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Flashcards in Budgeting Deck (26)
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1
Q

Budgeting standards

What is Ideal Standards?
What is advantage and disadvantage?

B2-32

A

Cost resulting from perfect efficiency and effectiveness in job performance
–no provisions for spoilage or downtime

A: continuous quality improvement to meet ideal
D: use of unattainable standards

2
Q

Budgeting standards

What is Currently Attainable Standards?
What is the advantage and disadvantage?

B2-32

A

Costs resulting from work performed by employees with appropriate training and experience
–provisions for spoilage and downtime

A: standards are reasonable
D: requires use of judgment and potential manipulation

3
Q

Budgeting standards

What is Authoritative Standard
What is the advantage and disadvantage?

B2-32

A

are set exclusively by management

A: quick implementation and includes all costs
D: workers won’t accept it

4
Q

Budgeting standards

What is participative standards?
What is the advantage and disadvantage?

B2-32

A

are set by managers and indiv who are held accountable

A: more likely accepted by workers
D: slower to implement

5
Q

What is a standard?

B2-32

A
  • -per unit budgets

- -integral to the development of flexible budgets

6
Q

Master Budget
What does it do?

B2-33

A

Documents specific short-term operating performance goals for a period of 1 yr or less
–includes Operating budget and Financial budget

7
Q

Master Budget
What else is it called?

B2-33

A

Static Budgets
Annual Business Plans
Profit Planning
Targeting Budgets

8
Q

Master Budget
What are the limitations?

B2-33

A
  • -confined to 1 year at a Single Level of activity

- -best when combined w/ Flexible Budgeting

9
Q

Master Budget
What budgets are produced?

B2-34

A

Operating Budgets

    1. sales budget
    1. production budget
    1. selling and admin budget
    1. personnel budget

Financial Budgets

    1. pro. forma financial statements
    1. cash budgets
10
Q

Operating Budget- Sales Budget
What is it?

B2-35

A
  • the foundation of the entire budget process
  • Anticipates sales in units and dollars
  • first to be prepared
  • it drives the development of other components of master budget
  • based on sales forecast
11
Q

Operating Budget- Production Budget
What is it?

B2-37

A
  • it is made up of amounts spent for DL, DM, FOH
  • amount is based on amounts of:
    • Inv on hand and
    • Inv necessary to sustain sales.
  • stated in units
12
Q

Operating Budget- Production Budget
How is it calculated?

B2-37

A

Budgeted Sales
+Desired EI
-Begin. Inventory
=Budgeted production

13
Q

Operating Budget- Production Budget
Direct Materials Budget

B2-38

A

it is made up of:

  • -DM purchases budget
  • -DM usage budget
14
Q

Operating Budget- Production Budget
Direct Materials Budget

How do you calculate DM to purchase?

B2-38

A

units of DM needed for production
+desired EI
-BI
=units of DM to purchase

15
Q

Operating Budget- Production Budget
Direct Materials Budget

How do you calculate cost of DM to purchase?

B2-39

A

units of DM to purchase
x cost per unit
= cost of DM to purchase (purchases at cost)

16
Q

Operating Budget- Production Budget
Direct Materials Budget

How do you calculate DM usage?

B2-39

A

BI at cost
+purchases at cost
-EI at cost
=DM usage (cost of materials used)

17
Q

Operating Budget- Production Budget
Direct Labor Budget

How do you calculate DL cost?

B2-39

A
budgeted production (units)
x hours required to product unit
= total hours needed
x hourly wage rate
= total wages
18
Q

Operating Budget- Production Budget
Factory Overhead Budget

How do you calculate budgeted FOH?

B2-40

A
  • includes fixed and variable production costs that are not DM, DL
  • FOH is applied to inventory based on cost driver (usually DL hrs)

IL
+IM
+factory costs
=FOH budgeted

19
Q

Operating Budget- Production Budget
Cost of Goods Manufactured and Sold Budgets

How do you calculate COGM?

B2-41

A

DL
+DM
+FOH applied
=cost of goods manufactured

COGM is also called product cost

20
Q

Operating Budget- Production Budget
Cost of Goods Manufactured and Sold Budgets

How do you calculate COGS?

B2-41

A

cost of goods manufactured
+BI finished goods
-EI finished goods
=COGS

21
Q

Operating Budget- Selling and Admin Exp Budget
What is it?

B2-42

A
  • represents fixed and variable non-manufacturing exp

- are period costs and matched against budgeted sales

22
Q

Financial Budget- Cash Budgets

What is it?

B2-43

A
  • detailed projections of cash receipts and disbursements
  • divided into 3 sections
  • -1. Cash available
  • -2. Cash disbursements
  • -3. Financing
23
Q

Financial Budget- Cash Budgets

What makes up Cash Available?

B2-43

A
  1. Cash Balances (beginning cash)
  2. Cash Collections
    - -cash sales from current period
    - -collection of AR from prior period
24
Q

Financial Budget- Cash Budgets

What makes up Cash Disbursements?

B2-43

A
  • -cash paid for current period exp
  • -cash paid on AP/ accruals from prior period
  • eliminates noncash op. exp (depreciation, etc)

Two types of budgets:

  1. Purchases
  2. Operating Expense
25
Q

Financial Budget- Cash Budgets
Financing

B2-45

A

considers the matter financing will be used to maintain minimum cash balance

26
Q

Financing Budget- Cash budgets

How is it calculated

B2-45

A
Begin cash
\+cash collections
-cash disbursements
=computed Ending cash
-cash required to sustain operations
=working capital loans to maintain cash required