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 Maser 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

How do Fixed Costs affect budgeting?

Answer 3

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

Question 4

How do Variable Costs affect budgeting?

Answer 4

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

Question 5

How are Labor Variances calculated?

Answer 5

SAL Standard Labor Costs - Actual Labor Costs = Labor Variance

Question 6

How are Overhead Variances calculated?

Answer 6

OAT Overhead Applied - Actual Overhead Cost = Total Overhead Variance

Question 7

How does Absorption Costing compare to Variable Costing?

Answer 7

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

Question 8

How is Contribution Margin calculated?

Answer 8

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

Question 9

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

Answer 9

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

Question 10

What is the focus in a Cost Center?

Answer 10

Management is concerned only with costs

Question 11

What is the focus in a Profit Center?

Answer 11

Management is concerned with both costs and profits

Question 12

What is the focus in an Investment Center?

Answer 12

Management is concerned with costs- profits- and assets

Question 13

What is the Delphi technique?

Answer 13

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

Question 14

What is Regression Analysis?

Answer 14

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

Question 15

What are Econometric Models?

Answer 15

Forecast sales using Economic Data

Question 16

What are Naive Forecasting Models?

Answer 16

Very Simplistic - Eyeball past trends and make an estimate

Question 17

How does a Moving Average compare to Exponential Smoothing?

Answer 17

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

Question 18

What are the characteristics of Short-term Cost Analysis?

Answer 18

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

Question 19

Flexible Budget

Answer 19

A flexible budget is a budget prepared for several possible levels of production or adjusted for the level of production actually achieved. It is also referred to as an incremental budget.

Question 20

Number of days in operating cycle

Answer 20

Number of days in = Number of days + Number of days sales
operating cycle sales in inventory in accounts receivable
(purchase to collection (purchase to sale) (sale to collection)
of cash) = 61 + 33

= 94