Chapter - 8: Master BudgetingAssignment

Required borrowings on a cash budget is calculated by ____________.

adding the desired ending cash balance to the amount of the cash deficiency

Given budgeted sales of 10,000 units, desired ending inventory of 5,000 units, and beginning inventory of 2,000 units, required production is ____________ units.

13,000

Challenging but highly achievable budgets increase the likelihood that lower-level managers will engage in undesirable behavior to secure their desired compensation.

False

For most companies a single, annual cash budget is sufficient.

False

The first step in the budgeting process is the preparation of the _________ budget.

Sales

The cash budget _________.

is prepared near the end of the master budget process

If a budget initiated by top management has targets that are set too high, __________.

motivation will suffer

When a manager creates a budget that is too easy to attain, ___________ occurs.

budgetary slack

The first step in the budgeting process is preparing the __________ budget.

sales

In large organizations, many smaller individual budgets submitted by department heads and other responsible people comprise the __________ budget.

selling and administrative

On the cash budget, what is subtracted from total cash available to find the cash excess or deficiency?

Cash disbursements

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

master

Which of the following budgets shows the company's planned profit and serves as a benchmark against which subsequent company performance can be measured?

Budgeted income statement

Many managers believe that being empowered to create their own self- ____________ budgets is the most effective method of budget preparation.

imposed

A manager cannot complain that the budget was unrealistic and impossible to meet when a(n) __________ - ___________ budget, or a participative budget, is in place

Self - Imposed

A detailed plan used by a merchandising company that shows the amount of goods that must be purchased from suppliers during the period is called a(n) ______________ budget.

merchandise purchases

Variable selling and administrative expenses are calculated by multiplying the budgeted units ___________ by the variable selling and administrative expense per unit.

sold

Highly achievable budget targets _________.

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

Borrowing money is required whenever ___________.

- the cash excess is less than the minimum required cash balance - there is a cash deficiency

When profit targets are set by top managers, ___________.

- too much slack may be allowed - goals may be unrealistically high

Using budgeting assumptions when preparing the master budget, ___________.

makes it easier to answer "what-if" questions

An integrated business plan that formally lays out the company's goals is called the __________ budget.

master

What is subtracted from total budgeted selling and administrative expenses to determine the cash disbursements for selling and administrative expenses?

Non-cash expenses

The cash budget uses information from several other budgets. Which of the following budgets is NOT used to prepare the cash budget?

Production

Madison Corporation's expected beginning cash balance is $35,000. Cash collections are budgeted at $50,000 and cash disbursements are estimated to be $80,000. The minimum required cash balance is $20,000 and the company can borrow as much as needed in increments of $10,000. Calculate the expected ending cash balance for the month.

$25,000 ($35,000 + $50,000 - $80,000 = $5,000. Since they can borrow in increments of $10,000 they must borrow $20,000 to meet or exceed the minimum cash balance making the ending balance $25,000.)

Master budget schedules _________.

- are based on estimates and assumptions - answer several key questions for a company

The amounts under the Year column in the cash budget always equal the sum of the amounts for the months or quarters of the budget.

False

A company's planned net profit that serves as a benchmark against which subsequent company performance can be measured is shown on the budgeted ___________________ .

Income Statement

Many of the schedules in a master budget are based on a variety of management estimates and assumptions.

True

The annual master budget file includes the ___________ from last year because it is needed for the schedule of expected cash collections.

balance sheet

To prepare a budgeted balance sheet as of December 31, 2021, data is needed from the ______ December 31, 2020.

balance sheet as of

Budgets ___________.

communicate management's plan throughout the organization

When creating an Excel budget and performing what-if analysis, it is generally easiest to __________.

create the budget with a budgeting assumption tab

More accurate estimates and higher motivation are generally the result of using a(n) __________ budget.

participative

Developing goals and preparing various budgets to achieve those goals is part of _________.

planning

The amount of goods to be acquired from suppliers during the period is shown on the ___________ budget.

merchandise purchases

Budgeted expenses for areas other than manufacturing are shown on the ___________ budget.

selling and administrative

Identify the true statements about budgets.

- They encourage managers to think about and plan for the future. - They define goals and objectives that can serve as benchmarks for evaluating subsequent performance. - 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.

Limitations of self-imposed budgeting include __________.

- budgetary slack - suboptimal budget recommendations

The budgeted income statement relies on information from the ______.

- ending finished goods inventory budget - selling and administrative expense budget - cash budget - sales budget

A budget that is prepared with the full cooperation of managers at all levels is a self-imposed or _______________ budget.

participative

Because it is needed for the schedule of expected cash collections, the annual master budget file includes the ___________ from last year.

Balance Sheet

If a cash budget is prepared by quarter, the beginning cash balance for the year is the same as the beginning cash balance for the ____________ quarter and the ending cash balance for the year is the same as the ending cash balance for the ______________ quarter.

1st , 4th

A company with adequate cash balances at the beginning and end of the year, ____________.

may still have cash deficiency issues during the year

A budgeted balance sheet is developed using data from the ___________ of the budget period and data contained in the various schedules.

beginning

The final schedule of the master budget is the __________.

budgeted balance sheet

The final schedule of the master budget is the ___________.

budgeted balance sheet

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

top managers