Financial Planning Flashcards

2
Q

What is a Static Budget?

A

Budget targeted for a specific segment of a company.

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3
Q

What is a Maser Budget?

A

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

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4
Q

How do Fixed Costs affect budgeting?

A

Costs independent of the level activity within the relevant range Property Tax is the same whether you produce 100,000 units or zero units However – Fixed Costs per unit vary given the amount of activity If you produce fewer units, fixed costs per unit will be greater than if you produce more units – i.e. less units to spread the cost over

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5
Q

How do Variable Costs affect budgeting?

A

The more Direct Materials or Direct Labor used, the more Variable Costs per unit However – Variable Costs per unit don’t change with the level of activity like Fixed Costs per unit

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6
Q

How are Material Variances calculated?

A

SAM: Standard Material Costs - Actual Material Costs = Material Variance

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7
Q

How are Labor Variances calculated?

A

SAL Standard Labor Costs - Actual Labor Costs = Labor Variance

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8
Q

How are Overhead Variances calculated?

A

OAT Overhead Applied - Actual Overhead Cost = Total Overhead Variance

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9
Q

How does Absorption Costing compare to Variable Costing?

A

Absorption Costing - External Use, Cost of Sales, Gross Profit, SG&A Variable Costing - Internal Use, Variable Costs, Contribution Margin, Fixed Costs

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10
Q

How is Contribution Margin calculated?

A

Sales Price (per unit) - Variable Cost (per unit) = Contribution Margin (per unit)

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11
Q

How is Breakeven Point (per unit) calculated?

A

Total Fixed Costs / Contribution Margin (per unit) = Breakeven Point Per Unit Assumption: Total Costs & Total Revenues are LINEAR

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12
Q

What is the focus in a Cost Center?

A

Management is concerned only with costs

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13
Q

What is the focus in a Profit Center?

A

Management is concerned with both costs and profits

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14
Q

What is the focus in an Investment Center?

A

Management is concerned with costs, profits, and assets

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15
Q

What is the Delphi technique?

A

Forecasting technique where Data is collected and analyzed Requires judgement/consensus

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16
Q

What is Regression Analysis?

A

A forecasting technique where Sales is the dependent variable. Simple Regression - One independent variable Multiple Regression - Multiple independent variables

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17
Q

What are Econometric Models?

A

Forecast sales using Economic Data

18
Q

What are Naive Forecasting Models?

A

Very Simplistic “Eyeball” past trends and make an estimate

19
Q

How does a Moving Average compare to Exponential Smoothing?

A

Both project estimates using average trends from recent periods Difference: Exponential Smoothing weighs recent data more heavily

20
Q

What are the characteristics of Short-term Cost Analysis?

A

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