Budgeting

Question 1

What is prepared first?
Sales budget or Production budget?

Answer 1

Sales budget → Production budget

Question 2

For budgeting, always remember it is opposite of computation of COGS

Answer 2

Ending Inventory → Added
Beginning Inventory → Deducted

Question 3

For the 1st Quarter (January to March)
- what is the ending inventory?
- what is the beginning inventory?

Answer 3

Ending Inventory → March
Beginning Inventory → January

Question 4

Starting Line
- DM Budget
- DL Budget
- OH Budget
- S&A Expense Budget

From what budget?

Answer 4

DM Budget → Units to be Produced (from Production Budget)

DL Budget → Units to be Produced (from Production Budget)

OH Budget → Labor Required (from DL Budget)

S&A Expense Budget → Budgeted Sales (from Sales Budget)

Question 5

Total MOH / S&A Expense is different to Total Payment for MOH / S&A Expense

Answer 5

YES!!!

Question 6

A practice of underestimating revenues or overestimating costs to make budget targets easily achievable in order to project a seemingly favorable performance

Answer 6

Budgetary Slack

Question 7

An incremental budget that adds the current period and drops the older period to maintain a constant budget period of usually 12 months; revised monthly or quarterly.

Answer 7

Continuous Budget (Rolling Budget)

Question 8

After ALL the budgets above have been completed, what is the next budget to be created before you can create Budgeted IS → Budgeted BS?

Answer 8

Cash Budget

Question 9

Operating Budget → From Sales to S&A (Income Statement Accounts)
Financial Budget → From Cash to Financial Statements (Balance Sheet Accounts)

Answer 9

YES