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Principles of Accounting - Managerial > Chapter 8 - Master Budgeting > Flashcards

Chapter 8 - Master Budgeting Flashcards

1
Q

What is a detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period?

A

A budget

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2
Q

What is the act of preparing a budget?

A

Budgeting

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3
Q

What is the use of budgets to control an organization’s activities?

A

Budgetary control

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4
Q

What involves developing objectives and preparing various budgets to achieve those objectives?

A

Planning

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5
Q

What involves the steps taken by management to increase the likelihood that the objectives set down while planning are attained and that all parts of the organization are working together toward that goal?

A

Control

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6
Q

List 5 advantages of budgeting

A
  1. Define goals and objectives
  2. Think about and plan for the future
  3. Means of allocating resources
  4. Coordinate activities
  5. Communicate plans
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7
Q

Which items should managers be held responsible for?

A

Only the items that they can significantly control

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8
Q

Fill in the Blanks:

Responsibility accounting enables organizations to _________ to deviations from their plans and to ____ from feedback.

A
  1. React quickly

2. Learn

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9
Q

What is a 12-month budget that rolls forward one quarter as the current quarter is completed?

A

A continuous budget

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10
Q

What is a budget that is prepared with the full cooperation and participation of managers at all levels?

A

A self-imposed budget

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11
Q

What are the 4 advantages of a self-imposed budget?

A
  1. Individuals from all levels are seen as members of the team
  2. It’s more accurate
  3. Motivation is higher
  4. It gets rid of the unrealistic claim
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12
Q

What is based on various estimates and assumptions?

A

A master budget

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13
Q

What is the layout of the sales budget?

A

Budgeted unit sales
Selling price per unit
Total budgeted sales

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14
Q

What is the formula to find the total budgeted sales?

A

Budgeted unit sales x selling price per unit

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15
Q

What is the production budget expressed in?

A

Units

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16
Q

What is the layout of the production budget?

A 
Total Budgeted Sales
Add: Desired Ending Finished Goods Inventory
Total Needs
Less: Beginning Finished Goods Inventory
Required Production
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17
Q

What is the formula to find the desired ending finished goods inventory?

A

Next quarters budgeted sales in units x desired ending inventory %

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18
Q

What is the beginning finished goods inventory equal to?

A

The previous quarters desired ending finished goods inventory

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19
Q

What is the year’s desired ending finished goods inventory equal to?

A

The last quarters desired ending finished goods inventory

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20
Q

What is the year’s beginning finished goods inventory equal to?

A

The first quarters beginning finished goods inventory

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21
Q

What is the layout of the direct labor budget?

A 
Required production
Direct labor time per unit
Labor hours required
Hourly wage rate
Total direct labor cost
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22
Q

What is the formula to find the labor hours required?

A

Required production x direct labor time per unit

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23
Q

What is the formula to find the total direct labor cost?

A

Labor hours required x hourly wage rate

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24
Q

What is the layout of the manufacturing overhead budget?

A 
Labor Hours Required
Variable Manufacturing Overhead Rate
Variable Manufacturing Overhead
Fixed Manufacturing Overhead
Total Manufacturing Overhead
Less: Depreciation
Cash disbursement of manufacturing overhead
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25
Q

How do you find the total fixed manufacturing overhead?

A

You add all the fixed manufacturing overhead

26
Q

What is depreciation?

A

A noncash charge

27
Q

What are the 4 sections of the cash budget?

A
  1. Cash receipts
  2. Cash disbursements
  3. Cash excess or deficiency
  4. Financing
28
Q

What is the layout of the cash budget?

A 
Beginning cash balance
Add: Total cash receipts
Total cash available
Less: Cash disbursements
Excess (deficiency)
Financing:
Borrowing
Repayment
Interest
Total Financing
Ending Cash Balance
29
Q

What is the formula to find the total cash available?

A

Beginning cash balance + total cash receipts

30
Q

What is the formula to find the cash budget’s excess/deficiency amount?

A

Total cash available - cash disbursements

31
Q

When do you borrow money?

A

When your excess(deficiency) amount is below the minimum cash balance

32
Q

What is the formula to find interest?

A

Borrowed amount x % x (# number of quarters after you borrowed the money/total number of quarters)

33
Q

What is the formula to find the ending cash balance?

A

Excess/Deficiency + total financing

34
Q

True or False:

The repayment and interest values are always negative

A

True

35
Q

What is the 2nd quarters beginning cash balance equal to?

A

The previous month’s ending cash balance

36
Q

What is the year’s beginning cash balance equal to?

A

The first quarters beginning cash balance

37
Q

What is the year’s ending cash balance equal to?

A

The lash quarters ending cash balance

38
Q

If you cash balance has a deficiency how much money should you borrow?

A

The amount that brings you ending cash balance to the minimum cash balance amount

39
Q

List the order of the budgets

A
  1. Sales Budget
  2. Production Budget
  3. Direct Labor Budget
  4. Manufacturing Overhead Budget
  5. Cash Budget
40
Q

What is included in the sales budget?

A

The Expected Cash Collections

41
Q

Who should review the self-imposed budgets?

A

Higher levels of management

42
Q

Why should self-imposed budgets be reviewed by higher levels of management?

A

It prevents “budgetary slack”

43
Q

Fill in the Blanks:

Top management must be ________ and ________ to the budget process.

A
  1. Enthusiastic

2. Committed

44
Q

Fill in the Blanks:

Top management must not use the budget to ______ employees or ______ them when something goes wrong.

A
  1. Pressure

2. Blame

45
Q

What are usually preferred when managers are rewarded based on meeting budget targets?

A

Highly achievable budget targets

46
Q

What question does the sales budget answer?

A

How much sales revenue will we earn?

47
Q

What is computed at the end of the budgeting period?

A

The balance sheet

48
Q

Which section of the cash budget lists all cash inflows excluding cash received from financing?

A

The cash receipts section

49
Q

Which section of the cash budget consists of all cash payments excluding repayments of principal and interest?

A

The cash disbursements section

50
Q

Which section of the cash budget determines if the company will need to borrow money or if it will be able to repay funds previously borrowed?

A

The cash excess or deficiency section

51
Q

Which section of the cash budget details the borrowings and repayments projected to take place during the budget period?

A

The financing section

52
Q

Which expense doesn’t appear on the cash budget?

A

Depreciation expense

53
Q

Which expense doesn’t appear on the schedule of cash payment for selling & revenue expense budget?

A

Depreciation expense

54
Q

Which budget covers a one-year period corresponding to the company’s fiscal year?

A

The operating budget

55
Q

What is a continuous budget also known as?

A

Perpetual budget

56
Q

What is a self-imposed budget also known as?

A

Participative budget

57
Q

What is the formula to find the expected cash collection’s cash sales?

A

Month sales x % of cash sales

58
Q

What is the formula to find the expected cash collection’s credit collection?

A

Month sales x % of credit sales x % collection in that month

59
Q

What is the formula to find the expected cash collection’s total cash collection?

A

Month cash sales + Month credit collection + Month 1 + Month 2

60
Q

What is the formula to find the expected cash collection’s accounts receivable at the end of the month?

A

Month cash sales x % of credit sales x % collected in Month 1

Principles of Accounting - Managerial (11 decks)

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