Planning and Budgeting

Question 1

Budgeted Production Formula

Answer 1

Budgeted Production Formula:
Sales
\+ Desired ending inventory
Total Units Required
– Beginning Inventory
Budgeted Production

Question 2

Measures of Financial Performance

Answer 2

Measures of Financial Performance will focus on results of operations and utilization of assets.

Question 3

The “internal business” perspective of the balanced scorecard

Answer 3

The “internal business” perspective of the Balanced Scorecard measures results of business operations by improvements in measures of efficiency.

Question 4

The Financial Perspective of a balanced scorecard

Answer 4

The financial perspective of a balance scorecard is concerned with the capture of increased market share.

Question 5

The learning and growth (advanced learning and innovation) perspective

Answer 5

The learning and growth (advanced learning and innovation) perspective of the balanced scorecard is concerned with employee satisfaction and retention measures.

Question 6

Responsibility Accounting

Answer 6

Responsibility accounting defines a profit center as being responsible for both revenues and costs.

Question 7

Investment Center

Answer 7

Investment Center is responsible for revenues, costs, and invested capital.

Question 8

The Balanced Scorecard

Answer 8

The balanced scorecard demonstrates that no single dimension of the organization’s performance can be relied upon to evaluate success; having financial and nonfinancial success factors makes it a “balanced” scorecard. The critical success factors are often classified as human resources, business process, customer satisfaction, and financial performance.

Question 9

Flexible Budgeting

Answer 9

A flexible budget is a series of projects based on different activity levels within the relevant range. A flexible budget contains budgeted costs for actual output. A flexible budget is a budget prepared at different levels of operating activity. It is appropriate for all industries and activity that happens variable costs and direct labor.

The limitation of flexible budgeting is that flexible budgeting is highly dependent upon accurate identification of fixed costs and the variable cost per unit within the relevant range. The benefit of flexible is that, given the actual output, management can budget what revenues and expenses will be.

Question 10

The Selling and Administrative Expense Budget

Answer 10

The selling and administrative expense budget is dependent upon sales. The selling and administrative expense budget is operational, not financial. The selling and administrative expense budget represents a fixed and variable nonmanufacturing expenses anticipate during the present period.

Question 11

Controllable Margin

Answer 11

Controllable Margin is computed as contribution margin net of controllable (fixed) costs. Controllable (fixed) costs represent those fixed costs that managers can impact in less than a year.

Question 12

The Customer Section of the balanced Scorecard

Answer 12

The Customer Section of the balanced Scorecard would focus on the company’s defining its value in the marketplace.

Question 13

Learning and Innovation (the learning and growth perspective)

Answer 13

Learning and innovation would focus more on the effective use of personnel in improving business processes and linking rewards with recognition. The learning and growth perspective of a balanced scorecard is concerned with employee satisfaction and retention measures.

Question 14

The Overhead Efficiency Variance

Answer 14

The overhead efficiency variance compares the amount of variable overhead applied using standard rates to the amount of variable overhead that would have been applied at actual. If more was applied and would have been incurred, the results are favorable.

Question 15

A Master Budget

Answer 15

A Master Budget is in the overall budget, consisting of many smaller budgets, that is based on one specific level production.

Question 16

Pro Forma Financial Statements

Answer 16

Planned additions of capital equipment and related debt from the capital budget are added to the pro forma balance sheet. Planned financing expenses and principal repayments on capital equipment additions are included as disbursements on the cash budget.

Question 17

Selling And Administrative Expenses

Answer 17

The Selling and administrative expense budget is dependent upon sales. The selling and administrative expense budget is operational, not financial. The selling and administrative expense budget represents the fixed and variable nonmanufacturing expenses anticipate it during the budget period.

Question 18

Static Budget

Answer 18

A static budget is based on cost at one level output. Static budgets include budgeting costs for budgeted,, not actual, output. Static budgets are not based on or adjusted for actual performance.

Question 19

Capital Expenditures Budget

Answer 19

The capital expenditures budget is developed independently but must take into account the cash available. The production budget is based on the sales budget, with adjustments for any changes in planned inventory levels.