Chapter 9
The budgeting technique in which managers from different departments help build their own budgets.
What is participative budgeting?
The process where companies split their operations into different operating segments
What is decentralization?
The type of budget where the ideal, not actual figures are budgeted.
Static budget
Budget that is set by the central decision-maker for a centralized budget
What is the top-down budgeting approach?
Part of organization whose manager is accountable for planning and controlling certain activities
What are responsibility centers
The variance that occurs due to a difference in the number of units sold and produced from the budgeted figure and the actual figure
What is the sales volume variance
This budget is calculated by multiplying the projected sales units by the price
What is the sales budget?
Manager is accountable for cost only
What is cost center?
The variance that occurs due to the quantity and/or price of direct materials, direct labor, or overhead
What is the flexible budget variance?
This budget is calculated by adding the units needed for sale, adding the desired ending inventory, and subtracting the beginning inventory
What is the production budget?
Manager is accountable for cost and revenue
What is the profit center?
sales budget variance + flexible budget variance = ?
What is the static budget variance?
This kind of budget tracks the amount of cash a business will have by projecting the portion of their sales they expect to receive in cash as opposed to credit.
What is the cash budget?
Responsibility center where the manager is accountable for costs, revenues, and capital expenditure
What is an investment center
static budget variance - flexible budget variance = ?
What is the sales budget variance?