Chapter 21

Question 1

buttom-up participative budget

Answer 1

A budget approach driven by the direct participation of lower-level employees.

Question 2

budget committee

Answer 2

A group of senior managers from each business unit charged with leading the budget preparation and review process

Question 3

budget slack

Answer 3

The influence of behavior to “pad” a budget via misstating expected revenues and/or expenses; to create more favorable budget vs. actual performance appraisals.

Question 4

cash budget

Answer 4

An essential budget component detailing planned cash receipts, disbursements, and financing actions

Question 5

continuous budget

Answer 5

A budget that is constantly updated; as one month/quarter is completed another is added to the set of projections.

Question 6

direct labor budget

Answer 6

A budget that details expected direct labor needs, along with the related costs of labor.

Question 7

direct material purchases budget

Answer 7

A budget that details expected direct material purchases, along with the related cash payments.

Question 8

encumbrance

Answer 8

A budgetary restriction occurring in advance of a related expenditure

Question 9

factory overhead budget

Answer 9

A budget that details the anticipated factory overhead, including calculations related to the allocation of such amounts.

Question 10

flexible budget

Answer 10

A budget that covers a range of potential outcomes by relating expense levels to the potential revenues.

Question 11

incremental budgeting

Answer 11

A budgeting approach where the prior year experience sets a base line for a new budget; changes are made based on new information but the base need not be rejustified in detail.

Question 12

master budget

Answer 12

Also know as the comprehensive budget; an integrated set of articulated budgets relating to numerous operation subcomponents (labor, material, overhead, SG&A, etc.)

Question 13

pro forma financial statments

Answer 13

“As if” budgeted financial statments

Question 14

production budget

Answer 14

A budget that details planned levels of production; takes into account sales and inventory build/decline.

Question 15

sales budget

Answer 15

A budget that details anticipated sales levels.

Question 16

SG&A Budget

Answer 16

A budget that details anticipated selling, general, and administrative costs.

Question 17

static budget

Answer 17

A budget that does not anticipate alternative outcomes; estimated sales and expenses are fixed and establish the relevant benchmarks.

Question 18

top-down mandated budget

Answer 18

A budget approach where upper level management establishes parameters under which the budget is to be prepared.

Question 19

zero-based budgeting

Answer 19

A budget approach where each expenditure item must be justified for each new budget period.