Financial Planning and Analysis Flashcards
What is a Static Budget?
Budget targeted for a specific segment of a company.
What is a Master Budget?
“Budget targeted for the company as a whole
Includes budgets for Operations and Cash Flows
Includes set of budgeted Financial Statements”
How do Fixed Costs affect budgeting?
“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”
How do Variable Costs affect budgeting?
“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”
How are Material Variances calculated?
= budgeted cost of materials used - budgeted cost of materials that should have been used
How are Labor Variances calculated?
= standard cost of actual hours - standard cost of budgeted hours
How are Overhead Variances calculated?
“OAT
Overhead Applied
- Actual Overhead Cost
= Total Overhead Variance”
How does Absorption Costing compare to Variable Costing?
“Absorption Costing - External Use- Cost of Sales- Gross Profit- SG&A
Variable Costing - Internal Use- Variable Costs- Contribution Margin- Fixed Costs”
How is Contribution Margin calculated?
“Sales Price (per unit)
- Variable Cost (per unit)
= Contribution Margin (per unit)”
How is Break-even Point (per unit) calculated?
“Total Fixed Costs / Contribution Margin (per unit)
= Break-even Point Per Unit
Assumption: Total Costs & Total Revenues are LINEAR”
What is the focus in a Cost Center?
Management is concerned only with costs
What is the focus in a Profit Center?
Management is concerned with both costs and profits
What is the focus in an Investment Center?
Management is concerned with costs, profits, and assets
What is the Delphi technique?
“Forecasting technique where Data is collected and analyzed
Requires judgement/consensus”
What is Regression Analysis?
“A forecasting technique where Sales is the dependent variable.
Simple Regression - One independent variable
Multiple Regression - Multiple independent variables”
