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Flashcards in Business 2 Budgeting Deck (23)
1

What is the first budget to be produced during the budgeting process?

Sales budget

2

What is the last budget to be produced during the budgeting process?

Cash budget

3

True or false.

The annual business plan process typically begins with operating budgets that are driven by sales budgets that, in turn, provide the required variables for production, selling and personnel budgets. Financial budgets (including pro forma f/s and cash budgets) come at the end of the process and are prepared last.

True

4

True or false.

Cash budgets are typically derived from the operating budgets that assume accrual basis assumptions (e.g. credit sales and credit purchases).

True

5

What is a static budget based on?

Budgeted costs for budgeted output

6

True or false.

Selling and administrative budgets are difficult to allocate by month and are best presented as one number for the entire year.

False (usually based on sales and easy to allocate by month)

7

True or false.

Selling and administrative budgets need to be detailed in order that the key assumptions can be better understood.

True

8

Does the cash budget provide info concerning the need for internal financing?

No (external financing)

9

The info contained in a COGM budget would most directly relate to what four budgets?

- Materials used budget
- DL budget
- Overhead applied budget
- WIP inventories budget

10

Tactical plans are what type of planning tool?

Short term planning tool covering up to 18 months

11

Give an example of a type of single-use tactical plan.

Annual budget

12

Budgets frequently revolve around the development of what?

Standards

13

Standards have been referred to as what?

Per-unit budgets (integral to development of flexible budgets)

14

Ideal standards represent the costs that result from what?

Perfect efficiency and effectiveness in job performance

15

Currently attainable standards represent what?

Costs that result from work performed by employees w/ appropriate training and experience but w/o extraordinary effort

16

A master budget is also known as what?

Annual business plan

17

What does a master budget document?

Documents specific ST operating performance goals for a period of time (normally 1 year or less)

18

An annual business plan normally includes what types of budgets?

- Operating (nonfinancial) budget
- Financing budget that outlines sources of funds and detailed plans for their expenditure

19

What does a master budget begin with?

Projected sales budget

20

What is the order in preparing a master budget?

1) Projected sales budget
2) Production budget
3) COGS budget
4) SG&A expense budget
5) Capital budget
5) Financial budgets (cash budget and pro forma financial statements)

21

True or false.

Capital (purchases) provide detail on planned capital expenditure items for an organization based on a defined period.

True

22

What is a flexible budget?

- Financial plan that allows for adjustments for changes in production or sales
- Accurately reflects expected costs for the adjusted output

23

What does a flexible budget analysis focus on?

-Substantive variances from standards (rather than simple changes in volume or activity)