Budgeting

Question 1

What the purposes of budgeting systems?

Answer 1

1. Planning
2. Allocating resources
3. Evaluating performance and providing incentives
4. COntrolling porfit and operations
5. Facilitating communication and coordination

Question 2

What is the most common purpose of budgeting systems?

Answer 2

Planning

Question 3

What is planning for?

Answer 3

To quanitify a plan of action for the operations of a pharmacy org

Question 4

What does Facilitating Communication and Coordination entail?

Answer 4

Managers within an organization must communicate their plans with each other, to ensure effective operations.

Question 5

WHat is allocating resources?

Answer 5

All resources are limited, so organizations must use their resources in the most effective, efficient manner.

Question 6

Controlling Profit and Operations?

Answer 6

Remember that budgets are plans, and much like any plan in life, it is subject to change without notice
Budgets are benchmarks

Question 7

Evaluating Performance and Providing Incentives

Answer 7

Important for managers to compare their operation’s actual results to their budgeted results when evaluating performances

Question 8

Comprehensive collection of budgets that compiles all phases of a pharmacy organization’s operations for a specific time period

Answer 8

Mast budget

Question 9

Demonstrates the resemblance of a pharmacy organization’s financial statements if its operations proceed according to plan

Answer 9

Budgeted financial statements

Question 10

Includes a budgeted income statement, budgeted balance sheet, and a budgeted statement of cash flows

Answer 10

Budgeted financial statements

Question 11

Profit plan

Answer 11

Master buget

Question 12

pro forma financial statements

Answer 12

Budgeted financial statements

Question 13

Plan for acquiring capital assets (i.e., buildings, equipment)

Answer 13

Capital budget

Question 14

Plan that demonstrates how a pharmacy organization will acquire its financial resources (i.e., issuing stock, incurring debt)

Answer 14

Financial budget

Question 15

Budget that cover a brief time period (i.e., month, quarter, year)

Answer 15

short range budget

Question 16

Budget that covers a time period longer than one (1) year

Answer 16

Long range budget

Question 17

Updated continually by adding a new incremental time (i.e., quarter) and dropping the period just completed

Answer 17

Rolling budget

Question 18

“revolving budgets” or “continuous budgets”

Answer 18

Rolling budget

Question 19

How should managers develop a master budget?

Answer 19

Sales busdget: determine the need for products and services to fulfill orders
Porduction budget: Provides an organization with the necessary information to determine how much of each input and conversion resource is needed
Financing budget: Estimates an organization’s cash flow and identify likely cash shortfalls and surpluses
Budgeting financial statements: The combination of the sales budget and production budget, along with organization’s input and resource cost estimates will provide the necessary elements of an appropriate budget

Question 20

Sales revenue budget is based on?

Answer 20

Sales forcast for goods and services

Question 21

Critical step in the budgeting process, as it can be very difficult to complete accurately

Answer 21

Sales forcasting

Question 22

What are the components of an operational budget?

Answer 22

1. Manufacturing
2. Merchanidsing
3. Patient care services

Question 23

Types of budgets for manufacturing?

Answer 23

1. Production
2. Inventory

Ex: Pharmacy must store adequate inventory to meet the demand at all times while maintianing production

Question 24

Ex of mercahndising?

Answer 24

Develop a costs of goods sold (COGS) budget, along with budgets for labor (i.e., personnel), overhead, and selling and administrative expenses.

Question 25

Types of budgets for patient care services?

Answer 25

Production

Question 26

Types of financing budgets?

Answer 26

Cash receipt budgets
Cash disbursements budget
Cash budget

Question 27

Provides information about the cash flows into the pharmacy organization based on sales of goods or services

Answer 27

Cash Receipts Budget

Question 28

Complex budget that is dependent on the spending plans reflected in several operational budgets

Answer 28

Cash Disbursements Budget

Question 29

Provides a summary of various cash inflows and outflows from operations, which helps managers to plan the cash needs of a pharmacy organization

Answer 29

Cash budget

Question 30

What do you do if cash outflow is greater than inflows?

Answer 30

Arrange for sources of borrowing money

Question 31

What do you do if cash inflow is greater than outflow?

Answer 31

Pay off borrowings and make investments

Question 32

What is an important tool for predicting and avoiding cash emergenicies?

Answer 32

Cash budget

Question 33

What are the elemetns of the final step of developing a master budget?

Answer 33

Budgeted income statement
Budgeted balance sheet
Budgeted statement of cash flows

Question 34

Activity-based costing (ABC) steps?

Answer 34

1. Managers assign overhead costs to cost pools that represent the most important activities.
2. Overhead costs are allocated from each activity cost pool to cost objects, proportional to the amount of activity consumed

Ex: utilities bill for an independent community pharmacy

Question 35

How does acitivty based budgeting differ from ABC?

Answer 35

Reverses the flow of the analysis:
1. Specify the products and services
2. Determine necessary activites to produce services/products
3. Quanify resources to perform activity

Ex: Projection of sales in newer companies