Chapter 7

Question 1

Advantages of Budgeting

Answer 1

Compels managers to think ahead by formalizing their responsibilities for planning.
Provides an opportunity for managers to reevaluate existing activities and evaluate possible new activites
Aids managers in communicating objectives and coordinating actions acreoss the organization
Provides benchmarks to evaluate subsequent performance

Question 2

Strategic Planning:

Answer 2

Covers no specific time period, and often is not built around financial statements.

Question 3

Long-Range Planning:

Answer 3

5-10 year horizon and consists of financial statements without much detail.

Question 4

Budgeting planning:

Answer 4

1 year horizon or less, consists of financial statements with much detail.

Question 5

Operating Budget:

Answer 5

Used as a guide for production and sales and it focuses on the income statement

Question 6

Financial Budget:

Answer 6

Used to control the receipt and disbursement of funds and it focuses on the statement of cash receipts and disbursements