Chapter 9

Question 1

Budgeting (1)

Answer 1

• detailed plan for the future that is typically expressed in quantitative terms

Question 2

Budgetary control (1)

Answer 2

• use of budget to control firms activities

Question 3

Master budget (1)

Answer 3

• summarize a company’s plan (specific target, production, distribution, administrative and financing activities)

Question 4

Advantage of budgeting (6)

Answer 4

• communicate plan
• define goal and objective
• coordinate activities
• mean of allocating resources
• uncover potential bottleneck
• think about and plan for the future

Question 5

Participative budget (2)

Answer 5

• preparing budgets in which managers prepare their own budget estimates
• prepared with the full cooperation and participation of managers at all levels

Question 6

Advantages of participative budget (4)

Answer 6

• individuals at all levels are recognized as members of the team
• estimates prepared by front line managers are then accurate and reliable than estimates prepared by top managers, who have less detailed of day to day operations
• motivation is generally higher when individuals participate in setting their own goals
• managers unable to meet budget has been impose from above can also say that budget is unrealistic

Question 7

Zero based budgeting (1)

Answer 7

• managers require to explain all budgeted items (time consuming and costly)

Question 8

Master budget (10)

Answer 8

• sale budget
• production budget
• DM purchases budget
• DL budget
• MOH budget
• End FG inventory budget
• Sell and Admin expense budget
• Cash budget
• Budgeted income statement
• Budgeted balance sheet

Question 9

Sales budget (2)

Answer 9

• starting point in preparing master budget

- total budgeted sales = budget sales unit x budget selling price

Question 10

Schedule of expected cash flow

Answer 10

• detail plan of how cash resources will be acquired and use over some specified time

Question 11

Steps of cash collection (3)

Answer 11

• cash sales of this month
• credit sales of previous month
• total collection

Question 12

Step to Production budget (5)

Answer 12

• budgeted sales in unit
• add desired end inventory
• total needs
• less beginning inventory
• required production

Question 13

Steps to DM purchase budget (5)

Answer 13

• raw material
• add desired ending inventory
• total