Budgeting Flashcards
What is an ideal standard and its advantages/disadvantages?
- represent the costs that result from perfect efficiency and effectiveness in job performance
- ideal standards are generally not historical; they are forward-looking
- no provision is made for normal spoilage or downtime
- advantage: implied emphasis on continuous quality improvement (CQI) to meet the ideal
- disadvantage: demotivation of employees by the use of unattainable standards
What are currently attainable standards and its advantages/disadvantages?
- represent costs that result from work performed by employees with appropriate training and experience but without extraordinary effort
- provisions are made for normal spoilage and downtime
- adv: fosters the percetion that standards are reasonable
- dis: required use of judgement and potential manipulation
What are authoritative standards and its advantages/disadvantages?
- set exclusively by management
- adv: authoritative standards can be implemented quickly and will likely include all costs
- dis: workers might not accept imposed standards
What are participative standards and its advantages/disadvantages?
- set by both managers and the individuals who are held accountable to those standards
- adv: workers are most likely to accept participative standards
- dis: participative standards are slower to implement
What is included in an operating budget?
- sales budgets
- production budgets
- selling and admin budgets
- personnel budgets
What is included in a financial budget?
- pro forma FS
- cash budgets
What is the budgeted production formula?
budgeted sales
+ desired ending inventory
- beginning inventory
= budgeted production
What is the units of DM to be purchased for the period formula?
units of DM needed for a production period
+ desired ending inventory at the end of the period
- beginning inventory at the start of the period
What is the cost of DM to be purchased formula?
units of DM to be purchased for the period * cost per unit
What is the DM usage formula?
beginning inventory at cost
+ purchases at cost
- ending inventory at cost
What is the total wage formula?
budgeted production (in units) * hours required to produce each unit
= total number of hours needed * hourly wage rate
= total wages
What is the factory overhead budget?
- includes the fixed and variable production costs that are not DL or DM
- applied to inventory based on a representative statistic
Describe the cost of goods manufactured and sold budget
- accumulates the info from the DL, DM and factory OH budgets
Describe the selling and admin expense budget
- represent the fixed and variable nonmanufacturing expenses anticipated during the budget period
What are examples of variable selling expenses?
- sales commissions
- delivery expenses
- bad debt expenses
