Question

1) What is the first budget that should be done and why?

2) Budgetary control is the use of budgets in controlling operations. What are the steps in budgetary control?

2) What is a static budget? Whys is a static budget is an appropriate basis for evaluating a manager’s effectiveness in controlling costs?

4) List the steps in preparing a flexible budget?

5)Responsibility reports differ from budget reports in two respects? State and explain each one.

6) There are three types of responsibility centers. Please list and define what each center does?

7) What costs are included in a performance report for a cost center?

8) What is a Controllable margin? What is the purpose of controllable margin?

9) What is the primary basis for evaluating the performance of the manager of an investment center? How is it calculated?

Answer 1

Since, multiple questions have been posted are unrelated to each other, I have answered the first one.

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1)

The first budget that should be prepared is the "Sales Budget". Sales budget is used to forecast the sales for a given period (such as for the next quarter or next six months or for the next year (s)). It includes information on the number of units expected to be sold during the period in question and the price at which such units will be sold. The use of these two factors helps in estimating the total revenue (estimated units*estimated selling price). This budget helps a company in estimating the sales that may take place in the near future and it is on the basis of this budget that the company can plan its purchases of raw materials (required to meet anticipated sales) and inventory requirements, estimate selling, general and administrative expenses (such as sales commission, marketing and advertising expenses, etc.) prepare cash collection (from sales), cash disbursement for purchases and other expenses schedule. Without sales budget, it is practically impossible to prepare any other budget. Therefore, sales budget is the first budget that should be done by any company implementing a budgeting process.