MGMT CH 8

To prepare a budgeted balance sheet as of December 31, 2020, data is needed from the ______ December 31, 2019.

balance sheet as of

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

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

create the budget with a budgeting assumption tab

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

false

True or false: 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

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

imposed

If inventory levels are ______, the result can lead to lost sales or last-minute, high-cost production efforts.

insufficient

The cash budget ______.

is prepared near the end of the master budget process

3 Risks of not knowing in advance how much labor time will be needed throughout the budget period includes ______.

labor shortages erratic layoffs low employee morale

Using budgeting assumptions when preparing the master budget, ______.

makes it easier to answer "what-if" questions

budgets communicate

management's plan throughout the organization

All costs of production other than direct materials and direct labor are shown on the _____________ budget

manufacturing overhead

The calculation of unit product cost requires information from the ______ budget

manufacturing overhead

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

non-cash expenses

What is another term for self-imposed budget

participative budget

Budgetary slack occurs when a manager submits a budget that is ______.

too easy to attain

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

top managers

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

true

A company can consider making investments or repay outstanding principal and interest when ______.

the cash excess is greater than the minimum required cash balance

When profit targets are set by top managers, ______.

-Goals may be unrealistically high -Too much slack may be allowed

A detailed plan for the future that is usually expressed in formal quantitative terms is ______.

A budget

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

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

Required borrowings on a cash budget is calculated by ______.

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

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

disbursement

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

may still have cash deficiency issues during the year

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

merchandise purchases

A likely consequence of excessive inventory levels is ______.

storage problems

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

What are the three benefits to a highly achievable budget target?

1. They may generate management commitment to the budget 2. They may help build manager confidence 3. They are used in most companies

What are two key aspects of master budget schedules?

1. they answer several key questions for a company 2. they are based on estimates and assumptions

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

Balance sheet

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

Beginning

What is needed to calculate raw materials to be purchased on the direct materials budget?

Beginning inventory of raw materials Raw materials required per unit

What are the two limitations of Self-imposed budgeting

Budgetary slack suboptimal budget recommendations

The final schedule of the master budget is the ______.

Budgeted balance sheet

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

Cash disbursements

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

Motivation will suffer

Facing labor shortages or having to hire or lay off workers at awkward times are consequences of ______.

Neglecting to budget the amount of labor time that will be needed

A budget that keeps managers focused at least one year ahead is a continuous or ________ budget

Perpetual or rolling

Developing goals and preparing various budgets to achieve those goals is part of ______,

Planning

In a manufacturing company, the _______________ budget is used to determine the budgets for manufacturing costs, including the direct materials budget, the direct labor budget, and the manufacturing overhead budget.

Production

Because all other parts of the budget depend on it, if the ______ budget is inaccurate, the rest of the budget will be inaccurate.

Sales

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

Sales price per unit

A manager cannot complain that the budget was unrealistic and impossible to meet when a(n) _________________ budget is in place

Self-imposed

In a manufacturing company, the ______ budget shows the number of units that must be manufactured to satisfy sales needs and provide for the desired ending inventory.

production

In a manufacturing company, the _____________ budget is prepared right after the sales budget

production

The budgeted income statement does NOT rely on information from the ______ budget.

production

The cash budget uses information from several other budgets. Which of the following budgets is NOT used to prepare the cash budget? a. sales b. production c. direct labor d. selling and administrative

production

The direct labor budget is based directly on the ______ budget.

production

The direct materials budget directly relies on the ______ budget.

production

What is found in the financing section of the cash budget?

repayments, interest, borrowings

Both the production and selling and administrative expense budgets are prepared using information directly from the _______________ budget.

sales

The first step in the budgeting process is the preparation of the __________ budget

sales

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

selling and administrative

True or false: For most companies a single, annual cash budget is sufficient

False

What is added to the variable selling and administrative expenses to get the total selling and administrative expenses?

Fixed selling and administrative expenses

In a manufacturing company, which budget is used as the basis for creating the direct materials budget, the direct labor budget, and the manufacturing overhead budget?

Production

What budgets are directly based on information from the sales budget

Production budget selling and administrative expense budget

What number does the direct materials budget take directly from the production budget?

Required production

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 for the ___________ quarter

first, fourth

The number of working hours required to satisfy the production budget is shown on the ______________ budget

Direct labor

What budgets are needed to calculate unit product costs?

Direct materials, manufacturing overhead, direct labor

The cost of unsold units is computed on the ______ budget.

Ending finished goods inventory

True or false: Control involves developing goals and preparing various budgets to achieve those goals.

False

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

selling and administrative

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

sold

In a manufacturing company, the ____________________ budget details the raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories

direct materials

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

master

The amount of goods for resale to be acquired from suppliers during the period is shown on the ______________ budget

merchandise purchase

What are the 4 pros of budgeting

1. they coordinate the activities of the entire organization by integrating the plans of its various parts 2. Budgets and their process can uncover potential bottlenecks before they occur 3. They force managers to think about and plan for the future 4. they define goals and objectives that can serve as benchmarks for evaluating subsequent performance

The first line of the direct labor budget consists of the budgeted units expected to be ______ during the period.

Produced