Budgeting Flashcards
Definition of a budget?
Plan showing how resources are to be acquired and used over a specific interval.
Advantages of budgets?
- Identifies future problems and opportunities
- Makes management plan for the future
- Provides measure for comparing actual performance
- Promotes internal communication and coordination
Human factors in budgeting?
Managers held accountable for performances they control.
Mangers should participate in setting targets.
Different types of operating budgets?
Sales budget
Production budget
Direct material purchases budget
Direct labour budget
Overhead budget
Cost of goods manufactured budget
Selling and administrative budget
Budgeted income statement
Different types of financial budgets?
Cash budget
Budgeted income statement
Budgeted balance sheet
Capital expenditures budget
What should be considered when projecting sales?
- Past experience
- Pricing policy
- Market research
- Economic conditions
- Industry outlook (new products, etc)
- Market share
- Competition
Production budget format
Sales
+ ending inventory
= total requirements
— opening inventory
= budgeted production
Direct material usage budget (units) format
Direct materials purchase budget format
Direct materials usage budget format ($)
Direct labour budget format
Overhead budget format
Selling and admin expenses budget format
Budgeted statement of financial performance (income statement) format
Cash budget (budgeted cash flow statement) format
