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Strategy and the master budget
Ch. 10
26
Accounting
Undergraduate 4
04/18/2016

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Cards

Term
activity-based budgeting (ABB)
Definition
A budgeting process that is based on activities and associated activity costs to support production and sales; an extension of the traditional form of activity-based costing (ABC)
Term
budget
Definition
A detailed plan for the acquisition and use of financial and other resources over a specified period of time—for example, a year, a month, or a quarter
Term
budgetary slack
Definition
The difference between budgeted performance and expected performance; a “cushion” managers intentionally build into budgets to help ensure success in meeting the budget
Term
budgeting
Definition
The process of preparing one or more budgets
Term
capital budgeting
Definition
A process of identifying, evaluating, selecting, and controlling an organization’s capital investments (i.e., its long-term projects and programs)
Term
cash budget
Definition
A schedule depicting the effects on cash of all budgeted activities
Term
direct materials purchases budget
Definition
A budget that shows the physical amount and cost of planned purchases of direct materials
Term
direct materials usage budget
Definition
A plan that shows the amount and budgeted cost of direct materials required for planned production
Term
financial budgets
Definition
Budgets that identify and relate to sources and uses of funds for planned operations and capital expenditures
Term
fixed-performance contract
Definition
An incentive compensation plan whereby compensation (reward) is a function of actual performance compared to a fixed (budgeted) target
Term
gaming the performance measure
Definition
Non-value-adding actions taken by managers to improve indicated performance
Term
goal congruence
Definition
The consistency between the goals of the firm, its subunits, and its employees. It is achieved when the manager acts independently in such a way as to simultaneously achieve personal objectives and those of top management
Term
kaizen budgeting
Definition
A budgeting approach that incorporates continuous improvement expectations in the budget
Term
long-range plan
Definition
A plan that identifies actions required during the 5- to 10-year period covered by the plan to attain the organization’s strategic goals
Term
manufacturing cells
Definition
A set of machines, typically laid out in the form of a semicircle, needed to produce a particular product or part
Term
master budget
Definition
An aggregation of all subunit budgets into an integrated plan of action for the budget period
Term
merchandise purchases budget
Definition
A budget that shows the amount (and cost) of merchandise a firm plans to purchase during the budget period
Term
operating budgets
Definition
Plans for all phases of operation, including production, purchasing, personnel, and marketing budgets
Term
practical capacity
Definition
Theoretical capacity reduced by normal output losses due to personal time, normal maintenance, and so on; the measure of capacity used to estimate cost-driver rates under ABC and TDABC systems
Term
production budget
Definition
A budget showing planned output (production) for an upcoming period
Term
relative performance contracts
Definition
Contracts that reward managers for performance based on a comparison of actual results with specified benchmarks, not budgeted (fixed) targets; contrast with fixed-performance contracts
Term
rolling financial forecast
Definition
A constant planning horizon with the use of regularly updated forecasts
Term
sales budget
Definition
A schedule showing forecasted sales, in units and dollars, for an upcoming period
Term
strategic budget expenditures
Definition
Planned spending on projects and initiatives that lead to long-term value and competitive advantage
Term
time-driven activity-based budgeting (TDABB)
Definition
A method of budget preparation used in conjunction with a time-driven activity-based cost (TDABC) system
Term
zero-base budgeting (ZBB)
Definition
A budgeting process that requires managers to prepare budgets each period from a base of zero
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