Assignment 2071: Exam Study Guide
ACG 2071 Exam 2 Review
Ch. 5: 7Q, 2 C, 9 T
Ch. 6: 2Q, 2C, 4T
Ch. 7: 5Q, 2C, 7T
Ch. 8: 6Q, 4C, 10T
Chapter 5: Planning and Forecasting
I. Planning and Budgeting Process
Types of planning
1. Strategic planning – identifying the overall focus of the organization
2. Tactical planning – developing concrete actions that help to achieve the strategic plan. Tactical planning includes the budgeting process.
3. Budget – an operating plan that is expressed primarily in financial terms.
Benefits of budgeting
i. Forces mangers to plan for the future ii. Facilitates communication between different divisions of the company. iii. Serves as a benchmark to evaluate performance.
Approaches to Implementing the Budget
Pyramid structure: CEO at …show more content…
Ex: cash, machine hours, facilities, labor hours
Bottleneck – the most constrained resource that limits the business’ ability to produce products (or provide services).
4. Keeping or Eliminating Operations
Segment margin – contribution margin of a particular segment less any direct fixed costs.
For a location means that location can cover its variable costs and fixed costs as well as being able to contribute to common fixed cost for company.
EQ: Sales – VC = CM – Direct FC = Segment Margin – Common F = OI
i. If Operating Income is positive – don’t shut location down because it is generating revenue ii. If OI is negative – shut down because it is not making enough money to stay active
Direct Fixed costs – fixed costs that can be attributed to one special segment. Therefore, if the segment is eliminated, these fixed costs will be eliminated.
Common Fixed Costs – fixed costs that are shared by all segments. These fixed costs will continue to be incurred even if a segment is eliminated. Also called allocated or assigned fixed costs. (allocated to each location)
i.e. costs incurred at corporate headquarters, CEO
Ch. 5: 7Q, 2 C, 9 T
Ch. 6: 2Q, 2C, 4T
Ch. 7: 5Q, 2C, 7T
Ch. 8: 6Q, 4C, 10T
Chapter 5: Planning and Forecasting
I. Planning and Budgeting Process
Types of planning
1. Strategic planning – identifying the overall focus of the organization
2. Tactical planning – developing concrete actions that help to achieve the strategic plan. Tactical planning includes the budgeting process.
3. Budget – an operating plan that is expressed primarily in financial terms.
Benefits of budgeting
i. Forces mangers to plan for the future ii. Facilitates communication between different divisions of the company. iii. Serves as a benchmark to evaluate performance.
Approaches to Implementing the Budget
Pyramid structure: CEO at …show more content…
Ex: cash, machine hours, facilities, labor hours
Bottleneck – the most constrained resource that limits the business’ ability to produce products (or provide services).
4. Keeping or Eliminating Operations
Segment margin – contribution margin of a particular segment less any direct fixed costs.
For a location means that location can cover its variable costs and fixed costs as well as being able to contribute to common fixed cost for company.
EQ: Sales – VC = CM – Direct FC = Segment Margin – Common F = OI
i. If Operating Income is positive – don’t shut location down because it is generating revenue ii. If OI is negative – shut down because it is not making enough money to stay active
Direct Fixed costs – fixed costs that can be attributed to one special segment. Therefore, if the segment is eliminated, these fixed costs will be eliminated.
Common Fixed Costs – fixed costs that are shared by all segments. These fixed costs will continue to be incurred even if a segment is eliminated. Also called allocated or assigned fixed costs. (allocated to each location)
i.e. costs incurred at corporate headquarters, CEO