Cost Accounting - Ch 6

Front 1

Budget

Back 1

The quantitative expression of a proposed plan of action by management for a specified period and an aid to coordinate what needs to be done to implement that plan.

Front 2

Master Budget

Back 2

Expresses management's operating and financial plans for a speficied period (usually a fiscal year), and it includes a set of budgeted financial statements

Front 3

pro forma statement

Back 3

Budgeted financial statements

Front 4

Advantages of Budgets

Back 4

1.Promote coordination and communication among subunits within the company.
2. Provide a framework for judging performance and facilitating learning.
3. Motivate managers and other employees

Front 5

Rolling budget

Back 5

Also called a continuos budget. Is a budget that is always available for a speficied future period. It is created by continually adding a month, quarter, or year to the period that just ended.

Front 6

Steps in preparing an operating budget

Back 6

1. Identify the problems/uncertainties
2. Obtain information
3. Make predictions about the future.
4. Make decisions by choosing among alternatives.
5. Implement the decisions, evaluate performance, and learn

Front 7

Prepare Master Budget

Back 7

1. Prepare revenues budget
2. Prepare production budget (in units)
3. Prepare DM usage budget and DM purchase budget
4. Prepare Direct manufact. labor costs budget
5. Prepare manufact. OH costs budget
6.Prepare ending inventories budget
7. Prepare COGS budget
8. Prepare nonmanufacturing costs budget
9. Prepare budgeted income statement

Front 8

Activity-based budgeting

Back 8

Focuses on the budgeted cost of the activities necessary to produce and sell products and services,

Front 9

Financial planning models

Back 9

Mathmatical representations of the relationships among activities, financing activities, and other factors that affect the master budget.

Front 10

Responsibility center

Back 10

A part, segment, or subunit of an organization whose manager is accountable for a specified set of activities.

Front 11

Four types of responsibility centers

Back 11

Cost center
revenue center
profit center
investment center

Front 12

Variances

Back 12

Difference between actual results and budgeted results

Front 13

Variances can be used to help managers implement and evaluate strategies in what three ways?

Back 13

Early warning
Performance evaluation
Evaluation strategey

Front 14

Controllability

Back 14

The degree of influence that a specific manager has over costs, revenues, or related items for which he or she is responsible

Front 15

Controllable cost

Back 15

Any cost that is primarily subject to the influence of a given responsiblity center manager for a given period.

Front 16

Budgetary slack

Back 16

Describes the practice of underestimating budgeted revenues, or overestimating budgeted costs, to make budgeted targets more easily achievable.

Front 17

Kaizen budgeting

Back 17

Explicitly incorporates continuous improvement anticipated during the budget period into the budget numbers.