Chapter 9 - KNOWLEDGE

Question 1

What is a budget?

Answer 1

is a detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period

Question 2

What is planning?

Answer 2

developing objectives and preparing various budgets to achieve these objectives.

Question 3

What is controlling?

Answer 3

involves the steps taken by management that attempt to ensure the objectives are attained.

Question 4

Advantages of Budgeting?

Answer 4

Define goal and objectives, Coordinate activities, Means of allocating resources

Question 5

Who is held accountable for a budget?

Answer 5

Managers are held responsible for a budget that they have control over

Question 6

What is a continuous budget?

Answer 6

is a 12-month budget that rolls forward one month (or quarter) as the current month (or quarter) is completed.

Question 7

What is a participative budget?

Answer 7

A budget is prepared with the full cooperation and participation of managers at all levels

Question 8

1st Advantage of a Participative Budget?

Answer 8

Everyone is viewed as a member of the team who is valued by top management

Question 9

2nd Advantage of a Participative Budget?

Answer 9

Budget estimates prepared by front-line managers are often more accurate

Question 10

3rd Advantage of a Participative Budget?

Answer 10

Motivation is generally higher when individuals participate in setting their own goals

Question 11

4th Advantage of a Participative Budget?

Answer 11

Amanagerwhoisnotabletomeetabudgetimposed from above can claim that it was unrealistic

Question 12

What is a standing committee responsible for?

Answer 12

Overall policy matters relating to the budget, coordinating the preparation of the budget, resolving dispute and approval

Question 13

1st important factor of budgeting?

Answer 13

Top management must be enthusiastic and committed to the budget process.

Question 14

2nd important factor of budgeting?

Answer 14

Top management must not use the budget to pressure employees or blame them when something goes wrong.

Question 15

3rd important factor of budgeting?

Answer 15

Highly achievable budget targets are usually preferred when managers are rewarded based on meeting budget targets

Question 16

What is zero-based budgeting?

Answer 16

requires managers to justify all budgeted expenditures, not just changes in the budget from the prior year.

Question 17

What is Direct Materials Budget?

Answer 17

It details the raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories.

Question 18

What is Direct Labour Budget?

Answer 18

The direct labour budget is a detailed plan showing labour requirements over some specific time period.

Question 19

What is the Manufacturing Overhead Budget?

Answer 19

The manufacturing overhead budget provides a schedule of all costs of production other than direct materials and direct labour.

Question 20

What is The Ending Finished Goods Inventory Budget?

Answer 20

After computing unit product costs, the carrying cost of the unsold units is computed on the ending finished goods inventory budget.

Question 21

What is the Cash Budget?

Answer 21

The cash budget pulls together much of the data developed in the preceding steps and displays it in four major sections: receipts, disbursements, cash excess or deficiency, and financing.

Question 22

1st Section of the Cash Budget?

Answer 22

Cash receipts listing all cash inflows excluding borrowing;

Question 23

2nd Section of the Cash Budget?

Answer 23

Cash disbursements listing all payments excluding repayments of principal and interest

Question 24

3rd Section of the Cash Budget?

Answer 24

Cash excess or deficiency;

Question 25

4th Section of the Cash Budget?

Answer 25

The financing section listing all borrowings, repayments and interest

Question 26

What is a static budget?

Answer 26

are prepared for a single, planned level of activity.

Question 27

What are flexible budgets?

Answer 27

Show costs that should have been incurred at the actual level of activity, enabling “apples to apples” cost comparisons.

Question 28

What do we need to know when we flex budget?

Answer 28

Total variable costs change in direct proportion to changes in activity, Total fixed costs remain unchanged within the relevant range.

Question 29

Multinational Budgeting: Error #1 ?

Answer 29

Fluctuations in foreign currency exchange rates.

Question 30

Multinational Budgeting: Error #2 ?

Answer 30

High inflation rates

Question 31

Multinational Budgeting: Error #3 ?

Answer 31

Local economic conditions and

governmental policies