Chapter 6 lecture NOT ON EXAM

Question 1

the quantitative expression of a proposed plan of action by management for a specified period

Answer 1

a budget

Question 2

an aid to coordinating what needs to be done to implement that plan

Answer 2

a budget

Question 3

a plany which uncludes both financial and nonfinancial aspects and serves as a road map for the company to follow in an upcoming period

Answer 3

a budget

Question 4

budgets help managers do what

Answer 4

1. set goals
2. review results

Question 5

communicate directions and goals to different departments of a company to help them coordinate the actions they must pursue to satisfy customers and suceed in the marketplace
(1 way how budgets help managers)

Answer 5

set goals

Question 6

judge performanace by measuring financial results against planned objectives, activities, and timelines to learn about potential problems and motivate employees to achieve targets
(1 way how budgets help managers)

Answer 6

review results

Question 7

is at the core of the budgeting process. it expresses managements operating and financial plans for a specified period

Answer 7

master budget

Question 8

two types of plans master budgets use for a specified period

Answer 8

1. operating decision
2. financial decision

Question 9

deal with how to best use the limited resources of an organization
(which master budget plan is this?)

Answer 9

operating decisions
(the operating budget)

Question 10

deal with how to obtain the funds to acquire those resources
(which master budget plan is this?)

Answer 10

financial decisions
(the financial budget)

Question 11

is the master budget one or many budgets

Answer 11

many budgets covering specific areas

Question 12

1. promote coordination and communication among submits within the company
2. provide a framework for judging performance and facilitating learning
3. motivate managers and other employees

Answer 12

advantages of budgets

Question 13

budgeting process is time consuming. estimates suggest that senior managers spend about ______ of their time on budgeting

Answer 13

10 - 20%

Question 14

a part, segment, or subunit of an organization whose manager is accountable for a specified set of activites

Answer 14

responsibility center

Question 15

4 types of responsibility center

Answer 15

1. cost center
2. revenue center
3. profit center
4. investment center

Question 16

accountable for costs only
(which type of responsibility is this?)

Answer 16

cost center

Question 17

accountable for revenues only
(which type of responsibility is this?)

Answer 17

revenue center

Question 18

accountable for revenues and costs
(which type of responsibility is this?)

Answer 18

profit center

Question 19

accountable for investments, revenues, and costs
(which type of responsibility is this?)

Answer 19

investment center

Question 20

is the degree of influence a specific manager has over costs, revenues, or related items for which he or she is responsible

Answer 20

controllability

Question 21

is any cost primrily subject to the influence of a given responsibility center manager for a given period

Answer 21

controllable cost

Question 22

helps managers to first focus on obtaining information for what they are responsible for as opposed to blaming others in the organization

Answer 22

responsibility accounting

Question 23

the fundamnetal purpose of _____ ______ is to enable future improvement

Answer 23

responsibility accounting

Question 24

_____, coupled with ______ ______, provide feedback to top managers about the performance relative to the budget of differnet responsibility center managers

Answer 24

budgets, coupled with responsibility accounting

Question 25

budgets offer feedback in the form of

Answer 25

variances
(when actual results deviate from budgeted targets)

Question 26

• early warning of problems
• a basis for performance evaluation
• a basis for strategy evaluation

Answer 26

variances provide managers with these