Chapter 5.6 - Types Of Budgets Flashcards
What 10 types of budgets are included in a master budget?
- A sales/revenue budget
- A production budget
- A direct materials budget
- A direct labour budget
- A manufacturing overhead budget
- A selling and administrative budget
- A capital budget
- A cash budget
- A budgeted income statement
- A budgeted statement of financial position
What are the options for creating a master budget?
Fixed or flexible (flexed).
What are the differences between a fixed and flexed budget?
A fixed budget does not get adjusted to reflect actual production, while a flexed budget does.
Sales/revenue forecast: What is the budgeted sales formula?
Estimated nr of units to be sold x expected selling price
True or false: estimates from other sources of income beyond sales are not included in the revenue budget.
True.
Production budget: name the 5 components of production budget
- Sales forecast
- Desired closing inventory
- Opening inventory
- Forecast defective goods
- Required production
What is the formula for determining the production budget?
Forecast sales qty - opening inventory + closing inventory + forecast defective goods = required production qty
Materials budget: name the 5 components of a materials budget.
Opening inventory
Closing inventory
Materials to be purchased
Cost per unit
Total material cost
Materials budget: name the 2 sections a materials budget is divided into.
- Materials usage
- Materials purchases
Materials budget: What is the formula for materials usage?
Budgeted required production (units) x Standard quantity of material per unit
Materials budget: What is the formula for determining materials purchases?
Materials usage - opening inventory + closing inventory = quantity of raw materials to be purchased
Materials budget: What is the formula for total material cost?
Quantity of raw materials to be purchased x Standard price of materials
Labour budget: What are the two sections of a labour budget?
Labour usage and labour cost
Labour budget: What is the formula for labour usage?
Budgeted production (units X direct labour (standard) hours per unit
Labour budget: What is the formula for labour cost?
Labour usage X direct labour cost per hour
True or false: a capital budget is a financial plan that shows the expected spending on long-term that will provide benefits over time
True.
What are capital expenditures?
Money spent by a business on acquiring or maintaining fixed assets.
What are the components of a cash budget?
Cash receipts (Cash inflows)
Cash payments (Cash outflows)
Opening Cash balance
Closing Cash balance
Cash budget: What are exceptional receipts?
Cash receipts that do not take place at regular intervals.
What are the characteristics of a fixed budget?
. Predetermined levels
. Unchanged over time
. Limited flexibility
. Comparison and control
What are the characteristics of a flexible budget?
. Adjusts to activity changes
. Is dynamic by nature
. Enables comparison at different levels
. Enables variance analysis
