ACC 154 Exam #3

CH 9, 10, 11 and 12

Big Data

Data that are characterized by six V’s: volume, velocity, variety, veracity, value, and vulnerability.

Buget Committee

A committee composed of upper management as well as cross-functional managers that reviews, revises, and approves the final budget.

Causal Model

A quantitative forecasting method that assumes that the item to be predicted has a cause-and-effect relationship with one or more other variables.

COD

Collect on Delivery or Cash on Delivery. A sales term indicating that the inventory must be paid for at the time of delivery.

Comprehensive Budget

The comprehensive planning document for the entire organization. The comprehensive budget includes the operating budgets and the financial budgets.

Cost of Goods Sold, Inventory, and Purchases Budget

A merchandiser’s budget that computes the cost of goods sold, the amount of desired ending inventory, and the amount of merchandise to be purchased.

Delphi Method

A qualitative forecasting method in which interviews are conducted individually with a panel of experts and results from interviews are compiled into a forecast.

Financial Budgets

The financial budgets include the capital expenditures budget and the cash budget. It culminates in a budgeted balance sheet.

Flexible Budgets

Budgets prepared for different volumes of activity.

Intercept of the Trendline

The intercept represents the fixed portion of the trendline.

Line of Credit

A lending arrangement from a bank in which a company is allowed to borrow money as needed, up to a specified maximum amount yet only pay interest on the portion that is actually borrowed until it is repaid.

Linear Trendline

Another name for regression line: the line that best fits the data points.

Market Research Method

A qualitative forecasting method that could include focus groups, customer surveys, or blind product testing; results are compiled to form a forecast.

Operating Budgets

The budgets needed to run the daily operations of the company. The operating budgets culminate in a budgeted income statement.

Panel Consensus Method

A qualitative forecasting method in which a ppanel of experts meets and forms a consensus forecast.

Participative Budgeting

Budgeting that involves the participation of many levels of management.

Qualitative Methods

A type of forecasting model that relies on human judgment and knowledge about the market, the customer, the product, and other factors.

Quantitative Methods

A type of forecasting model that is used when numerical data are available with which to build the mathematical model.

R squared Value

The R-squared value indicates the percentage of the variation in the outcome variable (y) that can be predicted by knowing the predictor variable (x).

Rolling Budget

A budget that is continuously updated so that the next 12 months of operations are always budgeted; also known as a continuous budget.

Safety shock

Extra inventory kept on hand in case demand is higher than expected or problems in the factory slow production.

Sensitivity Analysis

A what-if technique that asks what a result will be if a predicted amount is not achieved or if an underlying assumption changes.

Slack

Intentionally overstating budgeted expenses or understating budgeted revenues in order to cope with uncertainty, make performance appear better, or make room for potential budget cuts

Slope of the Trendline

The slope represents the variable portion of the trendline.

Strategic Planning

Setting long-term goals that may extend 5 to 10 years into the future.

Time Series Forecast

A quantitative forecasting method that is based on time-ordered data and is moderately successful at predicting the near future; techniques include moving average, exponential smoothing, and trend projections.

Variance

The difference between actual and budgeted figures (revenues and expenses)

Zero-based budgeting

A budgeting approach in which managers begin with a budget of zero and must justify every dollar put into the budget.

Balanced Scorecard

A performance evaluation system that integrates financial and operational performance measures along four perspectives: financial, customer, internal business, and learning and growth.

Capital Turnover

Sales revenue divided by total assets. The capital turnover shows how much sales revenue is generated with every $1.00 of assets.

Common Fixed Expenses

Fixed expenses that cannot be traced to the segment.

Comprehensive Budget Variance

The difference between actual results and comprehensive budget.

Cost Center

A responsibility center in which managers are responsible for controlling costs.

Data Visualization

The art and science of communicating quantitative information through visual presentations.

Decentralize

The process where companies split their operations into difference operating segments.

Direct Fixed Expenses

Fixed expenses that can be traced to the segment.

Favorable Variance

A variance that causes operating income to be higher than budgeted.

Flexible Budget

A summarized budget prepared for different levels of volume.

Flexible Budget Variance

The difference between the flexible budget and actual results. The flexible budget variances are due to something other than volume.

Goal Congruence

When the goals of the segment managers align with the goals of top management.

Gross Book Value

Historical cost of assets.

Investment Center

A responsibility center in which managers are responsible for generating revenues, controlling costs, and efficiently managing the division’s assets.

Key Performance Indicators (KPIs)

Summary performance metrics used to assess how well a company is achieving its goals.

Lag Indicators

Performance indicators that reveal the results of past actions and decisions.

Lead Indicators

Performance measures that predict future performance.

Management by Exception

A management technique in which managers only investigate budget variances that are relatively large.

Net Book Value

Historical cost of assets less accumulated depreciation.

Performance Reports

Reports that compare actual results against budgeted figures.

Performance Scorecard or Performance Dashboard

A report displaying the measurement of KPIs as well as their short-term and long-term targets.

Profit Center

A responsibility center in which managers are responsible for both revenues and costs and therefore profits.

Residual Income (RI)

Operating Income minus the minimum acceptable operating income given the size of the division’s assets.

Responsibility Accounting

A system for evaluating the performance of each responsibility center and its manager.

Responsibility Center

A part of an organization whose manager is accountable for planning and controlling certain activities

Return on Investment (ROI)

Operating income divided by total assets. The ROI meausre

Revenue Center

A responsibility center in which managers are responsible for generating revenue.

Sales Margin

Operating income divided by sales revenue. The sales margin shows how much income is generated for every $1.00 of sales.

Segment Margin

The operating income generated by a profit or investment center before subtracting the common fixed costs that have been allocated to the center.

Transfer Price

The price charged for the internal sale of product between two different divisions of the same company.

Unfavorable Variance

A variance that causes operating income to be lower than budgeted.

Variance

The difference between actual figures and budgeted figures.

Vertical Integration

The acquisition of companies within one’s supply chain.

Volume Variance

The difference between the comprehensive budget and the flexible budget. The volume variance arises only because the actual sales volume differs from the volume originally anticipated in the comprehensive budget.

Anomaly Detection

A data mining technique that can find specific items in the data set that do not match expected patterns, or outliers.

Association

A data mining technique that involves tracking patterns based on linked variables.

Attainable Standards

Standards based on currently attainable conditions that include allowances for normal amounts of waste and inefficiency. Also known as practical standards.

Classification

A data mining technique that uses attributes of data to sort the data into different categories.

Clustering

A data mining technique that groups data together into previously unknown categories rather than using predefined categories, as with classification.

Data Mining

The process of discovering previously unknown patterns and knowledge in large data sets; uses concepts from machine learning, statistics, and databases.

DIrect Labor Efficiency Variance

This variance tells managers how much of the total labor variance is due to using a greater or lesser amount of time than anticipated. It is calculated as follows: SR x (AH - SHA)

Direct Labor Rate Variance

This variance tells managers how much of the total labor variance is due to paying a higher or lower hourly wage rate than anticipated. It is calculated as follows: AH x (AR - SR).

Direct Material Price Variance

This variance tells managers how much of the total direct materials variance is due to paying a higher or lower price than expected for the direct materials it purchased. It is calculated as follows: AQP x (AP - SP).

Direct Materials Quantity Variance

This variance tells managers how much of the total direct materials variance is due to using a larger or smaller quantity of direct materials than expected. It is calculated as follows: SP x (AQU - SQA).

Fixed Overhead Budget Variance

The variance measures the difference between the actual fixed overhead costs incurred and the budgeted fixed overhead costs

Fixed Overhead Spending Variance

Another name for the fixed overhead budget variance. This variance measures the difference between the actual fixed overhead costs incurred and the budgeted fixed overhead costs.

Fixed Overhead Volume Variance

This variance is the difference between the budgeted fixed overhead cost and the standard fixed

Ideal Standards

Standards based on perfect for ideal conditions that do not allow for any waste in the production process, machine breakdown, or other inefficiencies. Also known as perfection standards.

Perfection Standards

Standards based on perfect or ideal conditions that do not allow for any waste in the production process, machine breakdown, or other inefficiencies. Also known as ideal standards.

Practical Standards

Standards based on currently attainable conditions that include allowances for normal amounts of waste and inefficiency. Also known as attainable standards.

Regression

A data mining technique that is used to build a model to predict an outcome based on one or more variables.

Standard Cost

The budgeted cost for a single unit of product. Also simply referred to as standards.

Standard Cost Accounting

Another common name for standard costing.

Standard Costing

Also known as standard cost accounting. A method of accounting in which product costs are entered into the general ledger inventory accounts at standard cost rather than actual cost. The variances are captured in their own general ledger accounts and displayed on a standard costing income statement prior to being closed out at the end of the period.

Standards

Another common name for standard costs.

Variable Overhead Efficiency Variance

This variance tells managers how much of the total variable MOH variance is due to using more or fewer hours of the allocation base (usually machine hours or DL hours) than anticipated for the actual volume of output. It is calculated as follows: SR x (AH - SHA).

Variable Overhead Rate Variance

Also called the variable overhead spending variance. This variance tells managers wether more or less was spent on variable overhead than they expected would be spent for the hours worked. It is calculated as follows: AH x (AR - SR).

Variable Overhead Spending Variance

Another common name for variable overhead rate variance.

Accounting Rate of Return (ARR)

A measure of profitability computed by dividing the average annual operating income of an asset by the initial investment in the asset.

Annuity

A stream of equal installments made at equal time intervals.

Capital Budgeting

The process of making capital investment decisions. Companies make capital investments when they acquire capital assets—assets used for a long period of time.

Capital Rationing

Choosing among alternative capital investments due to limited funds.

Compound Interest

Interest computed on the principal and all interest earned to date.

Cyclical Fluctuations

A variation in time series data that usually lasts for more than one year but has no fixed time interval.

Discount Rate

Management’s minimum desired rate of return on an investment; also called the hurdle rate and required rate of return.

Exponential Smoothing (Time Series) Model

A time series model in which upcoming data observations are based on an exponentially decreasing average of past data points.

Hurdle Rate

Management’s minimum desired rate of return on an investment; also called the discount rate and required rate of return.

Internal Rate of Return (IRR)

The rate of return (based on discounted cash flows) that a company can expect to earn by investing in a capital asset. The interest rate that makes the NPV of the investment equal to zero.

Irregular Variations

A variation in time series data that is due to random factors that do not repeat in a pattern and are difficult to predict.

LEED

LEED, which stands for Leadership in Energy and Environmental Design, is a certification system developed by the U.S. Green Building Council as a way of promoting and evaluating environmentally friendly construction projects.

Moving Average (Time Series) Model

A time series model in which (or “that states that”) the next observation is the average of all the past observations.

Net Present Value (NPV)

The difference between the present value of the investments net cash inflows and the investment’s cost.