Planning Control and Analysis Flashcards
What is the first step when preparing a master budget
Forecast sales volume
this can then be used to estimate revenue
What tool do you use when the conditions are uncertain
Expected Value
This takes that average outcomes to determine the long-run average outcome
What is PERT
Program Evaluation and Review Technique
- Used to schedule projects
- the greatest time requirements for functions that need to be performed sequentially is measured
- this is then used to determine the degree of flexibility available to schedule functions that wont require as much time
- It assumes that the time required to complete function is predictable and does not consider conditions of uncertainty
When do you use a cost - volume-profit-analysis
This is used to estimate the financial results that will occur at various levels of activity
Costs and revenue patterns are considered predictable
What is and when do you use scattergraph method
actual results at different level of activity are graphed to approximate the relationship between variables
How is a master budget prepared
It is prepared on the basis of a specific level of production
What is a flexible budget
A flexible budget uses a formula
It is when total costs within a range are measured as total fixed costs plus the variable cost per unity of volume multiplied by the volume
Asa result it provides budgeted number by various levels of activity
Not appropriate for several product division
It isolates the impact of changes in volume
It provides budgeted numbers for various levels of activities
It creates a range and then uses fixed costs and fixed variable costs per unit. These are then allied to any level of production within the range
How is flexible budget and master budget similar and different and when are they used
Both can be used for an individual department or an entire entity
- Both assume that within a range fixed costs are same within a range and variable cost permit are same within that range
During budgeting period:
- master budget - used as a means to control costs
- Flexible budget is used to help make decisions
After budgeting period:
master used to evaluate
flexibles to during the period to guide changes to the decisions
In ABC costing - how do you select cost drivers
- you want ones that have a high correlation to the cost-producing activity
- once that cab be measured inexpensively
- it should be one that wont encourage negative behavioral effects - Example: using one based on preventative maintenance - this might encourage employees to delay preventative maintenance to keep costs down. the result will be unexpected and expensive downtime for breakdowns - better to choose a different cost driver
How do you define something that is a Value added activity
These are activities provide value to the product - they alter or improve it
What do you do to your inventories and cash flows when you have seasonal demand fluctuations
You want to try to manage your inventories ad cash flows to match the cycle
What is the Delphi forecasting method
it is a structured forecasting method based on the collective judgement of a group of experts
The forecasts become more accurate after each round after which experts can revise their previous answers
What is the regression forecasting method
It predicts the dependent variable9y) based on the observed behaviors of independent variable (x)
As long as the independent variable and other factors are determined - no subjective judgement is involved.
What is the econometric model for forecasting
This is a statistical model that applies economic theories
some, but little judgment
What are time series models of forecasting
you look at previously observed data to predict future values
- little judgement
What is benchmarking performance measure
This is when you compare a company’s financial dat to published info to determine if optimal performance is achieved
Its when you camper tasks performed in your department to those same ones performed by another department, branch, or otters company in same industry to see you you measure up
What is cost of quality
This is the philosophy that failure have an underlying cause, prevention is cheaper than failure, an date cost of quality performance can be measured
What is rework
rework are costs spend on correcting defects which are caused by internal failure
Internal Failure costs are costs detected after production, but before shipment to customers
If costs are caused by the customer - the will be external failure costs
What is a balanced scorecard
it has 4 perspectives
Financial performance
Internal Operations
Learning and growth
Customer Satisfaction
What is Total Productivity performance measure
only looks at internal operations
What is using ABC costing the most beneficial
When indirect costs are a high percentage of total costs
how do ABC costing systems assign overhead
they are best for companies that make different or heterogenous products or product lines
Overhead is the assigned based on the product’s requirement s for resource consuming activities
example:
Employee benefits will use salary expense as a cost driver
Machine hours will be a cost driver for electricity, repair and maintenance and depreciation expense
What are example of preventive costs
These are specifically to prevent manufacturing defects
preventative:
- employee training
- preventative maintenance
- supplier education
- using materials of known quality
- monitoring production processes
Detective:
quality inspection
What is the best transfer price to use
If use Actual cost or the divisions getting the product will benefit from the cost savings, but the transferring division wont get any sales from it
If use actual plus a mark up - the transferring division will get sales, but the receiving division will have to pay excess costs
If you use a negotiated price. The transferring divisions will get profit based on the artificial negotiated prices rather than performance
If you use the standard variable cost - this is is the best because that transferring divisions will show performance and the division receiving will not be affected by the efficiencies or inefficiencies of the division transferring the units
What is responsibility accounting
Responsibility accounting allocates to responsibility centers those costs, revenues, and assets that are the responsibility of the manager to control
If a manager is only responsible for their costs - they are a cost center
If a manager is responsible fro both revenue and cost - profit center
