Chapter 8: Master Budget Flashcards
What are budgets used for
planning and control
What is planning
The process of establishing goals and specifying how to achieve them
What is control
The process of gathering feedback to ensure that a plan is being properly executed or modified as circumstances change
What is a self-imposed budget
A method of preparing budgets in which managers prepare their budgets. Higher-level managers often review these budgets, and any issues are resolved by mutual agreement.
What is a participative budget
A self-imposed budget
What is top-down approach budgeting
A method of preparing budgets where top-level managers initiate the process by issuing profit targets for lower-level managers to meet.
What is a master budget
A number of separate but interdependent budgets that formally lay out the company’s sales, production, and financial goals.
It culminates into a cash budget, budgeted income statement, and budgeted balance sheet
What is the start of the master budget
Sales budget
What is the sales budget
A detailed schedule showing the expected sales expressed in both dollars and units
What is a cash budget
A detailed plan showing how cash resources will be acquired and used over a specific time period
What is a budget
a detailed quantitative plan for acquiring and using financial and other resources over a time period
What is the production budget
A detailed plan showing the number of units that must be produced during a period in order to satisfy both sales and inventory needs
What is the direct material budget
A detailed plan showing the amount of raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories
What is the direct labor budget
shows the direct labor hours required to fulfill the production budget
What is the manufacturing overhead budget
lists all production costs other than direct labor and direct materials
