Chapter 8: Master Budgeting Flashcards
is a detailed plan for the future that is usually expressed in formal quantitative terms.
Budget
involves developing goals and preparing various budgets to achieve those goals.
Planning
involves gathering feedback to ensure that the plan is being properly executed or modified as cir-
cumstances change.
Control
(6) Advantages of Budgeting
- communicate
- think about and plan
- allocating resources
- bottlenecks
- coordinate
- benchmarks
is that a manager should be held responsible for those items—and only those items—that the
manager can actually control to a significant extent.
Responsibility Accounting
is a 12-month budget that rolls forward one month (or quarter) as the current month (or quarter) is completed.
continuous or perpetual
budget
budget is a budget that is prepared with the full cooperation and participation of managers at all levels.
self-imposed budget or participative budget
- Which of the following statements is false? (You may select more than one answer.)
a. Control involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change.
b. Responsibility accounting is based on the belief that all managers should be held accountable for achieving the company’s overall goals, even if this requires holding some managers responsible for items that are beyond their control.
c. A self-imposed budget is prepared with the full cooperation and participation of managers at all levels of the organization.
d. One limitation of self-imposed budgets is that lower-level managers may allow too much budgetary slack.
B.
enables organizations to react quickly to deviations from their plans and to learn from feedback
Respinsiblity Accounting
consists of a number of separate but
interdependent budgets that formally lay out the company’s sales, production, and financial goals.
Master Budget
which is a detailed
schedule showing the expected sales for the budget period.
Sales Budget
10 schedules contained in the Master Budget
- Sales Budget
- Production Budget
- Ending Inventory Budget
- Selling & Administrative Expense Budget
- Direct Materials Budget
- Direct Labor Budget
- Manufacturing Overhead Budget
- Cash Budget
- Budgeted Income Statement
- Budgeted Balance Sheet
is a detailed plan showing how cash
resources will be acquired and used.
Cash Budget
If it were a merchandising company, instead it would prepare a ________________- showing the amount of goods to be purchased from suppliers during the period.
merchandise purchases
budget
- If a company has a beginning merchandise inventory of $50,000, a desired ending merchandise inventory of $30,000, and a budgeted cost of goods sold of $300,000, what is the amount of required inventory purchases?
a. $320,000
b. $280,000
c. $380,000
d. $300,000
B
- Budgeted unit sales for March, April, and May are 75,000, 80,000, and 90,000 units. Management desires to maintain an ending inventory equal to 30% of the next month’s unit sales. How many units should be produced in April?
a. 80,000 units
b. 83,000 units
c. 77,000 units
d. 85,000 units
B.
- March, April, and May sales are $100,000, $120,000, and $125,000, respectively. A total of 80% of all sales are credit sales and 20% are cash sales. A total of 60% of credit sales are collected in the month of the sale and 40% are collected in the next month. There are no bad debt expenses. What is the amount of cash collections
for April?
a. $89,600
b. $111,600
c. $113,600
d. $132,600
C.
- Referring to the facts in question 2 above, what is the accounts receivable balance at the end of May?
a. $40,000
b. $50,000
c. $72,000
d. $80,000
A.
This computation was needed for two reasons: first, to help determine cost of goods sold on the budgeted income statement; and second, to value ending inventories on the budgeted balance sheet.
Ending Inventory Budget
lists the budgeted expenses for areas other than manufacturing. In large organizations, this budget would be a compilation of many smaller, individual budgets submitted by department heads and other persons responsible for selling and administrative expenses.
Selling & Administrative Expenses Budget
- Which of the following statements is true? (You may select more than one answer.)
a. The manufacturing overhead budget includes depreciation related to assets that support a company’s selling and administrative functions.
b. The cash disbursements for selling and administrative expenses are reported in the budgeted income statement.
c. The selling and administrative expense budget includes depreciation related to manufacturing assets.
d. The total variable and fixed selling and administrative expenses incurred during a period are reported in the budgeted income statement.
D.
The cash budget is composed of four main sections:
- The cash receipts section.
- The cash disbursements section.
- The cash excess or deficiency section.
- The financing section.
A detailed plan for the future that is usually expressed in formal quantitative terms.
BUDGET
A detailed schedule showing expected sales expressed in both dollars and units.
SALES BUDGET
