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43 Cards in this Set
- Front
- Back
A budget is a tool that satisfies what 4 needs?
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1. Planning
2. Control 3. Motivation 4. Communication |
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Budgetary slack
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an overestimation of expenses that must be avoided.
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What is the starting point for any organizations planning process?
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The mission statement
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Budget planning calender
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The schedule of activities for the devleopment and adoption of the budget.
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Strategic plan
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The means by which the firm expects to fulfill its mission statement.
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Participation in the budget process : Board of directors
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they begin the budget process by formulating the mission statement.
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Participation in the budget process : Senior management
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Translate the mission statement into a strategic plan with measurable, realizable goals.
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Participation in the budget process : budget committee
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composed of top management to draft the budget calender and budget manual. they review and approve departmental budgets submitted by operating managers.
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Participation in the budget process : Middle and lower management
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recieve budget instructions, draw up departmenal budgets in conformity with the guidelines and submit them to the budget committee.
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Top- down budgetinig
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imposed by upper management and therefore has less of a chance of acceptance by those on whom the budget is imposed.
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Bottom-up budgeting
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characterized by general guidance from the highest levels of management, followed by extensive input from middle to lower management.
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Strategic time frame for a budget
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Concern senior managers and have time frams of up to 10 years or more
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Intermediate time frame for a budget
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concern middle managers and have time frames of up to 2 years.
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Operational time frames
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concern lower-level managers and generally have time frames of 1 month to 1 year.
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External factors on the budgeting process
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1. General Economic Conditions
2. Industry situation |
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Standard costs
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predetermined expectations about how much of a unit of input, a unit of output, or a given activity should cost.
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Activity analysis
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indentifies, describes, and evaluates the activities that go into producing a particular output.
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Theoretical standards
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Standard costs that are set for production under optimal conditions. For this reason, they are also called perfection or maximum efficiency standards.
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Currentaly attainable standards
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the performance that is expected to be achieved by reasonably well-trained workers with an allowance for noraml spoilage, waste and downtime.
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Authoritative standard setting
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Ensures total consistency across all functional areas. It is also far less complex and time consuming than coordinating input from the middle and lower levels.
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Participative (bottom up) standard setting
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uses input from the middle and lower level employees.
This standard setting comes from a broader information base, but the the quality of participation is affected by the goals values, beliefs and expectations of those involved. |
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Qualitative methods
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rely on the manager's experience and intuition
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Quantitative methods
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Use mathematical models and graphs
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Y= a + bx
what is Y |
The dependent Variable
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Y= a + bx
What is A |
The constant Coefficient
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Y= a +bx
What is B |
The Variable coefficient
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Y= a +bx
What is x |
The independent variable
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What are other names for the master budget.
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the comprehensive budget/annual profit plan.
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What is the emphasis of the operating budget
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Obtaining and using current resources.
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What is the order of the operating budget
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1. Sales
2. Production 3. Direct Materials 4. Direct Labor 5. Manufacturing Overhead 6. Ending finished Goods Inventory Budget 7. Cost of goods sold 8. NonManufacturing budget 9. Proforma Income Statement |
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What is the order of the NonManufacturing budget
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1. Research and Development
2. Design 3. Marketing 4. Distribution 5. Customer Serviice 6. Administrative |
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What is the emphasis of the financial budget
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The emphasis is on obtaining the funds needed to purchase operating assets.
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What is contained in the Financial budget?
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1. Capital Budget
2. Projected cash disbursement schedule 3. Projected cash collection schedule 4. Cash Budget 5. Pro forma balance sheet 6. Pro forma statement of cash flows |
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Project budget
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A budget with all the costs expected to attach to a particular project.
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Activity based budgeting
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a budget that applies activity based costing principles to budgeting. Its greatest effect is on the application of indirect costs.
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What is the key to successful activity based budgeting?
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Selecting a driver for each pool that has a direct cause-and-effect realtionship wit the level of activity in that pool
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Zero Based budgeting
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a budget and planning process in which each manager must justify his/her departments budget every budget cycle.
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How is a Zero Based budget built?
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A manager must buidl the budget every year from a base of zero. All expenditures must be justified regardless of variance from previous years.
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What is the major limitation of Zero Based Budgeting?
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It requires more time and effort to prepare than a traditional budget.
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What are some of the advantages to actiity based budgeting
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Better identification of resource needs.
Linking of costs to outputs identification of budgetary slack. |
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Flexible budget
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A plan that is created using budgeted revenue and costs but is based on the actual units of output.
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Static Budget
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Based on only one level of sales or production
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Flexible budget
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a series of budgets prepared for many levels of activity.
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