Management Accounting Flashcards
(4 cards)
1
Q
Advantages and disadvantages of traditional budgetary control systems
A
Adv:
- Motivate managers
- Evaluates performance of managers
- Plan for the future
- Co-ordinate activities
- Control activities
Dis-adv:
- Time-consuming
- Concentrate on cost reduction not value creation
- Encourage budget gaming (unederstimate rev and over exp)
- Updated too infrequently
- Reinforce departmental bairries
2
Q
What is the basic framework of budgeting? (order) and what is the Master budget comprised of?
A
- Master Budget
- Sales budget
- Production budget
- Materials budget
- Labour budget
- Manufacturing overhead
- FG budget
Comprised of: The budgeted statement of profit and loss, the budgeted statement of financial position and the cash budget
3
Q
How does budgeting fit into the overall framework of budgeting and control? (explain the steps/circle)
A
- Identify strategies, objectives and goals
- Develop long term plans to implement strategies
- DEVELOP ANNUAL BUDGET TO MEET PLAN
- Monitor results of budget
- React to any divergance from plan
4
Q
What is a budget?
A
‘a quantitative expression of a plan for a defined period of time. It may include planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities and cash flow’
