Chapter 9- budgeting

Question 1

participative budgeting

Answer 1

each level of management is invited to participate
advantages: more accurate budget estimates because lower level managers have more detailed knowledge of their area.
bottom to top approach

Question 2

time period budgeting

Answer 2

long range planning- at least 5 years

short term - at least one year

Question 3

master budget

Answer 3

set of interrelated budgets that constitutes a plan of action for a specified time period

• operating budget
• financial budget

Question 4

operating budget

Answer 4

individual budgets that result in the preparation of the budget income statement, establishes goals for sales and production peronnel

Question 5

financial budget

Answer 5

the capital expenditures budgeted balance sheets- focus on cash needs to fund operational and capital expenditures

Question 6

order in which budgets are prepared

Answer 6

• operating budget

- financial budget

Question 7

sales budget

Answer 7

managements’s best estimate of sales revenue for the budget period. first budget prepared

Question 8

sales budget formula

Answer 8

expected unit sales volume for each product X anticipated unit selling price

Question 9

production budget

Answer 9

shows units that must be prepared to meet anticipated sales

Question 10

required production units formula

Answer 10

budgeted sales units + desired ending finished goods units - beginning finished goods units

Question 11

direct materials budget

Answer 11

shows both the quantity and cost of direct materials to be purchased

Question 12

1. direct materials units to be purchased formula

Answer 12

direct materials units required for production + desired ending direct materials units - beginning direct materials units

Question 13

2. budgeted cost of direct materials to be purchased=

Answer 13

required unit of direct materials X anticipated cost per unit

Question 14

direct labor budget

Answer 14

shows both the quantity hrs and cost of direct labor necessary to meet production requirements

Question 15

direct labor budget formula

total direct cost=

Answer 15

units to be produced X direct labor time per unit X direct labor cost per hr

Question 16

budget income statement

Answer 16

end product of operating budgets; indicates expected profitability of operations

Question 17

manufacturing overhead budget

Answer 17

shows the expected manufacturing overhead costs

distinguish between fixed and variable costs

Question 18

selling administrative expense budget

Answer 18

a projection of anticipated operating expenses

distinguish between fixed and variable costs

Question 19

order in which the budgets are prepared

Answer 19

1. Sales budget.
2. Production budget.
3. Direct labor budget.
4. Direct materials budget.
5. Manufacturing 6.overhead budget.
6. Selling and administrative expense budget.

Question 20

cash budget

Answer 20

contains:

• cash receipts
• cash disbursements
• financing

Question 21

merchandisers sales budget

Answer 21

these use a purchase budget instead of a production budget.

-does not use the manufacturing budgets (DM,DL,MO)

Question 22

required merchandise purchases formula

Answer 22

budgeted cost of goods sold + desired ending merchandise inventory-beginning merchandise inventory