DM purchase budget & DM

2 DM budgets
usage budget

3 major sections of financial cash available, cash

budgets disbursement & financing

1. sales budget
3 steps to financial budgets 2. production budget
3. cash budget/ pro forma financial statements

4 different names for master static budget, annual business plans,

budgets profit planning, or targeting budgets

Authoritative standards are set

management
exclusively by who?

The basic difference between a master Based on one specific level of production
budget and a flexible budget is that a and a flexible budget can be prepared for
master budget is: any production level within a relevant range.

A budget committee includes

senior management
members of who?

= budgeted sales + desired

Budgeted production =
ending inventory - beg inventory

beg period cash & cash collected

Cash available has what 2
through current period cash payments
balances? and collection of prior periods A/R

Cash available has what 2

...
balances?
The cash budget must be prepared
before you can complete the:
Forecasted balance sheet.

The cash budget provides information external financing, not internal

concerning the need for ? financing.

Cash disbursement budgets noncash operating expenses

eliminate what? such as depreciation

cash paid for current period expenses &

Cash disbursements are
cash paid on A/P / accural from prior
concerned with what 2 balances? periods

Cash disbursement uses what

actual, not applied
kind of overhead and not what?

a characteristic of a flexible Provides budgeted numbers

budget? for various activity levels.

COGS = COGM - EI FG + BI FG

Companies in what type of industry may

mass production and service
use a standard cost system for cost
control? (2) industry

Cost of DM to be purchases = units of DM to be purchased

for the period = for the period X cost per unit

work performed by employees with

currently attainable standards represent
appropriate training and experience but
costs that result from what?
without extraordinary effort
 A flexible budget provides cost allowances for
the difference between a flexible
different levels of activity whereas a static
budget and a static budget is correct? budget provides costs for one level of activity.

disadvantage of participative
takes more time
budgeting?

BI at cost + purchases at cost -

DM usage =
EI at cost

Do you evaluate current

yes
conditions for budget purposes?

Factory overhead is applied to

inventory
what?

Cash and capital purchases budgets.

The financial budget process
Balance sheet and statement of cash
includes: flows.

Flexible budgets are highly dependable fixed and variable costs and the
on the accurate identification of what? determination of the relevant range

The goals and objectives upon which an

A combination of financial, quantitative,
annual profit plan is most effectively
and qualitative measures.
based are:

How long is the master

normally one year or less
budget period?

The information contained in a cost of Materials used, direct labor, overhead

goods manufactured budget would applied, and work-in-process
most directly relate to the: inventories budgets.
 anticipate cash flows so that excess cash
The main reason for preparing
can be invested and to minimize the
a cash budget is to ? need for interim financing.

Master budgets are best when

flexible budgets
combined with what?

Master budgets are confined

one year, single level activity
to what?

Master budgets document short term operating

specific what? performance goals for a period

Operating income using a

= (units X CM) - Fixed costs
flexible budget =

Participative standards are set management and employees who

by who? are accountable to those standards

the sales budget (or forecast), with

The production budget is
modification for increases or decreases
based on ? in inventory levels.

Production budget is made up of the

amounts spent for what 3 items?
DL, DM, & overhead

Pro forma financial statements are part

of the budgeting process. Normally, the Statement of cash flows.
last pro forma statement prepared is:

Required loan $ to main cash

= beg cash + cash collections from sales - cash disbursement for
purchases and operating expense = computed ending cash -

requirements =
cash requirements to sustain operations = working capital loan to
maintain cash requirements
 Standards are what kind of
per-unit
budget?

Static budgets thus include budgeted costs for budgeted

what? output.

= budgeted production X hours

Total wages = required to produce each unit = total
number of hours needed X hourly rate

Units of DM to be purchases = units of DM needed for a

for the period = production period + desired EI - BI

What is most useful when risk

Expected value.
is being prioritized?

what is the order in which the four Sales, production, direct materials
types of budgets must be prepared? purchases, cash disbursements.

What type of budget is the last budget

to be produced during the budgeting cash
process?

Which budget is the foundation

sales budget
for the entire budget process?

Which must be prepared first,

I/S
I/S or B/S?