Financial Planning Flashcards
7 cards from real CPP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Planning flashcards as text
Annual demand is 10,000 units, ordering cost is $50 per order, and carrying cost is $4 per unit per year. What is the EOQ?
Answer: 500 units
EOQ = √(2 × 10,000 × 50 / 4) = √250,000 = 500 units.
Fixed costs are $200,000, the selling price is $50 per unit, and variable cost is $30 per unit. What is the break-even volume?
Answer: 10,000 units
Break-even = Fixed costs / Contribution margin = $200,000 / $20 = 10,000 units.
A project has an NPV of zero at the company's discount rate. What does this indicate?
Answer: The project earns exactly the required rate of return
An NPV of zero means discounted inflows equal outflows, so the return equals the discount rate.
Which statement about sunk costs is correct for a procurement investment decision?
Answer: They should be ignored because they cannot be recovered
Sunk costs have already been incurred and do not differ between future alternatives, so they are not relevant.
Procurement is asked to report savings that will appear in the CFO's income statement. Which type of savings qualifies?
Answer: Hard savings that lower spend versus the prior baseline
Only hard savings that reduce actual spend below the baseline show up on the P&L.
An expense budget is $1.2 million and actual spend is $1.32 million. What is the variance?
Answer: $120,000 unfavorable (10%)
Spending $120,000 over a $1.2M budget is a 10% unfavorable variance.
Which budgeting practice links spending to the cost of activities that drive outputs, helping procurement find indirect cost reductions?
Answer: Activity-based budgeting
Activity-based budgeting assigns resources to activities and their cost drivers, showing where overhead can be cut.