Chapter 8

Question 1

Administrative expense budget

Answer 1

a budget consisting of estimated expenditures for the overall organization and operation of the company.

Question 2

Budget

Answer 2

a moving 12-month budget with a future month added as the current month expires.

Question 3

Budget committee

Answer 3

a committee responsible for setting budgetary policies and goals, reviewing and approving the budget, and resolving any differences that may arise in the budgetary process.

Question 4

Budget director

Answer 4

the individual responsible for coordinating and directing the overall budgeting process.

Question 5

Budgetary slack

Answer 5

the process of padding the budget by overestimating costs and underestimating revenues.

Question 6

Budgets

Answer 6

a plan of action expressed in financial terms.

Question 7

Capital expenditures budget

Answer 7

a financial plan outlining the acquisition of long-term assets.

Question 8

Cash budget

Answer 8

a detailed plan that outlines all sources and uses of cash.

Question 9

Continuous budget

Answer 9

a moving 12-month budget with a future month added as the current month expires.

Question 10

Control

Answer 10

the process of setting standards, receiving feedback on actual performance, and taking corrective action whenever actual performance deviates significantly from planned performance.

Question 11

Controllable costs

Answer 11

costs that managers have the power to influence.

Question 12

Direct labor budget

Answer 12

a budget showing the total direct labor hours needed and the associated cost for the number of units in the production budget.

Question 13

Direct materials purchases budget

Answer 13

a budget that outlines the expected usage of materials production and purchases of the direct materials required.

Question 14

Dysfunctional behavior

Answer 14

individual behavior that conflicts with the goals of the organization.

Question 15

Effectiveness

Answer 15

the manager’s performance of the right activities. Measures might focus on value-added versus non-value-added activities.

Question 16

Efficiency

Answer 16

the performance of activities. May be measured by the number of units produced per hour or by the cost of those units.

Question 17

Ending finished goods inventory budget

Answer 17

a budget that describes planned ending inventory of finished goods in units and dollars.

Question 18

Feature costing

Answer 18

assigns costs to activities and products or services based on the product’s or service’s features.

Question 19

Financial budgets

Answer 19

that portion of the master budget that includes the cash budget, the budgeted balance sheet, the budgeted statement of cash flows, and the capital budget.

Question 20

Flexible budget variances

Answer 20

the difference between actual costs and expected costs given by a flexible budget.

Question 21

Flexible budget

Answer 21

a budget that can specify costs for a range of activity.

Question 22

Goal congruence

Answer 22

the alignment of a manager’s personal goals with those of the organization.

Question 23

Incentives

Answer 23

the positive or negative measures taken by an organization to induce a manager to exert effort toward achieving the organization’s goals.

Question 24

Incremental approach

Answer 24

the practice of taking the prior year’s budget and adjusting it upward or downward to determine next year’s budget.

Question 25

Marketing expense budget

Answer 25

a budget that outlines planned expenditures for selling and distribution activities.

Question 26

Master budget

Answer 26

the collection of all area and activity budgets representing a firm’s comprehensive plan of action.

Question 27

Myopic behavior

Answer 27

managerial actions that improve budgetary performance in the short run at the expense of the long-run welfare of the organization.

Question 28

Operating budgets

Answer 28

budgets associated with the income-producing activities of an organization.

Question 29

Overhead budget

Answer 29

a budget that reveals the planned expenditures for all indirect manufacturing items.

Question 30

Participative budgeting

Answer 30

an approach to budgeting that allows managers who will be held accountable for budgetary performance to participate in the budget’s development.

Question 31

Production budget

Answer 31

a budget that shows how many units must be produced to meet sales needs and satisfy ending inventory requirements.

Question 32

Pseudoparticipation

Answer 32

a budgetary system in which top management solicits inputs from lower-level managers and then ignores those inputs. Thus, in reality, budgets are dictated from above.

Question 33

Research and development expense budget

Answer 33

a budget that outlines planned expenditures for research and development.

Question 34

Rolling budget

Answer 34

a moving 12-month budget with a future month added as the current month expires.

Question 35

Sales budget

Answer 35

a budget that describes expected sales in units and dollars for the coming period.

Question 36

Static budget

Answer 36

a budget for a particular level of activity.

Question 37

Variable budget

Answer 37

a budget that can specify costs for a range of activity.

Question 38

Zero-base budgeting

Answer 38

a method of budgeting in which the prior year’s budgeted level is not taken for granted. Existing operations are analyzed, and continuance of the activity or operation must be justified on the basis of its need or usefulness to the organization.