CMA Exam Part 1 - Planning, Budgeting and Forecasting
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jsfranklin2 on May 17, 2011
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46 terms
Terms | Definitions |
|---|---|
 budget | estimate of what an organization expects to earn and spend during a specified period of time -planning business operations -communicating organizational goals -organizing work -maintaining controls. |
| budget controls | those budgetary actions that must be carried out in accordance with the budget plan |
| authoritative budgeting | top-down approach to setting budget. quicker to put together, but might not have employees support |
| participative budgeting | employees have input in setting budget, takes longer since more people are involved, but give employees sense of ownership of budget |
| budgeting guidelines | needed to minimize slacks and abuses in budget amounts |
| budget process | method in which a budget is created and approved |
| which department starts the budget process and what do they start with | the financial department starts with prior year financial figures |
| budgets communicate | the operational results expected by the organization and how to achieve those goels |
| budgetary slack | when income is underestimated and/or costs are overestimated in a budget |
| problems with budgetary slack | -does not provide incentive for employees to increase performance; once they meet low goals, they tend to reduce performance -sales are not maximized and cost not minimized, which ensures that budgetary slack will be incorporated into future budgets -encourages waste; overspend so budget amounts will not be reduced in future periods |
| zero-based budgeting | budgeting method where budget figures are not based on prior performance, but based on goals. Past performance is not taken into consideration |
| budget standards | the budgeted unit costs that are used to produce an optimal level of productivity and efficiency. the purpose is to indicate when actual costs are different than budgeted or standard costs. |
| ideal budget standards | set the basis for what costs should be when production is operation under optimal conditions. Assume skilled workers, not waste, spoilage or downtime. |
| practical standards | attainable standards; assume normal waste, spoilage and downtime. Achievable, but not necessarily easily achievable. |
| controllable costs | variable costs that can be influenced by an organization -materials -labor -product-related OH -some fixed costs (those related to a specific product or dept) |
| unattainable budget standards | budget goals set that cannot be realistically attained; may lead to frustrated workers, inaccurate financial rptg |
| operational budget | used to make operating decisions for an organization. Forecast of sales, income, COGS and expenses. Uses budgets: -sales -production -End Inv -Direct materials -Direct labor -factory OH -selling -admin |
| capital expenditure budget | used to plan for capital expenditure projects. shows when assets need to be replaced, cost of assets and construction costs; used to determine whether a project should be pursued. |
| regression analysis | statistical method that measures the relationship between a dependent variable and one or more other variables. Used to measure how much a changing variable, such as interest rate, affect the price of another varialbe, such as a financial investment. |
| simple (or linear) regression | measures the expected value of a variable based on the values of another variable. |
| multiple regression | measures the changes in one variable that are associated with changes in two or more other variables |
| learning curve | graphical depiction that shows the efficiencies gained from experience. Shows the relationship between the number of units produced and the time spent per unit. As an idividual learns a task, they move down the _________. |
| exponential smoothing | forecasting technique that uses a weighted moving average of historical data as the forecasting basis. give the most weight to recent data and less weight to older data. |
| time series analysis | use of historical data and mathematical techniques to predict the future. |
| annual (or master) budget | outlines the plans of the organization for its fiscal year. Purpose is to control the day to day operation of the organization. |
| creation of idividual budgets timeline | -sales budget -production budget -cash budget -forecasted balance sheet |
| sales budget | shows forecasted sales volume and the sales price of each product produced; estimates materials needed to meet sales figures |
| production budget | estimate of the materials and labor needed to meet the sales goals. |
| cash budget | determine whether organization will generate enough cash during the period to meet its finanacial nees and whether or not financing will be needed. |
| forecasted balance sheet | ensures that assets equal liabilites. consists of: -cash balances -accounts receivable -wages payable -taxes payable, -equity |
| project budgeting | method an organization uses to allocate money and resources to an individual project, details money and other resourses, land, equip |
| activity-based budgeting | Allocates funds to processes and/or projects, rather than depts. or functions -- Activities that incur costs across functional areas. |
| continuous budgeting | as the current month draws to a close, an additional month is added at the end of the budget period, resulting in a continuous 12-month budget |
| kaizen budgeting | budgetary approach that explicitly incorporates CONTINUOUS IMPROVEMENT anticipated during the budget period into the budget numbers |
| flexible budgeting | allows for modification to be made to the budget depending on the actual performance. For ex, if a budget is set for a production of 100 units, but the actual production is 200 units, the budget will be adjusted to show budgeted (but not actaul) revenues and costs for the 200 units |
| static vs. flexible budgets | ______ forecasts one level of production results and ______ projects budget for several production levels. When budgeted production levels are not met, a flexible budget is more useful because actual and budgeted costs can be compared for various production levels |
| annual profit plan | forecast of the revenues and expenses and computes the net income/loss |
| sales forecast | prediction of sales volume for a future period; basis for planning production capacity, production levels, inventory quantities, labor requirements and purchasing amounts |
| production budget | a detailed plan showing the number of units that must be produced during a period in order to satisfy both sales and inventory needs |
| direct material budget | A detailed plan showing the amount of raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories. |
| direct labor budget | estimate of the workforce needed to meet production output calc = units to be produced X hours of DL needed per unit X DL wager per hour |
| overhead budget | A budget that reveals the planned expenditures for all indirect manufacturing items. calc=fixed OH + variable OH |
| overhead expense | costs that cannot be linked to a particular job or department |
| contribution margin | the marginal profit per unit sale.; the amount remaining from sales revenues after all variable expenses have been deducted |
| selling and adminstrative budget | estimate of those costs that will be incurred on behalf of the sales and operations departments |
| budget for acquistion of capital assets | planning method for the purchase and replacement of LT assets; includes financing methods for these assets |
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