A planning device that helps a company set financial goals and that serves as a guage against which actual results can be measured.
What is a budget?
100
Prepared after the fact to measure actual results to what should have occurred at the level of operations achieved during the period.
What is a flexible budget?
100
This budget follows the sales budget because you need to know how many you expect to sell in order to know how many to make.
What is a production budget?
100
This is prepared because, of course you need to forecast all of the other factory/production costs.
What is the factory overhead budget?
100
The volume on which the initial calculation of projected costs is based.
What is standard production?
200
Prepared prior to the beginning of the period and based on the company's planned accomplishments.
What is a master budget?
200
They must be realistic and possible to attain.
What are the two requirements that the principles of budgeting state regarding goals?
200
This process starts with front line managers because they are closest to the individual sales territories or production departments.
What is participative (bottom up) budgeting?
200
Prepared after the other production budgets and requires estimates for beginning and ending inventories of work in process and finished goods.
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What is the cost of goods sold budget?
200
Calculated by projecting the units to be produced and applying direct material and labor costs and all overhead costs using standard costs to those units and dividing the total costs by the total units.
What is the standard product cost per unit?
300
The operational area that is always budgeted first and drives all of the other operational budgets.
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What is the sales or service revenue budget?
300
Includes components of the projected (pro-forma) financial statements.
What is an operating budget?
300
Where a manager sets unrealistically low goals in an effort to make average performance look good.
What is budget slack?
300
The level of production that will meet the normal requirements of ordinary sales demand over a period of years. Most manufacturing firms use this level for budget development.
What is normal capacity?
300
The reason for charging allocated sevice department costs to the production departments using a standard rate base.
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What is to avoid passing extra costs resulting from inefficient operations in the service departments to the production departments? (Hint-page 371)
400
Management must clearly define its objectives.
What is the first listed principle of budgeting?
400
Includes the budgeted balance sheet, budgeted retained earnings statement, and budgeted cash flow statement.
What is the financial budget?
400
This budget is driven by the production budget because you must forecast the material needed to meet forecasted production.
What is the direct materials budget?
400
The level of production that represents the maximum number of units that could be produced with the completely efficient use of all facilities.
What is theoretical capacity?
400
This budget is driven by the production budget and considers the beginning and ending raw material inventory balances.
What is the direct materials budget?
500
As months or quarters are completed this type of budget adds a new month or quarter of budgeted data at the end so there is always a one year budget to work from.
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What is a continuous or rolling budget?
500
Two budgets that support the financial budget.
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What are the cash budget and the capital expenditure budgets?
500
This budget flows from the production budget because you need to know how many you are going to make in order to know how many people and hours it will take to make them.
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What is the direct labor budget?
500
The level of production that provides complete utilization of all facilities and personnel but allows for some idle capacity due to operating interruptions such as machine breakdowns and idle labor time.
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What is practical capacity?
500
This budget is driven by the production budget and considers production standards that relate to the work time necessary to produce units of product.