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37 Cards in this Set
- Front
- Back
BE Sales
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Sales = VC + FC + NI
Or FC / CM Margin ratio |
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Target Net Income
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Required sales = VC + FC + NI
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BE unit
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Fixed cost / CM per unit
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Multiple Product Breakeven
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1. Add CM for each based on proportoin
2. FC / Total CM Linear equation to solve for X |
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Assumption underlying CVP
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1. Behavior for costs and revenue is linear
2. Cost can be accurately classified as eitehr fixed or variable 3. Changes in activity are the only factos that affect cost 4. All units produced are sold 5. sales mix remain constant 6. Selling price doesn't change with activity 7. Fixed costs are constant over relevent range 8. Productivity and efficiency are constant |
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BE Operating Income approach
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Oprating income before tax = Sales revenue - VC - FC
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net income under VC costing vs absorbtion costing
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Sales = production, no impact on income
Sales > production, VC income is higher than absorbtion costing Sales <Production VC income is less than AC |
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Potential advantages of variable costing
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1. NI is not affected by production level
2. Consistent with CVP 3. NI closely tied to change in sales level 4. Easier to identify cost and their effect on business |
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Margin of safety
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Actual sales - BE sales
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Financial Planning Process
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1. Analyze investment and financing alternative
2. Forecating future consequences of alternative 3. Deciding wihch alternative to undertake 4. Measuring subsequent performance against established goals |
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Budget
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Is a formal written statement of mgmt's plan for a specified future time peirod, expressed in financial terms.
Budget must reflect mgmt's objectives and plans |
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Types of budget
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Operating budget
Financial budget |
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Function of Budget
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1. Coordinate various funtional activities
2. Provide for a basis for control of activities |
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Production Budget
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Budgeted Sales
Plus desired ending inventory = Total units needed Less beginning inventory = units to be purchased |
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Direct Material Budget
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Production need in unit
+ desired endning inventory = total need - Beg DM inventory = DM to be purchases X Unit price = DM $ needed |
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Manufacturing CM
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Sales
Less V. Manufecturing cost = Manufecturing CM |
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Controllable Margin
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Sales
Less V. Manufecturing cost = Manufecturing CM - V Selling and admin cost = Cont. Margin - Controllable tracable fixed cost = Controllable Contribution |
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Delphi Technique of forecast
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Develops consensus among a group about the future through a series of structed questionnaries
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Types of Delphi technique
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1. Based on historical data
2. Based on observed application 3. Based on forecast of consumer behavior |
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Approached based on historcial data - Delphi
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1. Naive models - historical
2. Moving average 3. Exponential smoothing 4. Decompositio of time series (good for seasonal cyclical) |
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Approches based on observed association
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1. Regression analysis
2. Econometric models - Regression with economic data |
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Approches based on consumer behavior
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Markov Technique - considers brand loyalty, brand switching behavior, predicts change in market share
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Cost Function
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Y = a +bx
Y = Dependent a= constant b= slope X = independant |
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Coefficient of determination / Goodness of fit
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Adjusted R square
the % of variablity in the dependant variable explained by an independant variable |
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Coefficient of correlation
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Direction of move
can from from -1 to 1 0 = no relationship |
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Price variance of material
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AQ X AP - AQ X SP
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Qantity Variance
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AQ X SP - SQ X SP
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Total Budget Variance
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AP X AQ - SP X SQ
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Rate variance
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AH X AR - AH X SR
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Efficiency variance
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AH X SR
SH X SR |
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Fixed Production variance
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Budget based on capacity
- SQ X SR |
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3 variance approach
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Combined:
VOH spending variance FOH spending variance then VOH efficiency Fixed production |
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Basic elements of project
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1. Resources
2. Time 3. Money 4. Scope |
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Process of project mgmt
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Project initiation
Project planning Project execution Project monitoring and control Project closure |
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PERT: Project evaluation and review technique
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Focuses on interdependencies and time required to complete an activity.
Looks at critical path and slack time |
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Network diagram
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1. Illustrates interdependencies
2. Identifies critical path 3. Facilitates risk analysis 4. Enables mgmt to evaluate consequence of delay |
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Types of transfer pricing
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1. Cost based price
2. Market based price 3. negotiated price |