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Sales Management - D099 > Module 11: Budgeting and Planning > Flashcards

Module 11: Budgeting and Planning Flashcards

1
Q

P-O-L-C

A

Planning, organizing, leading, and control

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2
Q

Planning

A

The process by which managers establish goals and specify how those goals are to be attained

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3
Q

control

A

Monitoring the behavior of organizational members and the effectiveness of the organization itself to determine whether organizational goals are being achieved, and taking corrective action if necessary

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4
Q

sales budget

A

An outline of sales expectations set by management for the period of a year, which provides numbers sold, expected budgeted price, and value of sales

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5
Q

Activity-based costing (ABC)

A

Activity-based costing (ABC) is a method of assigning overhead and indirect costs—such as salaries and utilities—to products and services. The ABC system of cost accounting is based on activities, which are considered any event, unit of work, or task with a specific goal.

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6
Q

Purpose of a Budget

A

To plan and control the use of scarce resources
To reveal the company’s objectives and how management intends to acquire and use resources to attain those objectives (Giroux, 2014)
To provide a comparison of actual results to the plan of achieving those objectives

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7
Q

assumptions

A

Anything that is accepted as true or certain to happen, without any proof

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8
Q

planning horizon

A

The length of time into the future that is accounted for in a particular plan

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9
Q

capital budgeting

A

The budgeting process to evaluate potential major projects or investments

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10
Q

operations budgeting

A

The revenues and expenses over a period of time, typically a quarter or a year, that a company uses to plan its operations

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11
Q

Top management expresses the overarching financial goals, and management oversees the implementation and control process.

A
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12
Q

master budget

A

A master budget is composed of all the lower level budgets, financial statements, cash flow, and financial plans

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13
Q

income statement

A

Reports the revenues, gains, expenses, losses, net income, and other totals for the period

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14
Q

balance sheet

A

A balance sheet is a statement of assets, liabilities, and capital for an organization at a particular point in time

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15
Q

Components of the master budget.

A
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16
Q

safety stock

A

Level of inventory to have on hand for unforeseen events

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17
Q

direct materials

A

Those materials used only in making a product and are clearly and easily traceable to a particular product

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18
Q

direct labor

A

Labor costs of all employees actually working on materials to convert them to finished goods

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19
Q

Direct costs

A

Costs that can be identified specifically with a particular final cost objective such as a contract, project, or job

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20
Q

Indirect costs

A

Any cost not directly identified with a single, final cost objective, but rather two or more cost objectives or an intermediate cost objective

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21
Q

Examples of direct and indirect costs

A
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22
Q

Fixed overhead costs

A

Overhead costs that do not vary with the level of production

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23
Q

Variable costs

A

A cost that varies with the level of output

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24
Q

full product costing

A

A costing method in which the complete end-to-end costs of producing products and services are determined

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25
Q

absorption costing

A

Companies treat all manufacturing costs, including both fixed and variable manufacturing costs, as product costs

26
Q

work breakdown structure

A

A method of organizing and completing work in a project by breaking the project into smaller, more manageable components

27
Q

Independent agents

A

A freelance sales representative, distributor, or importer who is contracted with rather than hired

28
Q

Benefits and Drawbacks of Outsourcing

A
29
Q

Activity-based costing (ABC)

A

A costing method that first assigns costs to activities, then assigns costs to products based on their consumption of activities

30
Q

Key points about ABC are as follows:

A

The allocation of indirect costs is at least somewhat arbitrary, even using sophisticated accounting methods.
ABC provides more detailed measures of costs than traditional allocation methods.
ABC can provide more accurate product cost numbers for decisions about pricing.
Production benefits because ABC provides better information about the cost of each activity. In practice, ABC helps managers identify cost-causing activities.
ABC provides more information about product costs than traditional methods but requires more record keeping. Managers must decide whether the benefits or improved decisions justify the additional record-keeping cost.
Installing ABC requires teamwork among accountants, production managers, and marketing managers.1

31
Q

The Five Steps in ABC

A
  1. Identify the activities that consume resources and assign costs to those activities
  2. Identify the cost drivers associated with each activity.
  3. Compute a cost rate per cost driver unit.
  4. define an activity center
  5. Make decisions based on the results of the analysis.
32
Q

activity center

A

An activity center is a unit of the organization that performs some activity

33
Q

Full product costing or absorption costing focuses on reporting financial information outside of the organization, whereas ABC is more focused on internal financial reporting needs.

A
34
Q

The Purpose of Customer Profitability Analysis

A

Customer profitability analysis requires grouping customers into profitability segments and determining the costs associated with each group. ABC starts with the premise that customers generate activities and activities consume resources. Grouping customers into cost pools based on the activities required to service these customers enables managers to have a better understanding of which customers are profitable and why they are more profitable than other customer groups.

35
Q

Calculating Customer Profitability

A

Revenue − Costs = Profitability

36
Q

The most valuable customers are passive customers. The aggressive customers bring in low revenue and have a high cost to serve.

A
37
Q

Customer Classification Matrix

A

The customer classification matrix displays customers in terms of two dimensions: net price realized and the cost to serve them. The vertical axis is the net price from low to high, and the horizontal axis is the cost to serve from low to high.

38
Q

Customer Classification Matrix, Customers are then grouped into the following four boxes:

A

Carriage trade, Bargain basement, Passive customers, Aggressive customers

39
Q

Carriage trade

A

These customers generate high revenue but could also be expensive to serve. They can be profitable if the cost to serve them is lower than the revenue they generate.

40
Q

Bargain basement

A

These customers do not require much service, but they also do not generate high profits. They tend to be sensitive to price and relatively insensitive to service and quality.

41
Q

Passive customers

A

These customers do not generate high costs, but they are willing to accept high prices. These customers can generate the highest revenues at the lowest costs. They may need a specific product or be unwilling to switch to another provider due to the high cost of switching, or the cost of the product or service is insignificant in terms of their overall operations.

42
Q

Aggressive customers

A

These customers not only demand the highest product quality and the best service but also want the lowest prices. These customers tend to be influential buyers who are accommodated by businesses for reasons other than profit

43
Q

Profitable customers are valuable, and an organization seeks to increase business relations with them. Transforming unprofitable customers or monitoring nontarget customers are areas of improvement. Whereas unprofitable, nontarget customers are not the focus of the business strategy.

A
44
Q

Four Box Matrix

A

The four-box matrix is another method to allocate customers. It is based on whether customers or customer groups are considered profitable to the company and whether they fit the competitive strategy of the company. The vertical axis is fit to the company’s strategy, with customers divided into targeted and nontargeted based on alignment with the business strategy. The horizontal axis is profit, with customers divided into profitable and unprofitable.

45
Q

Customers in the profitable group

A

Customers in the profitable group who align with the company strategy should be retained, and efforts should be made to increase their business as long as it remains profitable and aligned with the business strategy.

46
Q

Customers who align with the strategy of the business

A

Customers who align with the strategy of the business but currently do not generate a profit should be transformed into profitable customers if possible, or at a minimum break-even. Which strategies a company employs to increase profits generated from these customers vary by customer.

47
Q

Customers who are profitable but do not align with the company strategy

A

Customers who are profitable but do not align with the company strategy should be monitored. Since they are profitable, current trading practices should be maintained but regularly reevaluated to make sure they do not become unprofitable.

48
Q

Unprofitable customers who do not align with the company strategy

A

Unprofitable customers who do not align with the company strategy should be replaced by customers who are profitable and are within the target population. Increasing prices until the customers either become profitable or the customer ceases being a customer is one suggested strategy

49
Q

strategic analysis

A

The process of researching an organization’s business environment within which it operates

50
Q

mission

A

A declaration of an organization’s objectives intended to guide internal decision-making

51
Q

vision

A

Defines what an organization is, why it exists, and its reason for being

52
Q

sales potential forecast

A

Describes the number of prospects and their buying power

53
Q

RACI matrix

A

A responsibility assignment chart that maps out tasks, milestones, and key decisions and assigns the roles of responsible, accountable, consulted, and informed

54
Q

R (Responsible)

A

those who do the work to achieve the task—This person (or persons) must complete the task or objective or make the critical decisions that will ultimately lead to completing the task.

55
Q

A (Accountable)

A

the person or stakeholder who must approve the finished work—This person verifies that all responsibilities have been assigned and takes full reasonability for completing the task or objective.

56
Q

C (Consulted)

A

active participants, commonly subject matter experts, whose input may be needed before the work can be completed—Two-way communication with consultants is required.

57
Q

I (Informed)

A

those who are made aware of progress or critical decisions using one-way communication to provide updates—Informed people are not active participants in the process.

58
Q

differentiation

A

the process of distinguishing a product or service from others

59
Q

Finally, according to Birke, Sprengel, Ulrich, and Viertler (2014), there are four ways that the best sales teams beat the market:

A
  1. Know what metrics to measure
  2. Keep the sales cost low
  3. Free up salespeople so they can sell
  4. Use as many channels as possible
59
Q

Finally, according to Birke, Sprengel, Ulrich, and Viertler (2014), there are four ways that the best sales teams beat the market:

A
  1. Know what metrics to measure
  2. Keep the sales cost low
  3. Free up salespeople so they can sell
  4. Use as many channels as possible

Sales Management - D099 (12 decks)

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