Chapter 7 Flashcards
A financial plan managers use to coordinate a business’ activities with its goals and strategies.
budgets
The practice of comparing a company with its prior performance or with best practices from other companies.
Benchmarking
A budgeting process where those individuals who are directly impacted by a budget are involved
participative budget
occurs when managers intentionally understate expected revenues or overstate expected expenses.
budgetary slack
A budget technique that requires managers to justify all revenue and expenses for each new period
zero-based budget
A long-term financial plan used of coordinate activities needed to achieve the long-term goals of the company
strategic budget
a short-term financial plan used to coordinate the activities needed to achieve the short-term goals
operational budget
Involves continuously adding one additional month to the budget as each month goes by
Continuous budget
A budget prepared for only one level of sales volume
static budget
A budget prepared for various levels of sales volume
Flexible budget
Set of budgeted financial statements and supporting schedules for the entire organization.
Master budget
What are the three types of budgets included in the master budget
Operating
Financial
Capital expenditure
Set of budgets that projects sales revenue, COGS, and SG&A, all of which feed into the cash budget
operating budget
This budget presents the company’s plan for purchasing property, plant, equipment, and other long term assets.
Capital expenditures budget
This budget includes cash budget and the budgeted financial statements.
Financial budget
Budget that details how the business expects to go from the beginning cash balance to the desired ending cash balance
cash budget
Budget that estimates the amount of sales revenues
Sales budget
determines the number of units to be produced during the year to meet projected sales and is the basis for the production costs budgets.
production budget
The budget that estimates the amount of materials to purchase to meet the company’s production needs
Direct materials budget
Estimates the direct labor hours and related cost needed to support the production budget.
direct labor budget
estimates the variable and fixed manufacturing overhead needed to meet the company’s production needs.
manufacturing overhead budget.
Estimates the cost of goods sold based on the company’s projected sales.
Cost of Goods Sold Budget
Estimates the selling and administrative expenses needed to meet the company’s projected sales.
Selling and administrative budget
