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Chapter 22 Master Budgets and Planning 1

Quick Check—Chapter 22

QC1
22-1. What are the major benefits of budgeting?
22-2. What is the main responsibility of the budget committee?
22-3. What is the usual time period covered by a budget?
22-4. What are rolling budgets?

QC2
22-5. What is a master budget?
22-6. A master budget (a) always includes a manufacturing budget specifying the units to
be produced; (b) is prepared with a process starting with the operating budgets and
continues with the capital expenditures budget and then financial budgets; or (c) is
prepared with a process ending with the sales budget.
22-7. What are the three primary categories of budgets in the master budget?
22-8. How do the operating budgets for merchandisers and manufacturers differ?
22-9. How does a just-in-time inventory system differ from a safety stock system?

QC3
22-10. In preparing a budgeted balance sheet, (a) plant assets are determined by analyzing the
capital expenditures budget and the balance sheet from the beginning of the budget
period, (b) liabilities are determined by analyzing the general and administrative expense
budget, or (c) retained earnings are determined from information contained in the cash
budget and the balance sheet from the beginning of the budget period.
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2 Chapter 22 Master Budgets and Planning
Guidance Answers to Quick Checks—Chapter 22
22-1. Major benefits include promoting a focus on the future;
providing a basis for evaluating performance; providing
a source of motivation; coordinating the departments of
a business; and communicating plans and instructions.
22-2. The budget committee’s responsibility is to provide
guidance to ensure that budget figures are realistic and
coordinated.
22-3. Budget periods usually coincide with accounting peri-
ods and therefore cover a month, quarter, or a year.
Budgets can also be prepared for longer time periods,
such as five years.
22-4. Rolling budgets are budgets that are periodically revised
in the ongoing process of continuous budgeting.
22-5. A master budget is a comprehensive or overall plan for the
company that is generally expressed in monetary terms.
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22-6. b
22-7. The master budget includes operating budgets, the capi-
tal expenditures budget, and financial budgets.
22-8. Merchandisers prepare merchandise purchases budgets;
manufacturers prepare production and manufacturing
budgets.
22-9. A just-in-time system keeps the level of inventory to a
minimum and orders merchandise or materials to meet
immediate sales demand. A safety stock system main-
tains an inventory that is large enough to meet sales de-
mands plus an amount to satisfy unexpected sales
demands and an amount to cover delayed shipments
from suppliers.
22-10. a