Chapter 8: Budgeting Flashcards
(20 cards)
Responsibility Accounting
Managers are held accountable for items under their control
Bugdeting
Future plan in quantitate terms
Master Budget
Budgets for all areas of the company - culminates in the company’s budget income statement, balance sheet and cash budget
Continuous or Perpetual Budget
12 month budget which rolls forward 1 quarter as current quarter complete
Traditional Budget Approach
Start with last years budget and adjust up or down depending on the upcoming years plan. This is an incremental approach where we use last years budget as a baseline
Zero Base Budget
Must justify all budgeted expenditures not just in the changes as in a traditional approach
The usual starting point in budgeting is to make a forecast of net income
False; it is actually sales
On the income statement that is presented in the Annual report, which of the following would you most likely see?
Gross Profit
The activity variance for revenue is unfavorable if the actual level of activity for the period is less than the planned level of activity
True
The spending variance is the difference between the cost in the static planning budget and the actual amount of the cost for the period
False
On a cash budget, the total amount of the budgeted cash payments for manufacturing overhead should not be include any amount of depreciation on factory equipment
True
Production Buget
only in units of product - there is NO cash incolved
Direct Materials Budget
Must use production units not sales
must convert the production units to material units
Why should you never include depreciation?
Because it is not CASH
How do you calculate the COGS for a certain month?
Go to sales budget and multiple the units produced by the unit cost
how do you calculate the COGM for a certain month?
multiple the finished number of units of the month by the unit cost
In a segmented contribution format income statement, what is the best measure of the long run profitability of a segment?
its segment margin
Segment of a business responsible for both revenues and expenses would be called:
a profit center
Assume that two companies are roughly the same size and have the same selling price. With a decrease in sale
the company with high fixed costs and low variable costs
What is not affected by the breakeven point?
Number of units sold
