Term
| Which is better Top down or bottom up budgeting? |
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Definition
| Bottom Up, it doesnt change |
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Term
| Disadvantage of Bottom Up |
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Definition
| Longer, expensive, people can lowball |
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Term
| Order for preparing a budget |
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Definition
| Sales, Production (done in units not $), Materials/Labor, and Capital Aquistions |
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Term
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Definition
| Sales + desired ending inv. - begining inv. |
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Term
| Is depreciation a cash expense? |
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Definition
| No, so dont involve it in a cash budget |
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Term
| Difference in Ideal and Attainable standards |
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Definition
Ideal - Perfection
Attainable - Practical (Includes mistakes, maintance, etc)
Attainable is better. |
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Term
| Ideal Standards always have.... |
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Definition
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Term
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Definition
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Term
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Definition
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Term
| Difference in Master and Flex budget is |
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Definition
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Term
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Definition
| (Standard Price - Actual Price)x(Actual Quantity) |
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Term
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Definition
| (Standard Quantity - Actual Quantity)x(Standard Price) |
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Term
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Definition
| (Standard Prce - Actual Price)x(Actual Qantity) |
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Term
| Materials Quanity Variance |
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Definition
(Standard Quantity - Actual Quantity)x(Standard Price)
Rem - Stand Quant is how much is produced but at standard rates |
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Term
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Definition
Actual Overhead - Flexible Budget
Same with Fixed and Variable Overhead |
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Term
| Variable OH Volume Variance |
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Definition
| Flexible Budget VOH and Applied VOH always be the same with Variable |
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Term
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Definition
| ACTUAL Hours x Actual Rate |
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Term
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Definition
| Actual # Units Produced x Standard hours per unit x Standard Rate |
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Term
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Definition
| Same as Flexible Budget in Variable |
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Term
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Definition
| Flexible Budget - Overhead Applied |
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Term
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Definition
- Better and Faster Info/Decision Making
- Managers learn more andmove up faster
- Managers more motivated |
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Term
| Decentalized Disadvantages |
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Definition
-Lack of Goal Congruence
-duplication of duties (multiple departments) |
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Term
| Four Types of Responsibility Centers |
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Definition
| Cost Centers, Revenue Centers, Profit Centers, Investment Centers |
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Term
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Definition
manager controls only cost
No revenue
ex. manufactoring plant |
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Term
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Definition
Manager only controls over revenue
ex. sales office, call center |
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Term
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Definition
Manager controls revenue and costs
ex. department store |
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Term
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Definition
Manager controls profits and investing profits
-Long term goals, investment
ex. Regional VP of Walgreens |
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Term
| How do u measure a Cost Center and Profit Center? |
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Definition
Cost - How they keep cost down, compare actual cost and should have cost
Profit - Relative performance evaluation aka Compare profitability to similiar center |
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Term
| How do u measure Investment Center |
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Definition
How well they are investing assets
ROI = Return on Investment |
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Term
| Return on Investment (ROI) |
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Definition
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Term
| Total Assets for invested capital |
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Definition
| = Total Assets - Non bearing interest bearing current liabilities |
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Term
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Definition
(EBIT)(1 - TaxRate)
If adding back interest dont forget to tax that as well |
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Term
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Definition
| (Income/Sales)x(Sales/Invested Capital) |
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Term
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Definition
| High Price, Less Costs, Get Rid of nonproductive assets (ex. excessive inv.) |
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Term
| Depreciation drives the ROI _______ and why? And its effects? |
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Definition
| Up, b.c. depreciation lowers value of assets. Can cause managers to not upgrade equipment, so they under invest. |
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Term
| Why arent managers measured on profit |
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Definition
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Term
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Definition
| = Income - min acceptable income |
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Term
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Definition
Economical Value Added
Rem use RI but no interest |
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Term
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Definition
| amortized over time. RI goes up over time til it will benefit. |
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Term
| Balanced Scorecard is what? |
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Definition
| Final way to evaluate investment centers, |
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Term
| 4 Dimensions of Balance Scorecard and explain each |
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Definition
Financial - how it looks on paper
Internal Buis. Proc - Efficiency including Innovation, Operating, Post Sales Service
Learning and Growth - How employees doing, improving?
Customers - Happy? |
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Term
| Keys to having a succesful scorecard? |
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Definition
Good Iniatives (what needs to b done to achieve goals)
Responsible - People fulfill theres
Funding - Need to have money
Management Support - Workers suport there managers. |
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Term
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Definition
| Prices in between departments |
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Term
| Highest and lowest pricing in transfer pricing are? |
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Definition
Ceiling Price - Market Price
Floor Price - Variable Price
Usually cut out selling costs |
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