Flashcards
Budgeting
Cards in this deck (18)
- 1A Budget is ...... a short term plan for a defined period of time (usually a year and in financial terms)
- 2What valid reasons are there for using budgets?1. Provide a basis for control
2. Provide a basis for co-ordingating various sections and depts.
3. Provide a means for authorising activities
4. Help with planning & resource activities
5. Can be motivational and lead to improvements - 3What are the steps for the 'Budgeting and Budgetary Control' Process1. Prepare Annual Budgets
2. Perform and collect actual performance information
3. Respond to variances and exercise control
4. Revise plans (and budgets) if needed - 4The first four stages of a typical budget cycle are ...1. Establish responsibility for the budget setting process
2. Communicate budget guidelines
3. Identify the limiting factor
4. Prepare the budget for the area of the limiting factor - 5The final five stages of a typical budget cycle are ...5. Prepare budgets for all other areas
6. Review and co-ordinate budgets
7. Prepare the master budges (SPL, SFP and Cash Budget)
8. Communicate the budgets to all interested parties
9. Monitor actually performance against budgets - 6What are the two forms of Budgets?Master Budget
Operational Budget - 7The Production Budget (in Units) =Sales Budget + Closing Inventory - Opening Inventory
- 8Materials Purchases Budget (in Units) =Materials Usage Budget + Closing Inventory of Materials - Opening Inventory of Materials
- 9Raw Materials Usage Budget =Production Budget * Raw Materials per Unit * Cost of Raw Materials per Unit
- 10Direct Labour Budget =Production Budget * Direct Labour Hours per Unit * Direct Labour Cost per Unit
- 11Production Cost Budget =Raw Materials Usage Budget + Direct Labor Budget + Production Overhead
- 12What is Top Down BudgetingBudget set by top management and imposed on operational management
More likely to meet strategic objectives however may not be accepted by budget managers - 13What is Bottom Up BudgetingBudget set by operational management and communicated upwards.
- 14What is incremental budgetingNew Budget based on last years performance with adjustment for growth/inflation
Quick & easy to implement. However may not always be relevant and past inefficiencies are preserved - 15What is Zero-Based BudgetingEach year budget starts at zero (previous years ignored)
Can lead to significant efficiencies due to inquisitiveness and justification, however are time-consuming and expensive - 16What is Activity Based BudgetingBudgets produced (using ABC methods) according to cost-driving activity, not functional areas
Complex and time consuming however can provide more relevant information - 17What is a Rolling BudgetContinuously updated as year progresses, for the year ahead (always 12 months budget available).
- 18What is a Phased BudgetBudget broken down month by month to when revenues and costs are expected to occur.
Beneficial to managers when revenues don't occur evenly
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- Bachelors Degree Introduction to Accounting (Unit 9 - Budgeting and Cash Budgets) Flashcards on Budgeting, created by Jorden Allcock on 09/03/2016.
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- Jorden Allcock
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