Planning, Control and Analysis

Question 1

activity-based budgeting

Answer 1

budgeting approach that focuses on the cost of activities required to produce and sell products (extension of activity-based costing)

Question 2

avoidable costs

Answer 2

costs that will not continue to be incurred if a department or product is terminated

Question 3

benchmarking

Answer 3

requires that products, services, and activities be continually measured against the best levels of performance either inside or outside the organization

Question 4

budget

Answer 4

quantification of the plan for operations

Question 5

flexible budget

Answer 5

budget that is adjusted for changes in volume

Question 6

performance reports

Answer 6

compares budgeted and actual performance

Question 7

budgetary slack

Answer 7

the practice of underestimating revenues and overestimating expenses to make budgeted targets more easily achievable

Question 8

committed costs

Answer 8

arise from a company’s basic commitment to open its doors and engage in business

Question 9

contribution margin

Answer 9

equals revenue less all variable costs

Question 10

controllable costs

Answer 10

can be affected by a manager during the current period

Question 11

cost management

Answer 11

refers to the approaches and activities used by management to make planning and control decisions for the firm

Question 12

Cost-volume-profit anaysis

Answer 12

a planning tool used to analyze the effects of changes in volume, sales mix, selling price, variable expense, fixed expense, and profit

Question 13

differential (incremental cost)

Answer 13

the difference in cost between two alternatives

Question 14

discretionary costs

Answer 14

fixed costs whose level is set by current management decisions (ex: advertising, r&d)

Question 15

financial planning models

Answer 15

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.

Question 16

financial budget

Answer 16

cash budget, capital budget and budgeted balance sheet, budgeted statement of cash flows

Question 17

incremental budgeting

Answer 17

involves developing budgets that require only justification for increases in the funding over the prior period

Question 18

life-cycle budgeting

Answer 18

involves estimating the revenues and costs attributable to each product from initial research and development to its final customer and support

Question 19

management by exception

Answer 19

focuses attention on material deviations from plans while allowing areas operating as expected to continue to operate without interference.

Question 20

master budget

Answer 20

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

Question 21

mixed costs (semivariable)

Answer 21

costs that have a fixed component and a variable component. these components are separated by using the scattergraph, high-low, or linear regression methods.

Question 22

multiple regression

Answer 22

a model that estimates the relationship between a dependent variable and two or more independent variables. may be used to develop sales forecasts

Question 23

operating budget

Answer 23

budgeted income statement and related schedules.

Question 24

outlay (out-of-pocket) costs

Answer 24

the cash disbursement associated with a specific project

Question 25

planning

Answer 25

involves selecting goals and choosing methods to attain those goals

Question 26

control

Answer 26

implementation of the plans and evaluation of their effectiveness in attaining goals

Question 27

relevant costs

Answer 27

future costs that will change as a result of a specific decision

Question 28

relevant range

Answer 28

the operating range of activity in which cost behavior patterns are valid. it is the production range for which fixed costs remain contant

Question 29

responsibility accounting

Answer 29

measures subunit performance based on the costs and or revenues assigned to responsibility centers

Question 30

standard costs

Answer 30

predetermined target costs

Question 31

tactical profit plan

Answer 31

a defined short-term financial plan that includes assigned responsibilities at all levels

Question 32

target costing

Answer 32

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

Question 33

transfer pricing

Answer 33

determination of the price at which goods and services will be sold to profit or investment centers via internal company transfers

Question 34

variable costs

Answer 34

costs that vary proportionately in total with the activity level throughout the relevant range

Question 35

variances

Answer 35

differences between standards and actual results

Question 36

zero-based budgeting

Answer 36

involves developing budgets from the ground up by requiring each program or department to justify its level of funding