Managerial Accounting Chapter 9

The operating budgets culminate in the budgeted ________.

income statement

Benefits of budgeting includes

planning, coordination and communication, and benchmarking

Which of the following is true?

Only debit card transactions are limited by law

The comprehensive planning document for the entire organization is called the ________ budget.

Master

Participative budgeting is beneficial for the following reasons

1. Lower-level managers are closer to the action, and should have a more detailed knowledge for creating realistic budgets 2. Managers are more likely to accept and be motivated by, budgets the helped create

COD (Cost on Delivery or Cash on Delivery)

A sale term indicating that the inventory must be paid for at the time of delivery

Variance

The difference between actual and budget figures (revenues and expenses)

Sensitivity Analysis

A "what-if" technique that asks what a result will be if a predicted amount is not achieved or if an underlying assumption changes

Rolling Budget

A budget that is continuously updated so that the next 12 months of operations are always budgeted; also know as a continuous budget

Zero-Based Budgeting

A budgeting approach in which managers begin with a budget of zero and must justify every dollar put into the budget

Budget Committee

A committee comprised of upper management as well as cross-functional managers that reviews, revises and approves the final budget

Line of Credit

A lending arrangement from a bank in which a company is allowed to borrow money as needed, up to a specified maximum amount, yet only pay interest on the portion that is actually borrowed until it is repaid

Cost of Good Sold, Inventory, and Purchase Budget

A merchandiser's budget that computes the cost of goods sold, the amount of desired ending inventory, and amount of merchandise to be purchased

Which term describes the situation in which a manager intentionally overbudgets expenses or underbudgets revenues?

Budgetary slack

Participative Budgeting

Budgeting that involves the participation of many levels of management

Flexible Budgets

Budgets prepared for different volumes of activity

Which budget reflects the company's plant to invest in new property, plant, and equipment?

Capital expenditures budget

Master budget

Consists of all the supporting budgets needed to create the company's budgeted income statement

Which of the following budgets is unique to merchandising companies?

Cost of Goods Sold, Inventory, and Purchases Budget

Operating budgets

Culminate in a budgeted income statement

Financial budgets

Culminates in a budgeted balance sheet

Which of the following are non-cash expenses that will always result in differences between the budgeted operating expenses for a given period and the budgeted cash payments for the same period?

Depreciation expense & bad debt expense

Slack

Intentionally overstating budgeted expenses or understating budgeted revenues in order to cope with uncertainty, make performance appear better, or make room for potential budget cuts

Which of the following budgets must be prepared first, as it serves as a basis for most other budgets?

Sales budget

Strategic planning

Setting long-term goals that may extend 5-10 years into the future

Operating Budgets

The budgets needed to run the daily operations of the company. The operating budgets culminate in a budgeted income statement

Master Budget

The comprehensive planning document for the entire organization. The master budget includes the operating budgets and the financial budgets

Financial Budgets

The financial budgets include the capital expenditures budget and the cash budget. It culminates in a budgeted balance sheet

Which of the following is true for merchants that accept payments made by Visa, MasterCard, and other forms of "plastic"?

Transactions fees should be budgeted for in the operating expenses budget

Safety Stock

extra inventory kept on hand in case demand is higher than expected or problems in the factory slow production