Ch. 8 Principles of Managerial Accounting

Profit Planning

A profit planning budget refers to preparing a number of budgets that together form an integrated business plan

Sales Budget

A sales budget is a detailed budget showing the expected sales for the budget period.

self-imposed budget

A self-imposed budget is a budget that is prepared with the full cooperation and participation of managers at all levels and could be associated with any type of budget.

Identify the true statements about budgets.

They define goals and objectives that can serve as benchmarks for evaluating subsequent performance. They encourage managers to think about and plan for the future. They coordinate the activities of the entire organization by integrating the plans of its various parts. The budgeting process can uncover potential bottlenecks before they occur.

A number of separate, but interdependent, budgets that formally lay out the company's sales, production, and financial goals are contained in the

master budget

The master budget

consists of a number of separate but interdependent budgets that formally lay out the company's sales, production, and financial goals

Budgets are used for two distinct purposes:

planning- involved developing goals and preparing various budgets to achieve those goals. Control- Involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change.