chapter 9

Question 1

Strategic plan

Answer 1

long term planning to achieve organisational objectives, usually undertaken by senior management

Question 2

budget

Answer 2

detailed plan summarizing the financial consequences of an organisations operating activities for a specific future period

Question 3

operating budget

Answer 3

contains the sales budget which allows organisation to determine production budget (Direct Materials, Direct labor manufacturing overhead)

Question 4

financial budget

Answer 4

made up of cash budget, budgeted balance sheet, budgeted income statement

Question 5

top down budgeting

Answer 5

system where senior managers impose budget targets on more junior managers with little or no consultation

Question 6

Bottom up budgeting

Answer 6

participative process in which people at lower managerial and operational levels play an active role in setting their own budgets

Question 7

zero based budgeting

Answer 7

the process where all activities in the organisation are initially set to zero. to receive an allocation of resources during the budgeting process, managers must justify each activity in terms of its usefulness to the business
Advantages: forces managers to rethink each phase of a firms operations before requesting resources
stop managers from predicting next years budget on last years results