Financial Planning and Analysis Flashcards

1
Q

What is a Static Budget?

A

Budget targeted for a specific segment of a company.

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2
Q

What is a Master 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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3
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 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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4
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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5
Q

How are Material Variances calculated?

A

= budgeted cost of materials used - budgeted cost of materials that should have been used

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6
Q

How are Labor Variances calculated?

A

= standard cost of actual hours - standard cost of budgeted hours

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7
Q

How are Overhead Variances calculated?

A

“OAT

Overhead Applied
- Actual Overhead Cost
= Total Overhead Variance”

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8
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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9
Q

How is Contribution Margin calculated?

A

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

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10
Q

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

A

“Total Fixed Costs / Contribution Margin (per unit)
= Break-even Point Per Unit

Assumption: Total Costs & Total Revenues are LINEAR”

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11
Q

What is the focus in a Cost Center?

A

Management is concerned only with costs

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12
Q

What is the focus in a Profit Center?

A

Management is concerned with both costs and profits

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13
Q

What is the focus in an Investment Center?

A

Management is concerned with costs, profits, and assets

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14
Q

What is the Delphi technique?

A

“Forecasting technique where Data is collected and analyzed

Requires judgement/consensus”

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15
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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16
Q

What are Econometric Models?

A

Forecast sales using Economic Data

17
Q

What are Naive Forecasting Models?

A

“Very Simplistic

- Eyeball past trends and make an estimate”

18
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”

19
Q

What are the characteristics of Short-term Cost Analysis?

A

“Uses Relevant Costs Only

Ignore Sunk Costs

Opportunity Cost is a Must”