Financial Planning

Question 1

What is a Static Budget?

Answer 1

Budget targeted for a specific segment of a company.

Question 2

What is a Master Budget?

Answer 2

Budget targeted for the company as a whole Includes budgets for Operations and Cash Flows Includes set of budgeted Financial Statements

Question 3

Financial Budget

Answer 3

Capital

Cash

B/S

Cash Flow

Question 4

Operating Budget

Answer 4

Income Statement

Supporting Schedules

(production stuff)

Question 5

Kaizen Budget

Answer 5

Project costs based on improvement which have not yet been implememented

Question 6

Activity Based Budget

Answer 6

Operating budgets for each activity

Management insight to causes

Question 7

How do Fixed Costs affect budgeting?

Answer 7

Costs independent of the level activity within the relevant range

Question 8

How do Variable Costs affect budgeting?

Answer 8

The more Direct Materials or Direct Labor used- the more Variable Costs per unit

Question 9

How are Material Variances calculated?

Answer 9

SAM:

Stnd Mat Costs - Act Mat Costs = Mat Var

Question 10

Price Variance

Answer 10

AQ x AP

AQ x SP

Question 11

How are Labor Variances calculated?

Answer 11

SAL

Stnd Labor Costs - Act Labor Costs = Labor Var

Question 12

How are Overhead Variances calculated?

Answer 12

OAT

OH Applied - Act OH Cost = Total OH Variance

Question 13

How does Absorption Costing compare to Variable Costing?

Answer 13

Absorption Costing - External Use

• Cost of Sales- Gross Profit- SG&A

Variable Costing - Internal Use

• Variable Costs- Contribution Margin- Fixed Costs

Question 14

How is Contribution Margin calculated?

Answer 14

Sales Price (per unit)

• ALL Variable Cost (per unit)

Question 15

How is Break-even Point (per unit) calculated?

Answer 15

Total Fixed Costs / CM (per unit)

Assumption: Total Costs & Total Revenues are LINEAR

Question 16

What is the focus in a Cost Center?

Answer 16

Management is concerned only with costs

Question 17

What is the focus in a Profit Center?

Answer 17

Management is concerned with both costs and profits

Question 18

What is the focus in an Investment Center?

Answer 18

Management is concerned with costs- profits- and assets

Question 19

What are Naive Forecasting Models?

FORECAST

Answer 19

Very Simplistic “Eyeball” historical trends and make a subjective estimate

Question 20

What is the Delphi technique?

FORECASTING

Answer 20

Technique where group Data is collected and analyzed

Requires judgement/consensus

structured approach to qualitative forecast

Question 21

Consumer Behavior

FORECASTING

Answer 21

Markov Analysis

forecast purchases based on brand loyalty and such

Question 22

How does a Moving Average compare to Exponential Smoothing?

FORECAST

Answer 22

Both project estimates using average trends from historical periods

Difference: Exponential Smoothing weighs recent data more heavily

Question 23

What are Econometric Models?

FORECAST

Answer 23

Observed associations with Economic Data

Regression analysis

Question 24

What is Regression Analysis?

FORECAST

Answer 24

Quantitative technique, observed relationships

Simple Regression - One independent variable (predictor)

Multiple Regression - Multiple independent variables

Question 25

Goodness of Fit

Answer 25

Coefficient of Determination Adjusted R² Closer to 1 the better

Question 26

F-Statistic

Answer 26

Significance % chance it occurred by chance

Question 27

t-Statistic

Answer 27

significance of independent variable P-value is % chance it occurred by chance

Question 28

Regression Analysis Assumptions

Answer 28

* linear relationshps * variance/error constant * error/residual is independent * normally distributed

Question 29

Multi-collinearity

Answer 29

bad: high correlation among independent variables

Question 30

Auto-correlation

Answer 30

indication that error is not random measured by Durbin-Watson statistic

Question 31

What are the characteristics of Short-term Cost Analysis?

Answer 31

Uses Relevant Costs Only Ignore Sunk Costs Opportunity Cost is a Must

Question 32

Efficiency Variance

Answer 32

AQ x SP SQ x SP

Question 33

Diff in NI between Variable v Absorption Costing

Answer 33

(change in EndInv) x (FMOH/unit)

Question 34

Assumptions if CVP Analysis

Answer 34

1. Selling price does not change 2. Product mix constant 3. Fix/Var split-able 4. Variable are constant 5. Total fix constant over range 6. Productivity-efficiency constant 7. Units produced = sold

Question 35

Standard error of the estimate

Answer 35

Standard Deviation 2 = 95%

Question 36

Project Elements (4)

Answer 36

Resources Time Money Scope

Question 37

Project Management Process (5)

Answer 37

* Initiation * Planning * Execution * Monitoring-Control * Closure

Question 38

Project Initiation

Answer 38

Select Project Recognize benefits Authorize Assign PM Project Charter

Question 39

Project Planning | (SOW)

Answer 39

# Define Requirements Define Quality/Quantity of Work Identify resources Schedule Activities/Tasks Identify/Assess Risk

Question 40

Project Execution

Answer 40

Problems: Project organization uncertaintity (PM v Functional) Unusual decision pressure Inadequate Sr. Mgt support

Question 41

Project Monitoring-Control

Answer 41

Track progress Compare actual to predicted Analyze variances Adjust

Question 42

Network Diagrams Project Scheduling-Controlling

Answer 42

Critical Path (CPM) - one time est./actsivity PERT - addsd probability est./activity PERT Cost - adds resource cost GERT - adds looping & branching

Question 43

Gantt Chart Project Scheduling-Controlling

Answer 43

Bar Chart with start/finish

Question 44

Milestone Chart Project Scheduling-Controlling

Answer 44

Milestones over time

Question 45

Risk Management Steps Project Mangement

Answer 45

Identify Quantify Prioritize Respond