Ch. 6 lecture

Question 1

the quantitative expression of a proposed plan of action by management for a specified period

Answer 1

budget

Question 2

an aid to coordinating what needs to be done to implement that plan

Answer 2

budget

Question 3

a plan which includes both financial and nonfinancial aspects and serves as a road map for the company to follow in an upcoming period

Answer 3

budget

Question 4

budgets help managers to

Answer 4

1. set goals
2. review results

Question 5

communicate directions and goals to different departments of a company to help them coordinate the actions they must pursue to satisfy customers and succeed in the marketplace

Answer 5

set goals

Question 6

judge performance by measuring financial results against planned objectives, activities, and timeliness to learn about potential problems and motivate employees to achieve targets

Answer 6

review results

Question 7

(part of the bdgeting cycle)
before the start of a fiscal year, managers at all levels take into account past performance, market feedback, and anticipated future changes to initiate plans for the next period

Answer 7

plan

Question 8

(part of the budgeting cycle)
senior managers give subordinate managers a frame of reference, a set of specific financial or nonfinancial expectations, against which they will compare actual results

Answer 8

distribute

Question 9

(part of budgeting cycle)
managers and management accountants investigate any deviations from the plan

Answer 9

variance analysis

Question 10

is at the core of the budgeting process. It expresses managements operating and financial plans for a specified period

Answer 10

master budget

Question 11

(part of the master budget)
deal with how to best use the limited resources of an organization

Answer 11

operating decisions
(the operating budget)

Question 12

(part of the master budget)
deal with how to obtain the funds to acquire those resources

Answer 12

financial decisions
(the financial budget)

Question 13

the ______ is not one budget, but manu disaggregated budgets covering specific areas

Answer 13

master budget

Question 14

• promote coordination and communication among subunits within the company
• provide a framework for judging performance and facilitating learning
• motivate managers and other employees
  (what are these)

Answer 14

advantages of budgets

Question 15

for most organizations, the annual budget process is a months long exercise that consumes a tremendous amoount of resources
(what is this)

Answer 15

challenges in administering a budget

Question 16

a part, segment, or subunit or an organization whose manager is accountable for a specific set of activities

Answer 16

responsibility center

Question 17

how many types of responsibility centers

Answer 17

4

Question 18

4 types of responsibility centers

Answer 18

1. cost center
2. revenue center
3. profit center
4. investment center

Question 19

(which of the 4 types of responsibility centers is this)
accountable for costs only

Answer 19

cost center
(chick fil a example: training and development department
Metric: training cost per employee)

Question 20

(which of the 4 types of responsibility centers is this)
accountaible for revenues only

Answer 20

revenue center
(chick fil a example: drive thru team
Metric: drive thru sales)

Question 21

(which of the 4 types of responsibility centers is this)
accountable for revenues and costs

Answer 21

profit center
(chick fil a examples: individual restaurant
Metric: ner operating profit of that location)

Question 22

(which of the 4 types of responsibility centers is this)
accountable for investments, revenues, and costs

Answer 22

investment center
(chick fil a examples: corporate headquarters
Metric: ROI = operating income / assets invested)

Question 23

is a degree of influence a specific manager has over costs, revenues or related items for which he or she is responsible

Answer 23

controllability

Question 24

is any cost primarily subject to the influence of a given responsibility center manager for a given period

Answer 24

controllable cost

Question 25

responsibility accounting helps managers to

Answer 25

first focus on obtaining information for what they are responsible for as opposed to blaming in the organization

Question 26

the fundamental purpose of responsibility accounting is

Answer 26

to enable future improvement

Question 27

budgets, couple with responsibility accounting, provide ____ to top managers about the performance relative to the budget of different responsibility center managers

Answer 27

feedback

Question 28

budgets offer feedback in the form of

Answer 28

variances

Question 29

variances provide managers with

Answer 29

- early warning of problems - a basis for performance evaluation - a basis for strategy evaluation

Question 30

5 step decision making process

Answer 30

1. Identify the problems and uncertanties 2. Obtain information 3. Make predictions about the future 4. Make decisions by choosing among alternatives 5. Implement the decision, evaluate performance, and learn

Question 31

6 steps in preparing an operating budget

Answer 31

1. Prepare the revenues budget 2. Prepare the production budget 3. Prepare the direct materials usage and purchases budget 4. Prepare the direct manufacturing labor costs budget 5. Prepare the manufacturing overhead costs budget 6. Prepare the ending inventories budget