Accounting 2 chapter 8

Short-term objectives :

-are an important component of long-term objectives -need to be achieved in one year or less

Advantages of budgeting include:

-forcing managers to think about and plan for the future -promoting cooperation and coordination among different areas within the organization -providing lead time to solve potential problems -providing benchmarks for evaluating performance

Which of the following is NOT information that helps to determine the sales forecast?

Long-term research and development plans

When a manager creates a budget that understates expected revenues or overstates expected expenses, ___ ___ occurs

budgetary slack

The final step in the master budgeting process is to prepare the ______.

budgeted balance sheet

Which of the following provides critical information managers need to manage daily operations?

cash budget

Collections on credit sales made to customers in prior period(s) plus collections on sales made in the current budget period equal ______

cash receipts

To calculate the direct labor requirement for each quarter, ______

multiply the number of direct labor hours required per unit times the number of units to be produced

The budgeted income statement is formed from the combined ______ budgets

operating

The three sections of the cash budget are ___ , ___ , and financing.

payments , receipts

The direct materials budget directly relies on the ______ budget

production

Specific actions or mechanisms managers use to achieve objectives are called

tactics

A continuous or rolling budget ______

- keeps managers in continuous planning mode - adds one period to the end of the budget as each period comes to a close - helps avoid games at the end of a budget period

When an organization uses a top-down approach to budgeting:

- the budget is imposed on lower levels of the organization - top management sets the budget

Budgets that are most likely to motivate employees

are tight but attainable

To calculate the cash balance before financing on the cash budget, add the ______.

beginning cash balance to the budgeted cash receipts and deduct budgeted cash payments

A detailed document that identifies resources and expenditures that will be required over a limited time (typically a year) is a(n)

budget

Company objectives are translated into financial terms in a(n)

budget

Total sales on the sales budget equal budgeted unit sales multiplied by

budgeted sales price per unit

A future-oriented version of the statement of cash flows is the

cash, budget

The operating budgets feed directly into the ___ ___ , which then feeds directly into the budgeted balance sheet.

cash, budget

A pro forma budgeted balance sheet is developed from the ___ budgets.

financial

The cash budget is one of the primary ___ budgets that is prepared

financial

Managers must try to find the "just-right" level of difficulty in setting budgetary goals so they

have motivating effects on employee behavior

Managers put plans into action as part of

implementing

The direct materials purchases, direct labor, and manufacturing overhead budgets are all based on the ___ budget

production

The number of units that must be made to satisfy sales needs and to provide for the desired ending inventory is shown on the ____ budget

production

The first step in the process of preparing the master budget is the ___ budget or forecast

sales

The budget that shows the budgeted expenses for areas other than manufacturing is the ___ and ___ expense budget.

sales, admin

Sometimes budgetary ___ can be beneficial as a way to hedge against uncertainty or future events than cannot be anticipated.

slack

Tactics are

specific actions or mechanisms used to achieve an objective

Planning starts with managers'

strategic plan

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

merchandise purchases

The sales, production, and purchases budgets are all ___ budgets

operating / operational

Employees throughout the organization have input into the budget-setting process when ___ budgeting is used

participative

Budgeting is an important part of the __ and __ cycle.

planning, control

Budgets are used for two distinct purposes: ______ and ______. The first of these purposes relates to developing goals and preparing various budgets, while the second involves comparing actual results to the budget

planning, controlling

Developing goals for the budget is part of ___ whereas ___ involves determining if goals have been followed

planning, controlling

Which of the following is needed to prepare a sales budget?

The budgeted number of units to be sold

Understanding the interrelationships of individual budgets is the key to developing a master budget

True

To calculate materials to be purchased on the direct materials purchases budget, add the desired ___ inventory of raw materials to the raw materials needed based on the ___ budget and ___ the beginning inventory of raw materials to arrive at raw materials to be purchased.

ending, production, deduct

Budgeted cost of goods sold is based on ___

expected sales

Budgetary slack occurs when a manager submits a budget that is

too easy to attain

When management sets the budget and imposes it on employees throughout the organization, a ___ ___ approach is being followed

top down

The entire budget must be created from scratch every period when using ______ budgeting

zero - based

Under ___ ___ budgeting managers must justify their budget each year by starting from scratch

zero- based

Budgets ______

communicate management's plan throughout the organization

Another budget period is automatically added to the budget as one period passes when using a(n) ___ or rolling budget

continuous

All of the operating budgets are combined to form a budgeted

income statement

The budgeted ___ ___ shows a company's planned profit

income, statement

Long-term objectives are goals

managers want to achieve in 5 to 10 years

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

manufacturing overhead

Each component of a(n) ___ budget is based on or provides input for another component

master

Assume a company is preparing an annual production budget by quarter. Which of the columns can be added together when computing the yearly total column?

- Budgeted unit sales - Budgeted production in units

Which of the following budgets are needed to calculate unit product costs?

- Direct labor budget - Direct materials budget - Manufacturing overhead budget

Which of the following budgets are NOT needed in service firms?

- Manufacturing overhead - Production

Selling and Administrative Budget

- NOT used to calculate the budgeted manufacturing cost per unit - Does not rely on the production budget

When preparing a direct materials purchases budget, which of the following is needed to calculate raw materials to be purchased?

- Raw materials per unit - Beginning inventory of raw materials

The manufacturing overhead budget includes ______

- depreciation on production equipment - indirect manufacturing costs

Financial budgets:

- include the capital expenditures budget - include the cash budget - impact the budgeted balance sheet

The starting point of the planning process is management's ___ ___ or vision for the organization

strategic plan

Which of the following is NOT a way to determine the sales forecast?

Planned production activities for the upcoming period

Which of the following is NOT included on a budgeted cash payments budget?

Production in units

Budgeting is more important in manufacturing firms than in other types of businesses.

FALSE All organizations can benefit from budgeting

The same budget that is used for planning should always be used for performance evaluation

FALSE -Many dysfunctional behaviors can be minimized if different budgets are used for planning and performance evaluation.

Controlling involves developing goals and preparing various budgets to achieve those goals

False

Using a participative approach to budgeting is less likely to motivate employees than using a top-down approach

False

The sales budget is based on the production budget

False -Production budget is based upon the sales budget

Which of the following CANNOT be added together when computing the yearly totals for a production budget prepared by quarter?

Finished goods inventory