Question

Pick three of the key terms that appears and briefly discuss it using your own words. Your response must consist of at least three sentences.

Key Terms:

Administrative expense budget

Budget committee

Budget director

Budgetary slack

Budgets

Capital expenditures budget

Cash budget

Continuous budget

Control

Controllable costs

Direct labor budget

Direct materials purchases budget

Dysfunctional behavior

Effectiveness

Efficiency

Ending finished goods inventory budget

Feature costing

Financial budgets

Flexible budget

Flexible budget variances

Goal congruence

Incentives

Incremental approach

Marketing expense budget

Master budget

Myopic behavior

Operating budgets

Overhead budget

Participative budgeting

Production budget

Pseudoparticipation

Research and development expense budget

Rolling budget

Sales budget

Static budget

Variable budget

Zero-base budgeting

Control limits

Currently attainable standards

Direct labor efficiency variance (LEV)

Direct labor rate variance (LRV)

Direct materials price variance (MPV)

Direct materials usage variance (MUV)

Favorable (F) variance

Fixed overhead spending variance

Fixed overhead volume variance

Ideal standards

Kaizen standards

Mix variance

Price (rate) variance

Price standards

Quantity standards

Standard bill of materials

Standard cost per unit

Standard cost sheet

Standard hours allowed

Standard quantity of materials allowed

Total budget variance

Unfavorable (U) variance

Unit standard cost

Usage (efficiency) variance

Variable overhead efficiency variance

Variable overhead spending variance

Yield variance

Answer 1

• You have asked for 3 terms.
• Term #1: Cash Budget

>Cash Budget is prepared based on the estimate of cash that will be received and the cash that will be disbursed.

>It is also prepared to figure out if there will be any shortfall or deficit in the availability of Cash Balance.

>Cash Budget is prepared for future period(s)

>It contains particulars like beginning cash balance, Cash received from sales, Cash paid for expenses, Cash received from loans, ending Cash balance.

• Term #2: Direct labor Efficiency Variace (LEV)

>This variance refers to the difference between Standard Cost and Actual Cost as a result of difference between actual hours worked and standard hours.

>The formula for calculating LEV = (Standard hours for actual output – Actual hours worked) x Standard rate per labor hour.

>If above result is Positive, the Variance is a Favourable Variance, otherwise, the same is an Unfavourable Variance.

>This Variance is used in Variance Analysis to know how much has the ‘efficiency’ of labor force has led to the difference between budgeted standard cost and actual cost.

• Term #3: Production Budget

>Production Budget is also prepared for future period(s).

>It deals with the quantity of units to be produced in future, based on certain estimates.

>It forms the basis for Direct material Budget, Direct Labor Budget, etc

>The resultant figure depends on various factors like Budgeted Sales, Quantity of ending inventory desired, Beginning inventory.

>The format is as follows:

	Jan	Feb	Mar
Budgeted units to be sold	XXX	XXX	XXX
Add: Desired ending Inventory	XXX	XXX	XXX
Total needs	XXX	XXX	XXX
Less: Beginning Inventory	XXX	XXX	XXX
Units to be produced	XXX	XXX	XXX