CHAP 8 Flashcards
objectives of budgeting
establishing specific goals
executing plans to achieve the goals
periodically comparing actual results with the goals
what does budgeting affect?
planning
directing
controlling
how does it affect planning?
Planning involves setting goals to guide decisions and help motivate employees
how does it affect directing?
Directing involves decisions and actions to achieve budgeted goals.
how does it affect controlling?
Controlling involves comparing actual performance against the budgeted goals
human behavior problems that can arise in the budgeting process
goals set too tight
goals set too loose
goals conflict with objectives of company and employees
Attainable goals are more likely to motivate employees and managers
very important for employees and managers to be involved in budgeting porcess
budgetary slack
happens when goals are set too loose
not really accomplishing much
budgetary period for operating activities
normally includes the fiscal year of a company
for control purposes annual budgets
are usually subdivided into shorter time periods
continuous budgeting
maintains a 12 month projection into the future
developing an annual budget usually does what?
starts several months prior to the end of the current year
who is assigned to start the annual budget?
budget committee
methods of developing budget estimates
zero-based budgeting
static budget
flexible budget
zero-based budgeting
requires managers to estimate sales, production, and other operating data as though operations are being started for the first time
static budget
shows the expected results of a responsibility center for only one activity level. Once the budget has been determined, it is not changed, even if the activity changes
flexible budget
shows expected results of a responsibility center for several activity levels
series of static budgets
more accurate