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Cost Test 10

Terms in this set (74)

What is a budget?
-a detailed plan for acquisition and use of financial and other resources over a specified period of time for example, a year, month, or a quarter.
What is budgeting?
-the process of preparing one or more budgets
The budgeting process overview consists of:
-Budget committee
-Budget period
-Budget guidelines
-Negotiation, review, and approval
-Revision
(Strategy and the master budget)

The starting point in the budget-preparation process is specification of the ___________________.
organizations strategy
(Strategy and the master budget)

The organization _______________ identifies required actions over a 5-7 year period to attain the organization's strategic goals.
long-range plan
(Strategy and the master budget)

An organization expresses its strategic goals and long term objectives in its _______________ and ___________
master budget

capital budgeting
(Strategy and the master budget)

Master Budget short term objectives includes:
operating and financial budgets
(Strategy and the master budget)

What are plans for all phases of operations, including production, purchasing, personnel, and marketing budgets.
-operating budgets
(Strategy and the master budget)

What identify sources and uses of funds for budgeted operations and capital expenditures.
-financial budgets
(The master budget)

Represents the " " for an upcoming period.
grand plan of action
(The Master Budget)

Translates the organizations short term objectives into action steps by
-communicating to employees and managers alike the expectations of top management
-helping coordinate subunit activities.
(The Master Budget)

Culminates in the preparation of a set of __________
-pro-forma financial statements
(The Master Budget)

The master budget comprises a set of _________ and ____________.
-operating and financial budgets.
(The Master Budget)

The set of operating budget culminates in a _________________.
-budgeted income statement
(The Master Budget)

The set of financial budgets culminates in a ____________________. (Statement of financial position)
-budgeted balance sheet
The Master Budget starts with _____________.
sales budget
(Sales Budget)

Is prepared ____________.
-first
(Sales Budget)

The sales budget shows _______________________.
forecasted sales, in units and dollars for an upcoming period.
(Sales Budget)

Thus, the sales budget has two components
-forecasted sales volume
-budgeted selling prices
What is after the sales budget?
-production budget
(Production Budget)

After the sales budget, we prepare a set of manufacturing budgets, beginning with a ___________.
-production budget
(Production Budget)

Shows __________________ for a given period.
-planned production
(Production Budget)

Budgeted production (in units) is calculated as
Budgeted Sales (in units)
+Desired ending inventory (in units)
-Beginning inventory (in units)

=Budgeted production (in units)
What is after the production budget?
-direct material budgets
(Direct Material Budgets)

Two required budgets:
-direct material usage budget
-direct material purchases budget
(Direct Material Budgets).

Direct material usage budget

The last line of the production budget =
-first line of the direct materials usage budget
(Direct Material Budgets).

Direct material usage budget

Shows the amount (and budgeted cost) of _____________ for budgeted production.
-Direct material
(Direct Material Budgets).

Direct material purchases budget

Contains _______________ in units and dollars of direct materials for the upcoming period
-budgeted purchases
(Direct Material Budgets).

Direct material purchases budget

Is needed to complete the ________________ (provides unit cost data)
-direct material usage budget
(Direct Material Budgets).

Direct material purchases budget

Is a function of:
-materials required for production (from usage budget)
-target ending inventory of materials
-Beg of period inventory
-budgeted purchase price per unit of raw material
What is after Direct material budget?
-Direct labor budget
(Direct Labor Budget)

Enables the the personnel department to plan for _____________ of employees based on production needs
-hiring and repositioning
(Direct Labor Budget)

Is prepared for each __________
-type of labor
(Direct Labor Budget)

Is a function of:
-budgeted output (from production budget)
-standard (budgeted) labor hours per unit of output
-standard (budgeted) wage rate per hour
What is the step after Direct Labor Budget?
-factory overhead budget
(Factory Overhead Budget)

Factory Overhead budget includes all production cost other than ____________and ____________. Some firms separate factory overhead into variable and fixed cost.
-direct material and direct labor
(COGM and COGS budget)

The COGM and COGS budget is prepared ____________.
-after the factory overhead budget is prepared
(COGM and COGS budget)

Both use information from this budget?
-budgeted income statement
-budgeted balance sheet
(Cash Budget)

The cash budget depicts the effects on _______ of all budgeted activities.
-cash
(Cash Budget)

This budget generally has three sections:
-net cash flows from operating activities
-net cash flows from investing activities
-net cash flows from financing activities
(Cash Budget)

Preparation of this budget involves careful review of all other budgets to identify cash _________ and _______
-inflows and outflows
(Budgeted Income Statement and Budgeted Balance Sheet)
-can be prepared using all the budgets
(Budgeted Income Statement and Budgeted Balance Sheet)

The budgeted IS describes the _______________ for the upcoming period.
-expected net income
(Budgeted Income Statement and Budgeted Balance Sheet)

The budgeted BS, ______________ in the budget preparation process, incorporates the effects of all operations and cash flows during the budget period and shows projected ending balances in asset, liability and equity accounts.
-last budget
(Uncertainty and the budgeting process)

Includes
-what if analysis
-sensitivity analysis
-scenario analysis
(Uncertainty and the budgeting process)

Scenario analysis:
-best-case scenario
-worst case scenario
-most likely scenario
(Budgeting in Service Companies)

The firms have ____________operating characteristics , operating environments and considerations than those of manufacturing and merchandising firms.
-different
(Budgeting in Service Companies)

Service firms are different due to the ______________ of production or merchandise purchase budgets and their ancillary budgets.
-absence
(Budgeting in Service Companies)

The focus of the budgeting process must be _____________.
-personnel planning
(Budgeting in Service Companies)

Questions asked?
-Does the firm have sufficient staff and resources to provide the expected level of service output in the upcoming period?
-Do staff members have the appropriate skills?
What are alternative Budgeting approaches?
-Zero-base budgeting (ZBB)
-Activity-Based budgeting (ABB)
-Time-Driven activity based budgeting (TDABB)
-Kaizen
(Alternative Budgeting Processes)

Zero based budgeting is a budgeting process that requires managers to prepare budgets from a __________
-zero base
(Alternative Budgeting Processes)

ZBB allows _______________ or functions to be included in the budget unless managers justify their needs.
-no activities
(Alternative Budgeting Processes)

ZBB involves an in-depth review and analyses of all budget items make managers aware of activities and functions that ___________
-outlived their usefulness
(Alternative Budgeting Processes)

ZBB can be ________
-time consuming process
(Alternative Budgeting Processes)

ABB is an extension of the traditional form of __________
-activity based costing (ABC)
(Alternative Budgeting Processes)

ABB starts with budgeted output and segregates costs required for the budgeted output into _________
-homogeneous cost pools
(Alternative Budgeting Processes)

ABB can be a ______________
-can be a simple extension of a firms ABC system
(Alternative Budgeting Processes)

Time-Driven activity based budgeting (TDABB) is a method of budget preparation used in conjunction with a ___________
-TDABC system
(Alternative Budgeting Processes)

Budgeting in both ABC and TDABC systems facilitates _____________
-resource capacity planning
(Alternative Budgeting Processes)

Budgeting in both ABC and TDABC systems facilitates resource capacity planning.
-Effect of your planned versus practical capacity
(Alternative Budgeting Processes)

Kaizen
-continuous improvement budgeting
(Alternative Budgeting Processes)

Kaizen is a budgeting approach that incorporates _____________ in their budgets.
-continuous improvement expectations
(Alternative Budgeting Processes)

Kaizen can be used as complement to both _______ and ___________
-traditional and activity based systems (ABB and TDABB)
(Behavior Issues in Budgeting)
-budgetary slack
-spending the budget
-goal congruence
-authoritative or participative
-difficulty of the budget target
-linkage of compensation and budgeted performance
(Behavior Issues in Budgeting)

Budgetary slack is the __________ managers intentionally build into budgets to help ensure success in meeting the budget.
-"cushion"
(Behavior Issues in Budgeting)

Spending the budget is another issue; managers often feel if they do use all resources they receive, next year budget ________
-may be cut
(Behavior Issues in Budgeting)

Goal congruence is a term that refers to the degree of ___________ between goals of the firms, it's subunits and it's employees.

-involving employees in the budgeted process fosters goal congruence
-consistently
(Behavior Issues in Budgeting)

Authoritative or Participative budgeting?

Top down budgeting is referred to as_______
-authoritative budgeting
(Behavior Issues in Budgeting)

Authoritative or Participative budgeting?

Bottom up budgeting is referred to as ___________
-participative budgeting
(Behavior Issues in Budgeting)

Difficulty of the budget target.

An easy budget may _________ to encourage employees to give their best efforts while a difficult target can discourage managers from even trying.
-fail
(Behavior Issues in Budgeting)

Difficulty level of budget target.

A _____________________ is suggested with incentives for exceeding the budgeted figures.
"Highly achievable target"
(Behavior Issues in Budgeting)

Linkage of compensation and budgeted performance had problems
-with fixed performance contracts
-gaming the performance measure
(Behavior Issues in Budgeting)

Linkage of compensation and budgeted performance

Suggested improvements to basing incentive compensation on the basis of a fixed performance contract includes:
-using a linear compensation plan, rolling forecasts and relative performance.
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