Chapter 8- Master Budgeting

A ______ is a detailed plan for the future that is usually expressed in formal quantitative terms

budget

The ________ budget rolls forward 1 month at a time as the current month is completed

perpetual

Budgets have 2 distinct purposes: _____ and ___

planning and control

______ is the process of creating goals and specifying how to achieve them

planning

______ is the process of gathering feedback to ensure a plan is being properly executed or modified as circumstances change

control

Companies create budgets by relying on some combination of top-down budgeting and ....

self-imposed budgeting

In a ______, managers prepare their own budget. It is then reviewed by higher level managers

self-imposed budget

A self imposed budget is also called a

participative budget

Why do companies prepare budgets?

-think and plan about future

-communicate financial goals

-allocate resources

-coordinate plans and activities

-uncover potential bottlenecks

What are the limitations on self-imposed budgeting?

-suboptimal budget estimates by lower level managers

-budgetary slack in order to get a reward

The 1st step in the budget process is a _______.

sales budget

A _____ is a detailed schedule showing expected sales for a budget period

sales budget

T/F: All other parts of the master budget rely on the sales budget

true

The sales budget influences _____ parts of the selling and administrative budget and also feeds into the _____ budget

variable; production

The _____ is a detailed plan showing how cash resources will be acquired and used over a specific time period

cash budget

The final element of the master budget is the

balance sheet

The _____ is a detailed plan showing the number of units that must be produced during a period to satisfy sales and inventory needs

production budget

In a production budget, the desired ending inventory is the _________ for the next year

beginning inventory balance

T/F: The ending inventory for a quarter is the same as the year prior., not the sum. The beginning inventory is the same as the 1st month, not the sum.

True

Manufacturing companies prepare ______ budgets

production

Merchandising companies prepare _______ budgets

merchandise purchase

The _____ shows the amount of goods that must be purchased from suppliers during the period

merchandise purchases

The merchandise purchases budget is usually accompanied by the schedule of...

expected cash disbursements for purchases of materials

A ______ is a detailed plan showing the amount of raw materials that must be purchased to fulfill production budget and to produce for adequate inventories.

direct materials budget

The direct materials budget is prepared (before/after) the production requirements have been computed

after

The _______ is a detailed plan that shows the direct labor-hours required to fulfill production budget

direct labor budget

What can occur is a direct labor budget is neglected?

-labor shortages

-hiring and firing during awkward times

A ________ is a plan that shows the production costs, other than direct materials and direct labor, that will be incurred over a specified time period.

manufacturing overhead budget

THe __________ shows the dollar amount of unsold finish goods inventory that will appear on the ending balance sheet

ending finished goods inventory budget

The ______ lists the budgeted expenses for areas other than manufacturing.

selling and administrative expense budgets

In large organizations, the _____ is a compilations of different departments budgets.

selling and administrative expense budgets

T/F: Depreciation is added to the total expenses in a selling and admin. expense budget.

False

-subtracted

There are 4 main sections of a cash budget. What are they?

-cash receipts section

-financing section

-cash disbursement section

-cash excess or deficiency section

In the ____ section, one lists all the cash inflows (except financing inflows)

receipts

In the _____ section, one summarizes all cash payments planned for the period

disbursements

In the _____ section, one discusses borrowings and principal and interest repayments projected to take place

financing

The _____ shows the planned profit and serves as a benchmark against which subsequent company performance can be measured

budgeted income