[6] Profit Planning and Control: Budgeting

Question 1

Budgets are ?

•For example, they provide precise targets
in terms of:
x3

Answer 1

Budgets are short-term (often one-year) plans expressed (mainly) in financial terms.

EG:
✓ Sales volumes/revenues
✓ Production requirements
✓ Cash receipts and payments

Question 2

x5 Advantages of budgeting:

Answer 2

Control and Cordinate Activities
Motivate managers
Communicate plans
Evaluate manager performance
Consider future plans

Question 3

What is a Participative Budget System?

Answer 3

Where the flow of budget information goes from the less senior supervisors through middle management to the top

Question 4

What is the first thing you decide before composing the budget?

Answer 4

The budget period: This budget is usually a twelve-month budget that rolls forward one month as the current month is completed. The annual operating budget may be divided into quarterly or monthly budgets

Question 5

What is the Production budget determined by? x2

And what does it determine? x3

Answer 5

Sales Budget and End stock Budget

Direct Production Budget
Direct Labour Budget
Manufacturing overheads budget

Question 6

What is the master budget?

What is the starting point for it?

Answer 6

the master budget, a detailed
schedule showing expected sales for the
coming periods expressed in units and
pounds.

The sales budget is the starting point in preparing the master budget

Question 7

Production must be adequate to meet budgeted

___ and provide ___ ____ ___

Answer 7

sales

sufficient ending stock

Question 8

What are the row headings for the production budget? [5]

Answer 8

budget sales
add desired ending stock
total needed
(less) beginning stock
required production