Budgeting and Forecasting Flashcards
Forecast
reduction of what is likely to happen
Budget
Quantified plan of action
Principle budget factor
Factor which limits an organisations activities, usually sales demand
Master budget
consolidation of all the subsidiary budgets, includes:
a) budgeted IS
b) Budgeted BS
c) Cash budget
Sensitivity analysis
Sensitivity of budgets to changes in a assumptions a.k.a. ‘What if’ analysis
High-low method
Use when semi-variable cost
Total costs: Formula
FC + (VC per unit x output)
Linear regression analysis
~ technique for establishing a straight line equation
~ takes into account all data sets
Correlation
Degree to which one variable is related to another
R=-1
R=1
1= as one increase, so does the other -1= as one increase, the other decreases
Coefficient of determination
r^2
amount of one change that CAN BE EXPLAINED BY another change
! BEAWARE ! not ‘caused by’
Big data
concerns high-volume, high velocity and high-variety information assets and is used to identify trends
Big data analytics
identify storage, relationships, patterns and other correlations
Imposed budgeting
a.k.a. top-down
top management prep budget w/ no input from operating personnel
Participative budgeting
a.k.a. bottom-up
budgets developed by lower-level mgt and submitted to seniors mgt
Incremental budgeting
base next year on CY’s results but modified for changes in activity levels to pricing
Zero based budgeting
each budget should be prepared from the very beginning or zero
Rolling budgeting
a.k.a. continuous budgeting
budgets prepared every 1/2/3m for 12m and extend current budget
Product-based budgeting
separate budget for each product
Responsibility based budgeting
separate budgets for each area of responsibility
Activity based budgeting
based on a framework of activities and cost drivers
