Budget Flashcards
Budgets can be used for
control or planning
A mission statement is a:
broad general description of the basic societal need that the organization satisfies
Answers: what business are we in
Define Goals of Organization
Endpoints that must be accomplished for the organization to fulfill its mission
Define Objectives:
Statements of specific tasks that must be accomplished if the organization is to meet its goals
Define Revenue Budget
Budget that project future sales
Becomes a planning device for marketing and sales activities
Define Expense Budgets
Found in all units within a firm and in not-for-profit and profit making organization
List the primary activities undertaken by a unit to achieve its goals and allocate a dollar amount to each
Define Operating or profit budgets
Combine revenue and expense budgets to determine the units’ profit contribution
Define Cash budgets
Forecast of how much cash the org will have on hand and how much it will need to meet expenses
Define Capital expenditure budgets
Forecasts investments in property, buildings and major equipment
Define Fixed Budget
Assumes a fixed level of sales or production
Define Variable budget
Labor, products, material and administrative expenses v ar with volume
Define Incremental budget
Allocates funds to departments according to allocations in the previous period
Two identifying characteristics of incremental budget
Funds are allocated to a department and the manger allocates from there
Incremental budget develops out of previous budget
Problems with incremental budgeting
Allocating funds to org units makes it difficult to differentiate activities within the unit
Inefficiencies tend to grow in the incremental budget because they get hidden
Define Zero-based budget
Requires managers to justify their budget request in details from scratch (prevents hidden inefficiencies)
