Chapter 8 Flashcards
Administrative expense budget
a budget consisting of estimated expenditures for the overall organization and operation of the company.
Budget
a moving 12-month budget with a future month added as the current month expires.
Budget committee
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.
Budget director
the individual responsible for coordinating and directing the overall budgeting process.
Budgetary slack
the process of padding the budget by overestimating costs and underestimating revenues.
Budgets
a plan of action expressed in financial terms.
Capital expenditures budget
a financial plan outlining the acquisition of long-term assets.
Cash budget
a detailed plan that outlines all sources and uses of cash.
Continuous budget
a moving 12-month budget with a future month added as the current month expires.
Control
the process of setting standards, receiving feedback on actual performance, and taking corrective action whenever actual performance deviates significantly from planned performance.
Controllable costs
costs that managers have the power to influence.
Direct labor budget
a budget showing the total direct labor hours needed and the associated cost for the number of units in the production budget.
Direct materials purchases budget
a budget that outlines the expected usage of materials production and purchases of the direct materials required.
Dysfunctional behavior
individual behavior that conflicts with the goals of the organization.
Effectiveness
the manager’s performance of the right activities. Measures might focus on value-added versus non-value-added activities.
Efficiency
the performance of activities. May be measured by the number of units produced per hour or by the cost of those units.
Ending finished goods inventory budget
a budget that describes planned ending inventory of finished goods in units and dollars.
Feature costing
assigns costs to activities and products or services based on the product’s or service’s features.
Financial budgets
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.
Flexible budget variances
the difference between actual costs and expected costs given by a flexible budget.
Flexible budget
a budget that can specify costs for a range of activity.
Goal congruence
the alignment of a manager’s personal goals with those of the organization.
Incentives
the positive or negative measures taken by an organization to induce a manager to exert effort toward achieving the organization’s goals.
Incremental approach
the practice of taking the prior year’s budget and adjusting it upward or downward to determine next year’s budget.
Marketing expense budget
a budget that outlines planned expenditures for selling and distribution activities.
Master budget
the collection of all area and activity budgets representing a firm’s comprehensive plan of action.
Myopic behavior
managerial actions that improve budgetary performance in the short run at the expense of the long-run welfare of the organization.
Operating budgets
budgets associated with the income-producing activities of an organization.
Overhead budget
a budget that reveals the planned expenditures for all indirect manufacturing items.
Participative budgeting
an approach to budgeting that allows managers who will be held accountable for budgetary performance to participate in the budget’s development.
Production budget
a budget that shows how many units must be produced to meet sales needs and satisfy ending inventory requirements.
Pseudoparticipation
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.
Research and development expense budget
a budget that outlines planned expenditures for research and development.
Rolling budget
a moving 12-month budget with a future month added as the current month expires.
Sales budget
a budget that describes expected sales in units and dollars for the coming period.
Static budget
a budget for a particular level of activity.
Variable budget
a budget that can specify costs for a range of activity.
Zero-base budgeting
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.
