random Variations

53
Q

Formula of Additive Model as Time Series

A

TS = T + SV

TS = actual Time Series
T = trend series
SV = seasonal component

54
Q

Three Ways to Find the Trend

A

High Low Method
Linear Regression
Moving Average

55
Q

It is an average of the results of a fixed number of periods.

A

Simple Moving Average

56
Q

Companies use it to build business models to assist the forecasting and planning process.

A

Spreadsheet

57
Q

It is performed to see the impact of changes in assumptions.

A

‘What If’ Analysis or Sensitivity Analysis

58
Q

Performed to quantify risks of an organization as part of its risk measurement exercises.

A

Stress Test

59
Q

It refers to the information that societies generate each year.

A

Big Data

60
Q

Four Vs of Big Data

A

Variety
Velocity
Veracity
Volume

61
Q
A

Management Reporting (8 decks)

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