Accounting 208 Exam III
Highly achievable budget targets ______.
may generate greater management commitment to the budget may help build manager confidence are used in most companies
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
When comparing the static planning budget to actual activity, a problem that arises when actual activity is higher than budgeted activity is that ______.
net income is higher than expected but all or most expense variances are unfavorable
A company's budget ordinarily covers a
one year period corresponding to it's fiscal year
budgets are used for:
planning and controlling
Companies use the________ cycle to evaluate and improve performance
variance analysis
Why do organizations create budgets?
- Improve the efficiency and effectiveness of operations - Evaluate and reward employees
Given planning budget revenue of $284,000, actual revenue of $275,000, and flexible budget revenue of $290,000, there is a(n
favorable
flexible budget expense < planning budget expense
favorable
Comparing actual costs to what the costs should have been for the actual level of activity is done on a(n)_____ budget
flexible
What costs and revenues should have been for the actual level of activity is shown on a (n) ________ budget
flexible
Limitations of self-imposed budgeting include ______.
suboptimal budget recommendations budgetary slack
Perpetual budget
12 month budget that continuously rolls forward
Unfavorable variance
Actual revenue is less than budgeted revenue
Budget
Detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period
The system that compares actual results to a budget so that significant deviations can be flagged and investigated further is called
Management by exception
Which of the following budgets are directly based on information from the sales budget?
Selling and administrative expense budget Production budget
A flexible budget performance report combines the ______.
activity variances with the revenue and spending variances
continuous budget (perpetual budget)
a 12-month budget that rolls forward one month (or quarter) as the current month (or quarter) is completed
Self-imposed budget (participative budget)
a budget that is prepared with the full cooperation and participation of managers at all levels
Favorable variance
actual revenue is more than budgeted revenue
The variance analysis cycle ______.
begins with the preparation of performance reports
operating budget
cover a one-year period corresponding to a company's fiscal year
Revenue variance
difference between flexible budget revenue and actual revenue
Activity variance
difference between the planning budget and the flexible budget
The section on the cash budget that summarizes all cash payments that are planned for the budget period is the cash ____ section
disbursements
planning
involves developing objectives and preparing various budgets to achieve those objectives
Control
involves the steps taken by management to increase the likelihood that the objectives set down while planning are attained and that all parts of the organization are working together toward that goal
The cash budget ______.
is prepared near the end of the master budget process
To calculate total sales on the sales budget, multiply budgeted sales in units by ______.
sales price per unit
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
When profit targets are set by top managers, ______.
too much slack may be allowed goals may be unrealistically high
In companies that do not use a self-imposed budgeting process, profit targets are generally set by ______.
top managers