Chapter 7: Preparing Budgets

What is CIMA’s definition of a budget? How long are these usually for?

Explain the following reasons for budgeting:

• Planning

• Control

• Communication

• Co-ordination

• Evaluation

• Motivation

What are some of the advantages and disadvantages for budgeting?

What is a periodic budget? What is is suitable for?

What is a rolling budget, what is it useful for? What does it lead to, compared to periodic budgets?

Budget preparation should always start with a budget for the principal budgetary factor. Explain what this is.

What is a master budget and what does it usually comprise?

What are the 7 steps of the budgeting process?

What does the production budget identify? Why is opening inventory subtracted?

How is total production required calculated?

How are adjustments for faulty production treated when calculating total production required. What is the formula?

How is the materials usage budget calculated?

How is the material purchases budget calculated. Total cost of material purchases?

What are the total labour hours required for production based on? How is idle time treated?

How does CIMA define a cash budget?

What are cash budgets used for?

How do you calculate sales receipts? What is alternate way of doing this?

How do you calculate payments to suppliers? What is alternate way of doing this?

What are some factors to consider when interpreting cash budgets?

What is sensitivity analysis and what is it useful for? What is the key assumption?

Key assumption: Ceteris Paribus

What is a stress test?

What are some internal and external sources of data for budgets?

What is big data?

What are some sources of big data?

What are some advantages and disadvantages (4Vs) of big data?

What is AI? What does it provide when combined with big data?

Advantages and disadvantages of AI

Define incremental budgeting

Advantages and disadvantages of incremental budgeting

Define zero based budgeting, what are the steps of the technique?

advantages and disadvantages of zero based budgeting

Define activity based budgeting, how is the budgeted profit calculated under it?

Advantages and disadvantages of activity based budgeting.

What is beyond budgeting, what are some of its characteristics?

Advantages and disadvantages of beyond budgeting.