CHAP 8

Question 1

objectives of budgeting

Answer 1

establishing specific goals
executing plans to achieve the goals
periodically comparing actual results with the goals

Question 2

what does budgeting affect?

Answer 2

planning
directing
controlling

Question 3

how does it affect planning?

Answer 3

Planning involves setting goals to guide decisions and help motivate employees

Question 4

how does it affect directing?

Answer 4

Directing involves decisions and actions to achieve budgeted goals.

Question 5

how does it affect controlling?

Answer 5

Controlling involves comparing actual performance against the budgeted goals

Question 6

human behavior problems that can arise in the budgeting process

Answer 6

goals set too tight
goals set too loose
goals conflict with objectives of company and employees

Question 7

Attainable goals are more likely to motivate employees and managers

Answer 7

very important for employees and managers to be involved in budgeting porcess

Question 8

budgetary slack

Answer 8

happens when goals are set too loose

not really accomplishing much

Question 9

budgetary period for operating activities

Answer 9

normally includes the fiscal year of a company

Question 10

for control purposes annual budgets

Answer 10

are usually subdivided into shorter time periods

Question 11

continuous budgeting

Answer 11

maintains a 12 month projection into the future

Question 12

developing an annual budget usually does what?

Answer 12

starts several months prior to the end of the current year

Question 13

who is assigned to start the annual budget?

Answer 13

budget committee

Question 14

methods of developing budget estimates

Answer 14

zero-based budgeting
static budget
flexible budget

Question 15

zero-based budgeting

Answer 15

requires managers to estimate sales, production, and other operating data as though operations are being started for the first time

Question 16

static budget

Answer 16

shows the expected results of a responsibility center for only one activity level. Once the budget has been determined, it is not changed, even if the activity changes

Question 17

flexible budget

Answer 17

shows expected results of a responsibility center for several activity levels
series of static budgets
more accurate

Question 18

first step in the construction of a flexible budget

Answer 18

Identify the relevant activity levels

Question 19

second step in the construction of a flexible budget

Answer 19

Identify the fixed and variable cost components of the costs being budgeted

Question 20

third step in the construction of a flexible budget

Answer 20

prepare budget for each activity level by multiplying variable cost per unit by activity level, then adding the monthly fixed cost

Question 21

what is a master budget an integration of?

Answer 21

operating and financing budgets for a period of time

Question 22

how is a master budget prepared?

Answer 22

on a yearly basis

Question 23

operating budget

Answer 23

part of master budget

can be used to prepare a budgeted income statement

Question 24

financial budget

Answer 24

part of a master budget

provide info for a budgeted balance sheet

Question 25

how does a sales budget begin?

Answer 25

estimating the quantity of sales

Question 26

what happens once sales quantities are estimated?

Answer 26

the budgeted sales revenue can be determined

Question 27

formula for budgeted sales rev

Answer 27

expected sales volume * expected sale unit price

Question 28

what does a production budget estimate

Answer 28

the number of units to be manufactured to meet budgeted sales and desired inventory levels

Question 29

what does the direct material purchases budget estimate?

Answer 29

the quantities of direct materials to be purchased to support budgeted production and desired inventory levels

Question 30

first step to develop direct material purchases budget

Answer 30

determine the budgeted direct materials required for production

Question 31

formula to determine the budgeted direct materials required for production

Answer 31

budgeted production volume * direct materials quantity expected per unit

Question 32

second step to develop direct material purchases budget

Answer 32

The budgeted material required for production is adjusted for beginning and ending inventories to determine the direct materials to be purchased for each material

Question 33

third step to develop direct material purchases budget

Answer 33

determine the budgeted direct materials to be purchased

Question 34

formula to determine the budgeted direct materials to be purchased

Answer 34

direct material quantity to be purchased * unit price

Question 35

direct labor cost budget estimates what

Answer 35

direct labor hours and related cost needed to support budgeted production

Question 36

first step to determine direct labor cost budget

Answer 36

Determine the budgeted direct labor hours required for production

Question 37

formula to determine the budgeted direct labor hours required for production

Answer 37

budgeted production volume * direct material quantity expected per unit

Question 38

second step to determine direct labor cost budget

Answer 38

determine total direct labor cost

Question 39

formula to determine total direct labor cost

Answer 39

direct labor required for production * hourly rate

Question 40

factory oh estimates what

Answer 40

the cost for each item of foh needed to support budgeted production

Question 41

COGS budget is prepared by integrating what budgets

Answer 41

Direct materials purchases Direct labor cost FOH cost

Question 42

what is often used as the starting point for selling and admin expenses

Answer 42

sales budget

Question 43

selling and admin expenses budget is normally supported by what

Answer 43

departmental schedules