Budgeting (B4:M5-6)

Question 1

what is the difference between a static budget and flex budget?

Answer 1

static: based on one specific level of production
flex: can be prepared for any activity level within a relevant range

Question 2

what is the best basis for setting standards?

Answer 2

engineering standards based on attainable performance

Question 3

when preparing budgets, which budgeted FS must come before the other

Answer 3

income statement before balance sheet

Question 4

what do ideal standards represent?

Answer 4

the costs that result from perfect efficiency and effectiveness. I.e., no normal spoilage or downtime

Question 5

what kind of budget uses budgeted revenue and costs per unit, but is adjusted based on actual units of output?

Answer 5

flexible

Question 6

what is the main reason for preparing a cash budget?

Answer 6

to anticipate cash flows so that excess cash can be invested and to minimize the need for interim financing