Flashcards Becker U3 P1

U3 B.1. Strategic Planning Question Define a master budget. Answer A master budget documents specific short-term operating performance goals for a period of time, normally one year or less. The plan generally includes an operating (nonfinancial) budget as well as a financial budget. © Becker Professional Education. All rights reserved. U3 B.1. Strategic Planning Question List Porter's five external forces that affect the competitive environment and profitability of a firm. Answer The five external forces identified by Porter that affect the competitive environment and profitability of a firm are: Barriers to market entry Market competitiveness (intensity of competition) Existence of substitutes Bargaining power of the customers Bargaining power of the suppliers © Becker Professional Education. All rights reserved. U3 Page 2 of 9 FC-00313 CSO: 1B2d LOS: 1B2o #4 FC-00490 CSO: 1B1d LOS: 1B1h #3 U3 B.1. Strategic Planning Question What are the five basic competitive strategies, and what do the main components mean? Answer The five basic competitive strategies are: Cost leadership focused on a broad range of buyers Cost leadership focused on a narrow range (niche) of buyers Differentiation focused on a broad range of buyers Differentiation focused on a narrow range (niche) of buyers Best cost provider Cost leadership: Lowest overall costs Differentiation: Unique features that create loyalty/value Best cost: Low cost leader among rivals and unique features © Becker Professional Education. All rights reserved. U3 B.2. Budgeting Concepts Question Name the three components of product cost and identify which of these components are categorized as prime costs and conversion costs. Answer Direct Materials (DM) Direct Labor (DL) Manufacturing Overhead (MO) Prime Cost = DM + DL Conversion Costs = DL + MO © Becker Professional Education. All rights reserved. U3 Page 3 of 9 FC-00346 CSO: 1B2d LOS: 1B2l #6 FC-00361 CSO: 1B2a LOS: 1B2g #5 U3 B.2. Budgeting Concepts Question Define controllable margin. Answer Controllable margin represents the difference between the contribution margin (Revenue – Variable costs) and controllable fixed costs (those costs that managers can impact in less than one year). © Becker Professional Education. All rights reserved. U3 B.2. Budgeting Concepts Question Define currently attainable standards. Answer Currently attainable standards represent costs that result from work performed by employees with appropriate training and experience but without extraordinary effort. © Becker Professional Education. All rights reserved. U3 Page 4 of 9 FC-00345 CSO: 1B3a LOS: 1B3a #8 FC-00347 CSO: 1B2d LOS: 1B2m #7 U3 B.2. Budgeting Concepts Question Define ideal standards. Answer Ideal standards represent costs that result from perfect efficiency and effectiveness in job performance. © Becker Professional Education. All rights reserved. U3 B.3. Forecasting Techniques Question What is linear regression? Answer Linear regression is a method for studying the relationship between two or more variables. Linear regression is used to predict the value of a dependent variable [e.g., total cost (y)] corresponding to given values of the independent variables [e.g., fixed costs (A), variable cost per unit (B), and production expressed in units (x)]. Simple regression involves only one independent variable. Multiple regression involves more than one independent variable. © Becker Professional Education. All rights reserved. U3 Page 5 of 9 FC-00348 CSO: 1B4a LOS: 1B4a #10 FC-01375 CSO: 1B3b LOS: 1B3d #9 U3 B.3. Forecasting Techniques Question Explain the concept of a learning curve. Answer Learning curve analysis is based on the premise that as workers become more familiar with a specific task, the per-unit labor hours will decline as experience is gained and production becomes more efficient. The calculation begins with the first unit/batch. As cumulative production doubles (from one unit to two units, to four units, to eight units, etc.), cumulative average time per unit falls to a fixed percentage (the learning curve rate) of the previous average time. © Becker Professional Education. All rights reserved. U3 B.3. Forecasting Techniques Question Define flexible budget. Answer A flexible budget is a budget that can be adjusted to any activity level; it shows how costs vary with production volume. Fixed costs in total are constant over the relevant range of activity level.