Planning Techniques

Question 1

Master Budget Vs Flexible Budget

Answer 1

A flexible budget is simply a static budget adjusted for various possible volume levels within the relevant range.

A master budget or a flexible budget may be used during both the planning phase, when the budget is prepared, and the controlling phase, when actual results are compared to the budget.

A flexible budget may be prepared for any unit for which costs vary with changes in activity level. Flexible budgets provide as much cost control as do master budgets because they are based on costs allowable at different activity levels. In fact, flexible budgets may offer an even greater degree of control because valid guidelines are available to managers even if output deviates from expectations, whereas static budgets supply information regarding only the planned volume.

Question 2

Budgetary Control

Answer 2

Budgetary control includes budgeting and use of the budgets to control operations.

Question 3

Committed Costs

Answer 3

Committed costs arise from investments that cannot be altered in the short run.

Question 4

Coefficient of Correlation

Answer 4

Multiple R that is the coefficient of correlation.

In portfolio analysis a measure that is used to express the extent of the relationship among a set of investments is the coefficient of correlation

An effective portfolio is one in which the investments are negatively correlated. Thus, when the return on some investments is declining the return on others is increasing.

In portfolio analysis the concern is the correlation between investments

Question 5

Master Budget

Answer 5

The master budget is a comprehensive budget that includes both the operating and financial budgets.

Question 6

Participative Budgeting

Answer 6

Participative budgeting is more time-consuming because involvement of more individuals in the budgeting process takes more time.

Question 7

Budgeting

Answer 7

Budgeting begins with the sales budget, and sales volume is the first step in determining the amount of sales.

Question 8

Flexible Budget

Answer 8

A flexible budget Provides budgeted numbers for various activity levels.

Question 9

Financial Planning Model

Answer 9

• A financial planning model is a mathematical model that attempts to forecast future financial results.
• Sets of projected financial statements are a major output from the model.

Question 10

Planning Process

Answer 10

After the goals of the company have been established and communicated, the next step in the planning process would be the development of the sales budget.

Planning begins with the development of a sales budget.