Management Accounting Ch09

Budgeting is the process of establishing company-wide objectives that serve as a deterrent to waste and inefficiency.

The effectiveness of the budget program is directly related to its acceptance by all levels of management.

Budgeting always has the effect on human behavior of inspiring managers to higher levels of performance.

One disadvantage of budgeting is that it does not facilitate the coordination of activities within a business.

The sales budget is the first budget prepared and each of the other budgets depends on it.

The quantities of direct materials in the direct materials budget are derived from the formula: Desired Ending Direct Materials Units + Direct Materials Units Required for Production – Beginning Direct Materials Units = Required Direct Materials Units to be Purchased.

The manufacturing overhead budget shows only the expected indirect labor costs for the year.

The budgeted income statement indicates the expected profitability of operations for the next year and provides the basis for evaluating company performance.