Essentials of Effective Budgeting

Which of the following is not a benefit of budgeting?

• Management can plan ahead.

• An early warning system is provided for potential problems.

• It enables disciplinary action to be taken at every level of responsibility.

• The coordination of activities is facilitated.

The essentials of effective budgeting do not include:

• Top-down budgeting.

• Management acceptance.

• Research and analysis.

• Sound organizational structure.

Use this list of terms to complete the sentencpres that follow.

• A sales forecast shows potential sales for the industry and a company’s expected share of such sales.

• Operating budgets are used as the basis for the preparation of the budgeted income statement.

Use this list of terms to complete the sentences that follow.

• Lower-level managers are more likely to perceive results as fair and achievable under a participative budgeting approach.

• Financial budgets focus primarily on the cash resources needed to fund expected operations and planned capital expenditures.

What is the first bidget prepared derived from?

• Sales forecast

• Production forecast

• Direct materials forecast

What is the cost per pound of raw materials for Rightride?

• $4

• $5

• $6

What is the total direct labor cost formula?

• Direct labor hours x hourly wage rate

• Direct materials cost + direct labor cost

• Sales price - variable costs

What is the expected manufacturing overhead costs for the budget period?

• Fixed and variable overhead costs

• Only fixed costs

• Only variable costs

What is the important end-product of the operating budgets?

• Budgeted income statement

• Sales budget

• Production budget

Each of the following budgets is used in preparing the budgeted income statement except the:

• Sales budget.

• Selling and administrative budget.

• Capital expenditure budget.

• Direct labor budget.