Chapter 8: Master Budgeting

Question 1

Budget

Answer 1

A detailed quantitative plan for acquiring and using financial and other resources over a specific forthcoming time period.

Question 2

Planning

Answer 2

Developing objectives and preparing various budgets to achieve those objectives.

Question 3

Control

Answer 3

Involves the steps taken by management to increase the likelihood that the objectives set down while planning is attained and that all parts of the organization are working together towards that goal.

Question 4

Top-down budget managers

Answer 4

budgets made at top of rank —> given to employees at the bottom.

Question 5

Self-imposed budget or participation budget

Answer 5

budget prepared with the full participation of all employees

Question 6

Budget Flow Map

Answer 6

1. Sales Budget–>
2. Selling and Admin Budget– C.B.
3. Production Budget (End Inventory)–>
4. DM budget, DL budget, MOH budget–>
5. Cash Budget—>
6. Budgeted Income Statement and Budgeted Balance Sheet

Question 7

Production Budget

Answer 7

Most adequate to meet budgeted sales and to provide for desired ending inventory

Question 8

*Sales Budget Formula

Answer 8

Budgeted Sales in Units X Selling Price per Unit

Ex. Expected Cash Collection

Question 9

*Production Budget Formula

mfg company

Answer 9

Budgeted Sales 
\+Desired Ending Inventory
-------------------------------------
Total Needs
-Beginning Inventory
-------------------------------------
Required Production

Question 10

*Direct Materials Budget Formula

Answer 10

Production (#of Units)
X Materials Per Unit (ex Lbs)
-----------------------------------
Production Needs
\+ Desired Ending Inventory
---------------------------------------
Total Needs
-Beginning Inventory
----------------------------------
Materials to be Purchased
(multiply by the cost per amount of material = cost of materials purchased)

Question 11

*Direct Labor budget

Answer 11

Units of Production
X Direct Labor Time per Unit
-----------------------------------------
Labor Hours Required
X Hourly Wage Rate
---------------------------------
Total Direct Labor Costs

Question 12

Manufacturing OH budget

Answer 12

Budgeted Direct Labor Hours
X Variable OH Rate
——————————————
Variable OH Costs
+ Fixed Manufacturing Overhead Costs
—————————————–
Total Manufacturing Overhead Costs
-Noncash Cost
—————————————-
Cash Disbursement for Manufacturing Overhead

Question 13

Ending Finished Goods Inventory Budget

Answer 13

Ending Inventory in Units
X Units Product Cost
———————————–
Ending Finished Goods Inventory

Question 14

Selling and Administrative Expense Budget

Answer 14

Budget Sales 
X Variable SG&A rate
--------------------------------
Variable Expenses 
\+ Fixed SG&A Expenses
-------------------------------
Total SG&A Expenses
-Noncash Costs
------------------------------
Cash SG&A  Expenses

Question 15

Cash Budget

Answer 15

Beginning Cash Balance 
\+Cash Collections
---------------------------------
Total Cash Available 
- Cash Disbursements (Dividend, DL MOH)
---------------------------------
Total Disbursements
\+ Excess (deficiency)
-Financing:
Borrowing 
Repayment
Interest
--------------------------------
Total Financing
-------------------------------
Ending Cash Balance

Question 16

Retaining Earnings

Answer 16

Begining Balance
\+ Net Income 
- Dividends 
---------------------
Ending Balance