Ch 4, Module 5

Question 1

define operational and tactical planning

Answer 1

process of determining the specific objectives and means by which strategic plans will be achieved

Question 2

single use plan

Answer 2

apply to specific circumstances during a specific time frame

Question 3

annual budget

Answer 3

a type of single-use tactical plan

budgets translate the strategic plan and implementatino into a period-specific operational guide.

Question 4

ideal standards

Answer 4

represent the costs that result from perfect efficiency and effectiveness in job performance

this is the best we think we can ever do

advantage - emphasis on continuous quality improvement
disadvantage - demotivation of employees by the use of unattainable standards

Question 5

currently attainable standards

Answer 5

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

advantage - fosters the perception that standards are reasonable
disadvantage - required use of judgment and potential manipulation

Question 6

authoritative standards

Answer 6

set exclusively by mgt

advantage - implemented quickly and will likely include all costs
disadvantage - workers might not accept imposed standards

Question 7

participative standards

Answer 7

set by both managers and the individuals who are held accountable to those standards

advantages - workers are more likely to accept the stds

disadvantage - -slower to implement

Question 8

master budget

Answer 8

“annual business plan”

documents specific short term operating performance goals for a period (normally one year or less)

includes an operating (nonfinancial) budget as well as a financial budget that outlines the sources of funds and detailed plans for their expenditure

provide comprehensive and coordinated budget guidance for an org consistent with overall strategic objectives

Question 9

Limitations of the annual plan/budget

Answer 9

master budget confined to one year at a single level of activity (when in reality, budgets can vary signficantly from actual results)

Question 10

operating budget

Answer 10

established to describe the resources needed and the manner in which those resources will be acquired

include

• sales budgets
• production budgets
• Selling and admin budget
• personnel budgets

Question 11

financial budget

Answer 11

define the detailed sources and uses of funds to be used in operations

• pro forma F/S

- cash budget

Question 12

sales budget

Answer 12

the foundation (starting point)

represents the anticipated sales of the org in units and dollars

based on the sales forecast which is based on numerous factors

• past sales patterns
• general economic conditions
• change in prices
• change in product mix

Question 13

production budget

Answer 13

prepared for each product or each department based on the amount that will be produced, stated in units

made up of amounts spent on DL, DM, and factory OH

Question 14

what is required level of production based on?

Answer 14

inventory levels!

Question 15

calculation for budgeted production

Answer 15

budgeted sales + desired ending inventory - beginning inventory = budgeted production

Question 16

direct materials purchases budget

Answer 16

represents the dollar amount of purchase of DM required to sustain production requirements

Question 17

calculation for units of DM to be purchased for the period

Answer 17

Units of DM needed for production period
+ desired end inv. units at end of the pd
- beg inv units at the start of the period

Question 18

calculation for cost of DM to be purchased

Answer 18

units of DM to be purchased for the period x cost per unit

Question 19

direct materials usage budget

Answer 19

cost of material used

represents the number of units of DM required for production along with the related cost of those DM

Question 20

calculation of direct materials usage

Answer 20

beginning inventory cost
+ purchases at cost
- ending inventory at cost

Question 21

direct labor budget

Answer 21

these anticipate the hours and rates associated with workers directly involved in meeting production requirements

Question 22

calculation of DL budget

Answer 22

budgeted production (units)
x hours (or fraction of hours) required to produce each unit 
= total number of hours needed
x hourly wage rate
= total wages

Question 23

factory overhead budget

Answer 23

includes the fixed and variable production costs that are not direct labor or direct materials

Question 24

cost of goods manufactured and sold budget

Answer 24

represents the sum of the budgets for each element of the manufacturing as follows

• DM
• DL
• factory OH

Question 25

calculation of cost of goods manufactured

Answer 25

cost of goods manufactured
+ beg finished goods inv
- end finished goods inv
=COGS