8–1 What is a budget? What is budgetary control?

Budget is a financial plan of expenses or revenue that will be used or get in a specific amount of
time. Budgetary control is when the actual outcome are being compared to the budget plan.

8–2 Discuss some of the major benefits to be gained from budgeting.

a) It makes the management's plan interconnect.
b) Allocating of resources will be more effective and efficient.
c) It makes the actual execution easier.

8–3 What is meant by the term responsibility accounting?

It is a process wherein persons are being responsible to each responsible centers.

8–4 What is a master budget? Briefly describe its contents.

Master budget is a comprehensive financial plan that covers all the budgets. It covers:
a) A sales budget, including a schedule of expected cash collections.
b) A production budget (a merchandise purchases budget would be used in a merchandising
company).
c) A direct materials budget, including a schedule of expected cash disbursements for
purchases of materials.
d) A direct labor budget.
e) A manufacturing overhead budget.
f) An ending finished goods inventory budget.
g) A selling and administrative expense budget.
h) A cash budget.
i) A budgeted income statement.
j) A budgeted balance sheet.

8–5 Why is the sales forecast the starting point in budgeting?

Because the sales budget are related to the selling and administrative function of the
organization. It greatly affects the production budget and it brings a domino effect.
8–6 “As a practical matter, planning and control mean exactly the same thing.” Do you
agree? Explain.
I do not agree. Planning is about developing the goals and objectives while controlling is about
ensuring that the planned ideas are being properly executed.

8–7 Why is it a good idea to create a “Budgeting Assumptions” tab when creating a master
budget in Microsoft Excel?
Budgeting Assumptions make things easier. It answers the "what-ifs" of the budgets that can help
to see things clearer and more simple.

8–8 What is a self-imposed budget? What are the major advantages of self-imposed budgets?
What caution must be exercised in their use?
A self-imposed budget or participative budget is a budget that is prepared with the full
cooperation and participation of managers at all levels.
Self-imposed budgets have a number of advantages:
1. Individuals at all levels of the organization are recognized as members of the team
whose views and judgments are valued by top management.
2. Budget estimates prepared by front-line managers are often more accurate and reliable
than estimates prepared by top managers who have less intimate knowledge of
markets and day-to-day operations.
3. Motivation is generally higher when individuals participate in setting their own goals
than when the goals are imposed from above. Self-imposed budgets create commitment.
4. A manager who is not able to meet a budget that has been imposed from above
can always say that the budget was unrealistic and impossible to meet. With a selfimposed
budget, this claim cannot be made.
Self-imposed budgeting has two important limitations. First, lower-level managers
may make suboptimal budgeting recommendations if they lack the broad strategic perspective
possessed by top managers. Second, self-imposed budgeting may allow lower-level
managers to create too much budgetary slack.

8–9 How can budgeting assist a company in planning its workforce staffing levels?
When the budget are being met, employees can have more benefits. Budgeting means planning
and one of the key factors to achieve those plans are the manpower needed. A well properly
compensated workforce can achieve higher achievements.

8–10 “The principal purpose of the cash budget is to see how much cash the company will
have in the bank at the end of the year.” Do you agree? Explain.

No, cash budget is more than the end result of cash in the bank at the end year. Cash budget
shows the beginning balance, the outflow and inflow of cash that can help in loans and etc.