Accounting 208 Exam III

Highly achievable budget targets ______.

may generate greater management commitment to the budget may help build manager confidence are used in most companies

A perpetual budget keeps managers focused at least one year ahead by adding one ______.

month to the end of the budget as each month comes to a close

When comparing the static planning budget to actual activity, a problem that arises when actual activity is higher than budgeted activity is that ______.

net income is higher than expected but all or most expense variances are unfavorable

A company's budget ordinarily covers a

one year period corresponding to it's fiscal year

budgets are used for:

planning and controlling

Companies use the________ cycle to evaluate and improve performance

variance analysis

Why do organizations create budgets?

- Improve the efficiency and effectiveness of operations - Evaluate and reward employees

Given planning budget revenue of $284,000, actual revenue of $275,000, and flexible budget revenue of $290,000, there is a(n

favorable

flexible budget expense < planning budget expense

favorable

Comparing actual costs to what the costs should have been for the actual level of activity is done on a(n)_____ budget

flexible

What costs and revenues should have been for the actual level of activity is shown on a (n) ________ budget

flexible

Limitations of self-imposed budgeting include ______.

suboptimal budget recommendations budgetary slack

Perpetual budget

12 month budget that continuously rolls forward

Unfavorable variance

Actual revenue is less than budgeted revenue

Budget

Detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period

The system that compares actual results to a budget so that significant deviations can be flagged and investigated further is called

Management by exception

Which of the following budgets are directly based on information from the sales budget?

Selling and administrative expense budget Production budget

A flexible budget performance report combines the ______.

activity variances with the revenue and spending variances

continuous budget (perpetual budget)

a 12-month budget that rolls forward one month (or quarter) as the current month (or quarter) is completed

Self-imposed budget (participative budget)

a budget that is prepared with the full cooperation and participation of managers at all levels

Favorable variance

actual revenue is more than budgeted revenue

The variance analysis cycle ______.

begins with the preparation of performance reports

operating budget

cover a one-year period corresponding to a company's fiscal year

Revenue variance

difference between flexible budget revenue and actual revenue

Activity variance

difference between the planning budget and the flexible budget

The section on the cash budget that summarizes all cash payments that are planned for the budget period is the cash ____ section

disbursements

planning

involves developing objectives and preparing various budgets to achieve those objectives

Control

involves the steps taken by management to increase the likelihood that the objectives set down while planning are attained and that all parts of the organization are working together toward that goal

The cash budget ______.

is prepared near the end of the master budget process

To calculate total sales on the sales budget, multiply budgeted sales in units by ______.

sales price per unit

Recognizing individuals at all levels of the organization as team members whose views and judgments are valued by top management is an advantage of ______.

self imposed budgeting

When profit targets are set by top managers, ______.

too much slack may be allowed goals may be unrealistically high

In companies that do not use a self-imposed budgeting process, profit targets are generally set by ______.

top managers