ch 8

budgeted income statement

a budget that shows the company's planned profit and serves as a benchmark agains which subsequent measure can be measured

Responsibility accounting

A system of accountability in which managers are held responsible for those items of revenue and cost—and only those items—over which they can exert signifi- cant control. The managers are held responsible for differences between budgeted and actual results. (p. 337)

budgeted balance sheet

developed using data from the balance sheet from the beginning of the budget period and data contained in the various schedules

Planning

Developing goals and preparing budgets to achieve those goals. (p. 336)

Manufacturing overhead budget

A detailed plan showing the production costs, other than direct materials and direct labor, that will be incurred over a specified time period. (p. 349)

Direct labor budget

A detailed plan that shows the direct labor-hours required to fulfill the pro- duction budget. (p. 348)

Merchandise purchases budget

A detailed plan used by a merchandising company that shows the amount of goods that must be purchased from suppliers during the period. (p. 346)

Selling and administrative expense budget

A detailed schedule of planned expenses that will be incurred in areas other than manufacturing during a budget period. (p. 351)

Sales budget

A detailed schedule showing expected sales expressed in both dollars and units. **Starting point for preparing master budget. (p. 341)

Budget committee

A group of key managers who are responsible for overall budgeting policy and for coordinating the preparation of the budget. (p. 340)

Self-imposed budget

A method of preparing budgets in which managers prepare their own bud- gets. These budgets are then reviewed by higher-level managers, and any issues are resolved by mutual agreement. budget that is prepared with the full cooperation of managers at all levels. AKA participative budget. (p. 338)

Master budget

A number of separate but interdependent budgets that formally lay out the company's sales, production, and financial goals and that culminates in a cash budget, budgeted income statement, and budgeted balance sheet. (p. 341)

Continuous budget

A 12-month budget that rolls forward one month as the current month is completed. AKA perpetual budget (p. 337)

Ending finished goods inventory budget

A budget showing the dollar amount of unsold finished goods inventory that will appear on the ending balance sheet. (p. 350)

Budget

A detailed plan for the future that is usually expressed in formal quantitative terms. (p. 336)

Cash budget

A detailed plan showing how cash resources will be acquired and used over a specific time period. **provides necessary input data for the budgeted balance sheet (p. 341)

Direct materials budget

A detailed plan showing the amount of raw materials that must be pur- chased to fulfill the production budget and to provide for adequate inventories. (p. 346)

Production budget

A detailed plan showing the number of units that must be produced during a period in order to satisfy both sales and inventory needs. (p. 344)

Control

The process of gathering feedback to ensure that a plan is being properly executed or modified as circumstances change. (p. 336)