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Financial planning programs
Such programs differ in complexity. Some simple programs can include only those variables discussed while other more complicated ones can include an organization’s complete budget.
Many firms use interactive programs of basic CVP equation on their microcomputers to analyze data they have collected and entered. These interactive capabilities allow managers to enter and change their inputs easily and also make the analysis of the financial effects of various alternatives simpler.
The computers’ speed and accuracy in providing information from entered data improve the speed and accuracy with which the manager can select the most profitable actions.
Sensitivity study is one approach for coping with modifications in the values of the variables. It focuses on how a result will be changed if the original estimates or the underlying assumptions change.
The widespread use of spreadsheet packages which do not require programming expertise has enabled management accountants to develop CVP computerized models. The impact of alternative revised plans is quickly identified and changes only implemented when it is apparent that the original estimates are incorrect.
Illustration: ABC analysis Combine items on the basis of their relative value to form three categories—A, B and C. The data in the table below illustrates the ABC analysis.
Parameter prediction error: This is another aspect of faulty planning. As Hongren says, ‘planning decisions are based on predictions of future costs, future selling price, fut
During the year Leyland Company completed 1,300 units of product. Ending inventory consisted of 400 units that were 50% complete. The total dollar cost associated with production o
STEPS OF DEVELOPING A COST ESTIMATING RELATIONSHIP Firmly speaking, a CER is not a quantitative method. It is a framework for using suitable quantitative methods to quantify a
Inappropriate standards (or targets): This is a problem arising from deficiencies in planning. If not enough time and resources are devoted to setting accurate standards in th
Product life cycle Every product has a life cycle. The life cycle of a product vary from months to various years. For example in the case of cameras photocopying machines etc.
Account analysis (Inspection of accounts) method: This method requires that departmental managers and the accountant inspect each item of expenditure within the accounts for s
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Zero-Base Budgeting Zero-Base Budgeting (ZBB) was first developed and introduced for business by Peter A. Pyhrr. From this starting ZBB has been explored and adopted by many o
What are Selling and distribution expenses? Selling and distribution expenses incurred for the marketing of a commodity, for securing orders for the articles, dispatching goods
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