This document contains 14 questions related to budgeting and answers provided by someone named Yuliyana. The questions cover topics such as defining budgets and how they are used for planning and control, reasons for budgeting, types of budgets like master budgets and operating budgets, how sales forecasts relate to sales budgets, how all budgets depend on the sales budget, impacts of learning curves and flexibility on budgeting, cash budgets for small businesses, and static versus flexible budgets.

1. Name : Yuliyana
NPM : 1642006
Santi Yopie , SE., MM., CMA., Project+., CIBA., CPA., BKP.
2018

2. QUESTIONS FOR W R ITING A ND
DISCUSSION
1. Define budget. How are budgets used in planning?
2. Define control. How are budgets used to control?
3. Discuss some of the reasons for budgeting.
4. What is the master budget? An operating budget? A financial budget?
5. Explain the role of a sales forecast in budgeting. What is the difference
between a sales forecast and a sales budget?
6. All budgets depend on the sales budget. Is this true? Explain.

3. QUESTIONS FOR W R ITING A ND
DISCUSSION
7. Suppose that the vice president of sales is a particularly pessimistic individual.
If you were in charge of developing the master budget, how, if at all,
would you be influenced by this knowledge?
8. Suppose that the controller of your company’s largest factory is a particularly
optimistic individual. If you were in charge of developing the master
budget, how, if at all, would you be influenced by this knowledge?
9. What impact does the learning curve have on budgeting? What specific
budgets might be affected? (Hint: Refer to Chapter 3 for material on the
learning curve.)

4. QUESTIONS FOR W R ITING A ND
DISCUSSION
10. While many small firms do not put together a complete master budget,
nearly every firm creates a cash budget. Why do you think that is so?
11. Discuss the shortcomings of the traditional master budget. In what situations
would the master budget perform well?
12. Define static budget. Give an example that shows how reliance on a static
budget could mislead management.
13. What are the two meanings of a flexible budget? How is the first type of
flexible budget used? The second type?
14. What are the steps involved in building an activity-based budget? How do
these steps differentiate the ABB from the master budget?

5. ANSWER 1
 Budgets are the quantitative expressions of plans. Budgets are
used to translate the goals and strategies of an organization into
operational terms.

6. ANSWER 2
Control is the process of setting standards,receiving feedback on
actual performance,and taking corrective action whenever actual
performance deviates from planned perfor-mance. Budgets are
standards, and they are compared with actual costs and revenues to
provide feedback.

7. ANSWER 3
 Budgeting forces managers to plan
 pro-vides resource information for decision making
 sets benchmarks for control and evaluation
 and improves the functions of communication and coordination

8. ANSWER 4
 A master budget is a set of interconnected budgets of sales, production costs,
purchases, incomes, etc. and it also includes pro forma financial statements. A budget is a
plan of future financial transactions. A master budget serves as planning and control tool
to the management since they can plan the business activities during the period on the
basis of master budget. At the end of each period, actual results can be compared with
the master budget and necessary control actions can be taken.
 Operating budgets are concerned with the income generating activities of a firm.
 Financial budgets are concerned with the inflows and outflows of cash and with
planned capital expenditures.

9. ANSWER 5
The sales forecast is a critical input for building the sales budget.
However, it is not necessarily equivalent to the sales budget.Upon
receiving the sales forecast, management may decide that the firm can
do better than the forecast indicates. Consequently,actions may be
taken to increase the sales potential for the coming year (e.g.,
increasing advertising). This adjusted forecast then becomes the sales
budget.

10. ANSWER 6
Yes. All budgets are founded on the sales budget. Before a production
budget can be created, it must have the planned sales. The
manufacturing budgets, in turn, depend on the production budget.
The same is true for the financial budgets since sales is a critical input
for budgets in that category.

11. ANSWER 7
If the vice president of sles is a pessimistic individual, one might
expect that he or she would underestimate sales for the coming year.
In your role as head of the budget process, you might increase the
budgeted sales figure to takeout the individual bias

12. ANSWER 8
If the factory controller is a particularly optimistic
individual, it is possible that the costs for direct
material, direct labor, and overhead could be
underestimated

13. ANSWER 9
The learning curve is the relationship between unit costs of
production and increasing number of units . As time goes on , the
number of unit produced in a time period will increase and the cost
per unit will decrease. The budgets affected will be the direct materials
purchases budget, the direct labor budget, and the overhead budget

14. ANSWER 10
The preparation of cash budget is an important management task. While some
small business may be able to survive for a time without budgetting, savvy business
owners will realize its importance. A cash budget can protect a company from
being unprepared for seasonal fluctuations in cash flow or prepare a company to
take advantage of unexpected quantity discounts from suppliers.
Many small businesses find it helpful to prepare monthly cash budgets and to
analyze any variances between the budgeted and actual amount on a monthly basis .
This enables small business owners and managers to stay on top of any unexpected
cash uses.

15. ANSWER 11
Criticisms of the master budget can be classified into several
categories :
The traditional master budget is :
1. Department oriented and does not recognize the
interdependencies among department
2. Static, not dynamic
3. Results, not process, oriented

16. ANSWER 12
A static budget is fixed for the entire period covered by the budget, with no changes
based on actual activity. The problem with a static budget is the absence of flexibility
to adjust to unpredictable changes. In industry, fixed budgets are appropriate for those
departments is determined by management decision rather than by sales volume. Most
administrative, general marketing , and even manufacturing management departments
are in this category. Fixed appropriations for specific projects or programs not
necessarily completed in the fiscal period also become fixed budgets to the extent that
they will be expended during the year. Examples are ppropriations for capital
expenditures, major repairs projects and specifics advertising or promotional
programs

17. ANSWER 13
1. A flexible budget shows costs for varying levels of activity
 Useful for planning
 Useful for sensitivity analysis
2. A flexible budget can be constructed for the actual level of acitivity
 Useful for control
 Compares actual costs to budgeted amounts for actual level of acitivity

18. ANSWER 14
The activity based budget begins with output and then determines the
resources necessary to create thatoutput. Ideally, the organization
translates its vision into strategy with definable objectives in orderto
create value . Ways of creating value include growing market share,
improving sales rate, reducing expenses, increasing profit margin,
increasing productivity, and reducing the costs of capital. We can see how
clearly ABB is related to performance evaluation and, in particular, to
economic value added