Week 6

Question 1

Operating budgets

Answer 1

–Sales budget

–Various cost budgets

Question 2

The financial budgets

Answer 2

–Budgeted income statement

–Budgeted balance sheet

–Cash budgets

–Capital expenditure budget

Question 3

(Normal) Budgets

Answer 3

• Budgets are developed for specific time periods

Question 4

Rolling budgets (or continuous budgets)

Answer 4

• Rolling budgets (or continuous budgets) are continually updated by adding a new time period, such as a quarter, and dropping the period just completed

Question 5

The sales budget

Answer 5

–A detailed summary of the estimated sales units and revenues from the organisation’s products for the budget year.

Question 6

Internal factors & External factors

(The sales budget)

Answer 6

–Internal factors: past sales levels, new products planned, intended pricing policy, and planned advertising and promotions

–External factors: general economic trends, specific industry trends, political and legal events, expected activities of competitors and customers

Question 7

The cost budgets

Answer 7

–Manufacturing firms

–Retailers and wholesalers

–Service firms

Question 8

Manufacturing firms

Answer 8

Manufacturing firms

• A production budget, which has cost budgets for direct materials, direct labour and overheads
• Budgets for selling and administrative expenses

Question 9

Retailers and wholesalers

Answer 9

Retailers and wholesalers

• A purchasing budget will be used to determine the sales quantity and cost of goods purchased for resale

Question 10

Service firms

Answer 10

Service firms

• A set of budgets that show the costs that will need to be incurred to offer the planned level of services to customers