05 Budgeting Flashcards
Forecasting tool to determine future sources and uses of resources
Budgeting
Budgeting Cycle
- Planning
- Negotiation and Approval
- Implementation
- Review
Who spearheads budget?
Top level management
Budget for long term plans
Strategic budget
Sources of information for budgeting
a) past company records
b) industry benchmarks
c) company standards
Budget for short-term plans
Tactical budget
Carefully predetermined price, cost or quantity based on efficient operations and usually expressed on a per unit basis
Standard
Standard is expressed in a __________ basis, once it is totaled, it becomes a __________.
per unit; budget
Two components of master budget
Financial
Operating
Types of Standards
Attainable / practical
Theoretical / ideal
Overall plan of the company
Master Budget
First budget prepared in master budget
Sales budget by marketing department
Last budget prepared in master budget
Budgeted SCF
Financial budget components
cash budget
cash flow budget
capex budget
balance sheet budget
Operating budget components
revenues budget
production budget
material usage and purchases budget
labor budget
overhead budget
ending inventory budget
COGS budget
non-manufacturing budget
budgeted I/S
Head of budget committee
Controller
Explain the types of budget:
Kaizen
Activity-Based
Static
Flexible
Zero-based
Incremental
Continuous/Sliding/Rolling/Perpetual
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
Budgeting strategy where all levels of management participate, supports zero-based budgeting
Self-imposed / Cooperative / Participating
Technique of overstating expenditures and/or understating projected revenues when preparing a budget for easy attainability
Budgetary Slack
