Master Budget

Budget

Quantitative expression of a proposed plan of action by management for a specified period.

Financial Budget

Quantifies managers' expectations regarding a company’s income, cash flows, and financial position.

Strategy

Specifies how an organization matches its capabilities with opportunities in the marketplace to accomplish objectives.

Master Budget

Expresses management’s operating and financial plans for a specified period, usually a fiscal year.

Operating Decision

Deals with how to best use the limited resources of an organization.

Financing Decision

Deals with how to obtain funds to acquire those resources.

Coordination

Meshing and balancing all aspects of production or service and all departments in a company to meet its goals.

Communication

Ensuring all employees understand the company's goals.

Rolling Budget

A budget always available for a specified future period.

Revenue Budget

Starting point of the operating budget.

High Inventory Levels

Increase the cost of carrying inventory, quality, and shrinkage costs.

Low Inventory Levels

Increase setup costs and result in lost sales due to product unavailability.

Production Budget

Determines budgeted production costs (direct materials, direct labor, manufacturing overhead).

Activity Based Budgeting

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

Financial Planning Models

Mathematical representations of the relationship among operating activities, financing activities, and other factors affecting the master budget.

Sensitivity Analysis

Examines how results change if original predicted data are not achieved or if an underlying assumption changes.

Organization Structure

Arrangement of lines of responsibility within an organization.

Responsibility Center

Part of an organization whose manager is accountable for specified activities.

Responsibility Accounting

Measures plans, budgets, actions, and actual results of each responsibility center.

Cost Center

Manager is accountable for costs only.

Revenue Center

Manager is accountable for revenue only.

Profit Center

Manager is accountable for revenues and costs.

Investment Center

Manager is accountable for investments, revenues, and costs.

Budget Variances

Differences between actual results and budgeted amounts.

Controllability

Degree of influence a manager has over costs, revenues, or related items for which they are responsible.

Controllable Cost

Any cost subject to the influence of a given responsibility center manager for a given period.

Budgetary Slack

Underestimating budgeted revenues or overestimating budgeted costs to achieve targets easily.

Kaizen Budgeting

Incorporates continuous improvement anticipated during the budget period into the budget numbers.