Sec B - Planning, Budgeting and Forecasting

Question 1

Porter’s Five Forces

Answer 1

1) The risk of entry by potential competitors
2) The intensity of rivalry among establish companies within an industry
3) The bargaining power of buyers
4) The bargaining power of suppliers
5) The closeness of substitutes to an industries products

Question 2

PEST Analysis

Answer 2

Political
Economic
Social
Technological

Question 3

Overhead Costs - Fixed/Variable using High/Low Method

Answer 3

Variable Cost per Unit =

Difference of cost between the highest and lowest levels of activity
/
Difference of the highest and lowest activity levels

Fixed Cost =
Total Cost - Variable Cost

(substitute values in either highest or lowest in range)

Question 4

Master Budget Components

Answer 4

OPERATING BUDGET
Sales budget 
Production budget 
Direct labor budget 
Direct materials budget 
Manufacturing overhead budget 
Selling & Administrative budget 
Budget Income statement 

FINANCIAL BUDGET
Capital expenditure budget
Budgeted income statement
Budgeted balance sheet

• Cash Budget is prepared before the budgeted financial statements are created

Question 5

Regression Formulas HP 12c

Answer 5

a =
enter (x,y) values using y x
then 0 2 [ ŷ, r ]
this computes value of a when x = 0 (i.e., y = a + (0*b))

b =
[1] [2] [ ŷ, r ] [x⇔y] [R↓] [x⇔y] [-]

Question 6

Learning curve model

Answer 6

Constant percentage of decline in average time per unit occurs every time the quantity of unit produced doubles

90% learning curve
1st unit takes 10 hours
2 units: 10 hours x 2 x 90% = 18 hours
average time per unit: 18 hours / 2 = 9 hours