05 Budgeting

Question 1

Forecasting tool to determine future sources and uses of resources

Answer 1

Budgeting

Question 2

Budgeting Cycle

Answer 2

1. Planning
2. Negotiation and Approval
3. Implementation
4. Review

Question 3

Who spearheads budget?

Answer 3

Top level management

Question 3

Budget for long term plans

Answer 3

Strategic budget

Question 4

Sources of information for budgeting

Answer 4

a) past company records
b) industry benchmarks
c) company standards

Question 5

Budget for short-term plans

Answer 5

Tactical budget

Question 6

Carefully predetermined price, cost or quantity based on efficient operations and usually expressed on a per unit basis

Answer 6

Standard

Question 7

Standard is expressed in a __________ basis, once it is totaled, it becomes a __________.

Answer 7

per unit; budget

Question 8

Two components of master budget

Answer 8

Financial
Operating

Question 8

Types of Standards

Answer 8

Attainable / practical
Theoretical / ideal

Question 9

Overall plan of the company

Answer 9

Master Budget

Question 10

First budget prepared in master budget

Answer 10

Sales budget by marketing department

Question 11

Last budget prepared in master budget

Answer 11

Budgeted SCF

Question 12

Financial budget components

Answer 12

cash budget
cash flow budget
capex budget
balance sheet budget

Question 13

Operating budget components

Answer 13

revenues budget
production budget
material usage and purchases budget
labor budget
overhead budget
ending inventory budget
COGS budget
non-manufacturing budget
budgeted I/S

Question 14

Head of budget committee

Answer 14

Controller

Question 15

Explain the types of budget:
Kaizen
Activity-Based
Static
Flexible
Zero-based
Incremental
Continuous/Sliding/Rolling/Perpetual

Answer 15

a) Kaizen - total quality management (revenues is constant, attain production efficiency and decline production cost)
b) Activity-based - identify value-adding and non-value adding activities and eliminate NVA activities
c) Static (fixed) - based on normal capacity or budgeted capacity, prepared at the start of the year
d) Flexible - only budget adjusted to actual level of operations and used for evaluation
e) Zero-based - do not base on past years
f) Incremental - budget last year as basis
g) Continuous - prepared monthly or quarterly

Question 16

Budgeting strategy where all levels of management participate, supports zero-based budgeting

Answer 16

Self-imposed / Cooperative / Participating

Question 17

Technique of overstating expenditures and/or understating projected revenues when preparing a budget for easy attainability

Answer 17

Budgetary Slack