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10 Cards in this Set
- Front
- Back
objectives of budgeting |
1.)establishing specific goals 2.) executing plans to achieve goals 3.) periodically comparing actual results with the goal |
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budgeting affects 3 of the following managerial functions |
Planning, directing, controlling (PDC) |
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Planning |
-setting up goals to guide decisions and help motivate employees. -The planning process is often identifies where operations can be improved |
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Directing |
-involves decisions and actions to achieve budgeted goals. -A budgetary decision is often called a responsibility center |
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controlling |
-involves comparing actual performance against the budgeted goals -such comparisons provides feedback to managers and employees about their performance |
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Human Behavior and Budgeting |
Budgeted goals that are set too tight = very hard or impossible to reach Budgeted goals are set too loose (budgetary slack) = very easy to achieve Budgeted goals conflict with the objectives of the company and employees |
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Continuous budgeting |
-maintains a 12-month projection into the future - continually revised by replacing the data for the month just ended with the budget data for the same month in the next year. |
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Zero based budgeting |
requires managers to estimate sales, production, and other operating data as though operations are being started for the first time |
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what are the two major budgets that uses the zero based budgeting approach? |
Static and flexible budget |
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Static Budget |
Shows the expected results of a responsibility center for only one activity level. Once the budget has been determined, the budget does not change even if the activity changes. |