B4-M6

Question 1

Cash budgets provide management info on:

Answer 1

Availability of funds for distribution to owners. Repayment of debt, and for investment.

Also minimize cost/need for interim financing

Question 2

Flexible budget

Answer 2

• Provides budgeted numbers for various activity levels
• Appropriate for any activity with variable costs
• uses budgeted revenues and costs per unit but is based on actual units of output

Question 3

Inflation would not affect:

Answer 3

Depreciation (based on historical cost)
Interest expense (amortized)

Question 4

Operating income using a flexible budget

Answer 4

Budgeted contribution margin* actual units used - static fixed costs

Question 5

Proforma statements

Answer 5

Statement of cash flows is the last to be prepared (bc everything affects cash)

Question 6

Flexible budget variance

Answer 6

Difference between actual amounts and flexible budget amounts for the actual output achieved