Planning, Control and Analysis Flashcards
activity-based budgeting
budgeting approach that focuses on the cost of activities required to produce and sell products (extension of activity-based costing)
avoidable costs
costs that will not continue to be incurred if a department or product is terminated
benchmarking
requires that products, services, and activities be continually measured against the best levels of performance either inside or outside the organization
budget
quantification of the plan for operations
flexible budget
budget that is adjusted for changes in volume
performance reports
compares budgeted and actual performance
budgetary slack
the practice of underestimating revenues and overestimating expenses to make budgeted targets more easily achievable
committed costs
arise from a company’s basic commitment to open its doors and engage in business
contribution margin
equals revenue less all variable costs
controllable costs
can be affected by a manager during the current period
cost management
refers to the approaches and activities used by management to make planning and control decisions for the firm
Cost-volume-profit anaysis
a planning tool used to analyze the effects of changes in volume, sales mix, selling price, variable expense, fixed expense, and profit
differential (incremental cost)
the difference in cost between two alternatives
discretionary costs
fixed costs whose level is set by current management decisions (ex: advertising, r&d)
financial planning models
support the financial planning process by making it easier to construct projected financial scenarios. These models incorporate the interrelationships among operating activities, financial activities, and other factors that affect the business, and range from simple models to those that incorporate hundreds of equations.
financial budget
cash budget, capital budget and budgeted balance sheet, budgeted statement of cash flows
incremental budgeting
involves developing budgets that require only justification for increases in the funding over the prior period
life-cycle budgeting
involves estimating the revenues and costs attributable to each product from initial research and development to its final customer and support
management by exception
focuses attention on material deviations from plans while allowing areas operating as expected to continue to operate without interference.
master budget
a comprehensive expression of management’s operating and financial plans for a future period that is summarized as budgeted financial statements. consists of operating and financial budgets
mixed costs (semivariable)
costs that have a fixed component and a variable component. these components are separated by using the scattergraph, high-low, or linear regression methods.
multiple regression
a model that estimates the relationship between a dependent variable and two or more independent variables. may be used to develop sales forecasts
operating budget
budgeted income statement and related schedules.
outlay (out-of-pocket) costs
the cash disbursement associated with a specific project
planning
involves selecting goals and choosing methods to attain those goals
control
implementation of the plans and evaluation of their effectiveness in attaining goals
relevant costs
future costs that will change as a result of a specific decision
relevant range
the operating range of activity in which cost behavior patterns are valid. it is the production range for which fixed costs remain contant
responsibility accounting
measures subunit performance based on the costs and or revenues assigned to responsibility centers
standard costs
predetermined target costs
tactical profit plan
a defined short-term financial plan that includes assigned responsibilities at all levels
target costing
identifies the estimated cost of a new product that must be achieved for that product to be priced competitively and still produce an acceptable profit. often the product is redesigned and the production process simplified several times before the target cost can be met
transfer pricing
determination of the price at which goods and services will be sold to profit or investment centers via internal company transfers
variable costs
costs that vary proportionately in total with the activity level throughout the relevant range
variances
differences between standards and actual results
zero-based budgeting
involves developing budgets from the ground up by requiring each program or department to justify its level of funding
