Chapter 8

Question 1

Planning

Answer 1

Developing goals and preparing budgets to achieve those goals

Question 2

Control

Answer 2

The process of gathering feedback to ensure that a plan is being properly executed or modified as circumstances change.

Question 3

Responsibility Accounting

Answer 3

A system of accountability in which managers are held responsible for those items of revenue and cost—and only those items—over which they can exert significant control. The managers are held responsible for differences between budgeted and actual results

Question 4

Self Imposed Budget

Answer 4

A method of preparing budgets in which managers prepare their own budgets. These budgets are then reviewed by higher-level managers, and any issues are resolved by mutual agreement.

Question 5

Master Budget

Answer 5

A number of separate but interdependent budgets that formally lay out the company’s sales, production, and financial goals and that culminates in a cash budget, budgeted income statement, and budgeted balance sheet.

Question 6

Sales Budget

Answer 6

A detailed schedule showing expected sales expressed in both dollars and units

Question 7

Cash Budget

Answer 7

A detailed plan showing how cash resources will be acquired and used over a specific time period.

Question 8

Merchandise purchases budget

Answer 8

A detailed plan used by a merchandising company that shows the amount of goods that must be purchased from suppliers during the period.

Question 9

Production Budget

Answer 9

A detailed plan showing the number of units that must be produced during a period in order to satisfy both sales and inventory needs

Question 10

Direct Materials Budget

Answer 10

A detailed plan showing the amount of raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories

Question 11

Direct Labor Budget

Answer 11

A detailed plan that shows the direct labor-hours required to fulfill the production budget

Question 12

Manufacturing overhead budget

Answer 12

A detailed plan showing the production costs, other than direct materials and direct labor, that will be incurred over a specified time period.

Question 13

Ending finished goods inventory budget

Answer 13

A budget showing the dollar amount of unsold finished goods inventory that will appear on the ending balance sheet.

Question 14

Selling and administrative expense budget

Answer 14

A detailed schedule of planned expenses that will be incurred in areas other than manufacturing during a budget period.

Question 15

Cash budget

Answer 15

A detailed plan showing how cash resources will be acquired and used over a specific time period.

Question 16

Continuous budget

Answer 16

A 12-month budget that rolls forward one month as the current month is completed.

Question 17

Ending finished goods inventory budget

Answer 17

A budget showing the dollar amount of unsold finished goods inventory that will appear on the ending balance sheet.