module 22

Question 1

risk

Answer 1

is the danger that things will not go according to plan

Question 2

risk management

Answer 2

process of identifying, evaluating, and
planning possible responses to risks

Question 3

output/input approach

Answer 3

Budgets physical inputs and costs as a function of planned input
(unit-level) activities
 Starts with planned outputs and works backward to budget inputs
 Often used for service, merchandising, manufacturing and
distribution activities

Question 4

activity based approach

Answer 4

Type of output/input method
 Emphasis placed on the expected costs of the planned
activities that will be consumed
 Budgeted costs are computed as the projected use of
each activity multiplied by the cost per unit of the
activity.

Question 5

incremental approach

Answer 5

Budgets costs for a coming period as a dollar or
percentage change from the amount budgeted for a
previous period
 Used when relationship between inputs and outputs is
weak or nonexistent
 Widely used in government and not-for-profit
organizations

Question 6

minimum level approach

Answer 6

Establishes a base amount for budget items and
requires explanation or justification for any budgeted
amount above the minimum base
 Questions the necessity for costs included in the base
budget of the incremental approach

Question 7

master budget

Answer 7

The culmination of the budgeting process
 Groups all budgets and supporting schedules together
 Coordinates all financial and operational activities
 The master budget is complex; contents depend on the
business, products and processes.

Question 8

purchases budget

Answer 8

Forecasts the merchandise to be purchased to
meet sales needs and ending inventory
requirements
 Considers
 Budgeted sales
 Desired ending inventory
 Planned beginning inventory

Question 9

cash budget

Answer 9

Summarizes all cash receipts and disbursements
expected to occur during the budget period
 Because of issues related to the timing of sales and
collections on account
 Collections on sales may not equal sales revenue

Question 10

top down budget

Answer 10

Known also as an imposed
budget
 Top management
identifies primary goals
and objectives and
communicates to lower
management

Question 11

bottom up budget

Answer 11

Known also as a
participative budget
 Managers at all levels are
involved in budget
preparation
 Ensures that employees
understand their roles in
meeting goals