Operationsl Finance, Feedback control, Resource Planning Flashcards

1
Q

What is a Line Item Expense Budget

A

reviewing expenses from previous period, possible changes for the next period, and budgeting at the line level

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2
Q

when does a line item expense budget work best?

A

in a consistent work environment with stable activity, and selected accounts

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3
Q

what is a program budget

A

budgeting approach associated with large scale projects or programs

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4
Q

when is a program budget best?

A

Not for profit organizations, and when it’s more than just one department, so a line item expense budget doesn’t work

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5
Q

What is performance based budgeting

A

budgeting that is can flex resources to meet changes.wh

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6
Q

when is performance based budgeting best?

A

uncover waste or hidden costs, review WHY resources are being sent, and provide a way to evaluate the resource impact of process and technology changes

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7
Q

what is activity based planning

A

a type of performance budget that focuses on workload, not headcount.

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8
Q

why is activity based planning beneficial?

A

budgets resources through flexing activities,

providing greater granularity on what’s going on

helps understand what the understanding between resources and activities

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9
Q

what is object costing

A

connecting resources to activities

generally done with a chart and connecting lines

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10
Q

what is activity based budgeting

A

connecting activities back to resources

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11
Q

what is the feedback control loop

A

planning, execution, feedback control, repeat.

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12
Q

what is profit reporting

A

revenue - variable costs = contribution margin

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13
Q

what is Management control

A

Price x Quantity - (price costs) x Quantity = contribution margin

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14
Q

what are the five things that explain the delta to contribution margin

A

Sales Price
Sales Volume
Variable Cost Price
Variable Cost Volume
Variable Cost Efficiency

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15
Q

what is price deflation

A

the sales that would have occured if prices didn’t drop, expressed as a percent.

in other words, change in sales if you keep the price the same

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16
Q

what is cost inflation

A

the expenses that would have occurred if costs didn’t rise, expressed as a percent.

17
Q

what do you do with price deflation and cost inflation

A

you take the percentages +/- of 100, to get the “adjusted price”

18
Q

what do you do with “adjusted price” (for price deflation and cost inflation)

A

you find out “price/cost variance” which is how much of a sales/cost penalty from the change in demand

19
Q

how do you find the volume ratio

A

yr x adjusted price / (yr x - 1) actual

20
Q

how do you find the cost volume dollars?

A

use the (yr x - 1) costs and multiply them by the sales volume ratio to get the yr x volume adjusted cost. find the difference for cost volume variance$s

21
Q

what is the productivity formula

A

(deflated yr x sales X Historical cost/sales ratio) - Adjusted yr x costs

22
Q

what is a margin bridge

A

it starts with (yr x - 1) margin, then goes through all the contribution margin calculations to get to the yr x margin

23
Q

what is Planned Value (PV)

A

estimated value of the work planned to be done

24
Q

what is Earned Value (EV)

A

estimated value of the work actualy acomplished

25
what is the Actual Cost (AC)
actual cost incurred to date
26
what is Budget at Completion (BAC)
currently expected total cost of a project
27
what is Estimated cost at completion (EAC)
estimated total project cost at completion
28
what is estimated cost to complete (ETC)
how much more to finish
29
what is variance at completion (VAC)
How much over/under are we expected to be at completion
30
what is the planned value formula
Planned % complete * BAC
31
what is the earned value formula
Actual % complete * BAC
32
what is the schedule performance Index (SPI) formula
EV/PV (>1 is ideal)
33
What is the schedule variance formula
EV - PV (Positive is ideal)
34
what is cost performance Index (CPI) Formula
EV/AC (>1 is favorable)
35
What is the cost variance formula
EV - AC (Positive is favorable)
36
what is the Estimate at completion formula
BAC/CPI
37
what is the estimate to complete formula
EAC - AC
38
what is the Variance at completion
BAC - EAC