Ch 08 - Profit Planning

Question 1

Budget

Answer 1

A detailed plan for the future that is usually expressed in formal quantitative terms. (p. 336)

Question 2

Budget committee

Answer 2

A group of key managers who are responsible for overall budgeting policy and for coordinating the preparation of the budget. (p. 340)

Question 3

Cash budget

Answer 3

A detailed plan showing how cash resources will be acquired and used over a specific time period. (p. 341)

Question 4

Continuous budget

Answer 4

A 12-month budget that rolls forward one month as the current month is completed. (p. 337) Same as Perpetual budget.

Question 5

Control

Answer 5

The process of gathering feedback to ensure that a plan is being properly executed or modified as circumstances change. (p. 336)

Question 6

Direct labor budget

Answer 6

A detailed plan that shows the direct labor-hours required to fulfill the production budget. (p. 348)

Question 7

Direct materials budget

Answer 7

A detailed plan showing the amount of raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories. (p. 346)

Question 8

Ending finished goods inventory budget

Answer 8

A budget showing the dollar amount of unsold finished goods inventory that will appear on the ending balance sheet. (p. 350)

Question 9

Manufacturing overhead budget

Answer 9

A detailed plan showing the production costs, other than direct materials and direct labor, that will be incurred over a specified time period. (p. 349)

Question 10

Master budget

Answer 10

A number of separate but interdependent budgets that formally lay out the company?s sales, production, and financial goals and that culminates in a cash budget, budgeted income statement, and budgeted balance sheet. (p. 341)

Question 11

Merchandise purchases budget

Answer 11

A detailed plan used by a merchandising company that shows the amount of goods that must be purchased from suppliers during the period. (p. 346)

Question 12

Participative budget

Answer 12

Same as Self-imposed budget. (p. 338) Self-imposed budget: A method of preparing budgets in which managers prepare their own budgets. These budgets are then reviewed by higher-level managers, and any issues are resolved by mutual agreement. (p. 338)

Question 13

Perpetual budget

Answer 13

See Continuous budget. (p. 337) Continuous budget: A 12-month budget that rolls forward one month as the current month is completed. (p. 337)

Question 14

Planning

Answer 14

Developing goals and preparing budgets to achieve those goals. (p. 336)

Question 15

Production budget

Answer 15

A detailed plan showing the number of units that must be produced during a period in order to satisfy both sales and inventory needs. (p. 344)

Question 16

Responsibility accounting

Answer 16

A system of accountability in which managers are held responsible for those items of revenue and cost?and only those items?over which they can exert significant control. The managers are held responsible for differences between budgeted and actual results. (p. 337)

Question 17

Sales budget

Answer 17

A detailed schedule showing expected sales expressed in both dollars and units. (p. 341)

Question 18

Self-imposed budget

Answer 18

A method of preparing budgets in which managers prepare their own budgets. These budgets are then reviewed by higher-level managers, and any issues are resolved by mutual agreement. (p. 338) Same as Participative budget

Question 19

Selling and administrative expense budget

Answer 19

A detailed schedule of planned expenses that will be incurred in areas other than manufacturing during a budget period. (p. 351)