Chapter 21 Flashcards
What is a budget?
A budget is an accounting device used to plan and control resources of operational departments and divisions.
What are the three main managerial functions affected by budgeting?
Planning, Directing, and Controlling.
What is goal conflict in budgeting?
It occurs when employees’ or managers’ self-interest differs from the company’s objectives or goals.
What is zero-based budgeting?
A method where managers estimate sales, production, and other operating data as if operations are being started for the first time.
What is a static budget?
A budget that shows expected results for only one activity level and does not change, even if activity levels change.
What is a flexible budget?
A budget that adjusts for different activity levels, essentially creating a series of static budgets.
What is continuous budgeting?
A method that maintains a 12-month projection into the future by adding new months and removing past months.
What is the master budget?
An integrated set of operating and financial budgets for a period of time.
What is the first step in preparing a master budget?
Creating the sales budget by estimating the quantity of sales.
Why should the production budget be integrated with the sales budget?
To ensure that production and sales remain balanced.
What does the direct materials purchases budget estimate?
The quantities of direct materials needed to be purchased for production.
What is the purpose of the direct labor cost budget?
To estimate the direct labor hours and costs needed to support production.
What is included in the factory overhead cost budget?
Costs for factory overhead items such as maintenance and indirect materials.
What does the cost of goods sold (COGS) budget integrate?
Direct materials, work in process, and finished goods inventories.
What is the cash budget used for?
Estimating expected receipts and payments of cash over a period of time.
What is the capital expenditures budget?
A budget summarizing plans for acquiring fixed assets like machinery and equipment
How do budgets integrate company objectives with employee performance?
By aligning employees’ responsibilities with organizational goals through responsibility centers.
What is the purpose of the financial budget?
To reflect the financing and investing activities of a company.
What are the two primary financial budgets?
The cash budget and the capital expenditures budget.
What is the budgeted balance sheet?
A statement prepared at the end of the budget period, similar to a normal balance sheet but with estimated amounts.
