Planning

Question 1

What is a master budget?

Answer 1

Static budget for the company as a whole
Summarizes:
Operating Budget (income statement, sales, SGA)
and
Financial Budget (capital expenditures, cash, balance sheet, cash flows)

Question 2

What is a static budget?

Answer 2

Analyzes conditions for a specific level of activity

Question 3

What are the steps in strategic planning?

Answer 3

1. Prepare mission statement - identifies purpose and highest values
2. Identify goals and objectives to work towards mission
3. Identify specific performance measures with each goal and objective
4. Design tactics - specific actions used to meet goals

Question 4

What is Kaizen budgeting?

Answer 4

Managers make cost projections that incorporate their expectations for future improvements

Question 5

What are the steps in preparing a master budget?

Answer 5

1. Estimate future sales volume
2. Use sales volume to estimate future revenue
3. Use collection histories to estimate future collections
4. Estimate COGS based on number of units sold
5. Use current FG inventory, budgeted EI, and COGS to estimate number of units to manufacture
6. Use units manufactured to estimate future DM, DL and OH costs
7. Use DM needs, current DM inventory, and budgeted EI to estimate future purchases
8. Use purchase terms to estimate future payments
9. Complete cash flow budget

Question 6

What is formula for budgeted material purchases?

Answer 6

Units sold
\+ Budgeted increase in FG
-  Budgeted decrease in FG
= Units to be manufactured
x Units of raw material per unit of FG
= Units of raw material needed for production
\+ Budgeted increase in raw materials
-  Budgeted decrease in raw materials
= Budgeted raw materials purchases

Question 7

What is formula for production budget?

Answer 7

Budgeted sales
\+ Desired FG EI
= Total needs
- FG BI
= Number of units to be produced

Question 8

What is the order of preparing budgets?

Answer 8

Sales 
Production
DM Purchases
Cash Disbursements
Budgeted F/S

Question 9

What is a flexible budget?

Answer 9

Can be adjusted for changes in volume

y =a + (b x X)