13.4 Budget Methodologies Flashcards
_______________ budgeting extends budgets estimates at interim dates so that a budget for a specified period, usually 12 months, is always available.
Continuous budgeting
_________ budgeting prepares budgets for varying levels of productivity.
Flexible Budgeting
_____________ budgeting bases budgets on the most likely levels of activity.
Probabilistic Budgeting
A method of budgeting in which the cost of each program must be justified, starting with the one most vital to the company is
Zero-based budgeting
The principal advantage of _______ budgeting is that managers are forced to review each program in its entirely ate the beginning of every budget period, rather than merely extrapolate historical figures.
Zero-based budgeting
A company’s board of directors has requested a full in-depth review of all budgeted items for next fiscal year’s operating budget. The controller of the company subsequently advised all business units heads that the company will not automatically approve operating budget items for next fiscal year simply because they were approved in the past, and that all operating budget items for the next year will need to be justified. Based on the above information, which one of the following budgeting systems is the company most likely using?
A. Activity-based budgeting
B. Zero-based budgeting
C. Project budgeting
D. Flexible budgeting
B. Zero-based budgeting
A budgeting approach that requires a manager to justify the entire budget for each period is known as
zero-based budgeting
______ budget is a budget that lists budget items by program rather than by type of expense; it could be either zero-based or incremental
Program budgeting
_______ budgeting is the traditional budgeting method in which the current year’s budget is simply adjusted to allow for changes planned for the coming year.
incremental budgeting
_______ budgeting refers to the way a budget is used, and not how it is developed.
Performance budgeting
The type of budget that is continually updated to add a new budget period as the most recent budget period is completed is called
Rolling budget
_______ budget adjusts for changes in the volume of activity
Flexible budget
There are many different budget techniques or processes that business organizations can employ. One of these techniques or processes is zero-based budgeting, which is
A. Developing budgeted costs from clear-cut measured relationships between inputs and outputs
B. Budgeting from the ground up as though the budget process were being initiated for the first time
C. Using the prior year’s budget as a base year and adjusting it based on the experiences of the prior year and the expectations for the coming year.
D. Budgeting for cash inflows and outflows to time investments and borrowings in a way to maintain a bank account with a minimum balance
B. Budgeting from the ground up as though the budget process were being initiated for the first time.
A company uses a type of budgeting that focuses on the cost of the processes required to produce and sell products and services. This type of budgeting is known as
Activity-based budgeting
Activity-based budgeting’s greatest effect is on the application of
indirect costs.
A traditional budgeting system involves lumping all indirect costs into a single pool and allocating them to products based on a cost driver such as volume or machine hours.
