Budgeting_Flashcards
What is the purpose of budgeting?
To plan, control, and evaluate financial activities through resource allocation.
What are the components of a master budget?
Sales budget, production budget, direct materials budget, direct labor budget, overhead budget, selling and administrative expense budget, cash budget, budgeted income statement, and budgeted balance sheet.
What is a sales budget?
A detailed schedule showing expected sales in units and dollars for a specific period.
Why is the sales budget important?
It drives the entire budgeting process and is the basis for other budgets.
What is a production budget?
Ensures enough units are produced to meet sales demands and inventory requirements.
What is included in a cash budget?
Receipts, disbursements, and financing sections to plan cash flow.
What is budgetary slack?
A cushion added to budgets by overestimating costs or underestimating revenues.
What is participative budgeting?
A process where lower-level managers contribute to budget estimates.
What is a flexible budget?
A budget that adjusts for changes in activity levels, providing better performance evaluation.
How does a static budget differ from a flexible budget?
Static budgets are fixed and do not change with activity levels, while flexible budgets adjust.
What are guaranteed labor hours?
Minimum hours for which employees are paid, regardless of hours worked.
What are the benefits of participative budgeting?
Encourages ownership, improves accuracy, and increases motivation among managers.
What are the challenges in budgeting?
Budgetary slack, unrealistic estimates, and ensuring coordination across departments.
What is the master budget?
A comprehensive financial plan integrating all individual budgets for a period.
What is a continuous budget?
A 12-month budget that rolls forward as each month is completed.
