budget

Question 1

what is budgetary control

Answer 1

supports achieving corporate objectives

comparing actual results to budget provides a feedback loop

allows management to adjust operations as needed

master budget (set of interrelated budgets that creates a plan of action for a specified period of time)

Question 2

what is in the master budget budget

Answer 2

sales budget

operating expenses budget

production budget

manufacturing budget

financial budget

Question 3

what is in the financial budget

Answer 3

cash expenditure budget

cash budget

focus on the cash resources needed to fund expected operations and planned capital expenditures

Question 4

what are the 4 steps of the budgeting process

Answer 4

1. identify budget report name
   - i.e. sales budget/manufacturing overhead budget
2. state report frequency
   - i.e. weekly or monthly
3. specify report purpose
   - i.e sales goals, expense mgmt, cash
4. indicate primary recipient(s)
   - i.e. department lead, management

Question 5

what is a static budget report

Answer 5

projection of budget data at one level of activity

Question 6

what is the flexible budget report

Answer 6

projects budget data for various levels of activity

a series of static budgets at different levels of activity

Question 7

what are the 4 steps for developing a flexible budget

Answer 7

1. identify the activity index and the relevant range of activity
2. identify variable costs & budgeted variable cost per unit
3. identify fixed costs & determine the budgeted amount
4. prepare budget
   - consider increments of activity
   - consider relevant rang

Question 8

what is a static budget report useful for

Answer 8

static budget reports are useful for evaluating the progress toward planned sales and profit goals

Question 9

what is the flexible budget report useful for

Answer 9

flexible budget reports make it possible to evaluate a manager’s performance in controlling production and costs