9.2 Types of budgets

• A master budget integrates all individual budgets into a comprehensive plan
• What type of budget adjusts to changes in activity levels?

  Flexible budget
• A fixed budget remains unchanged regardless of activity levels.


  True
• Match the sales budget component with its description:

  Sales Volume ↔️ Quantity of products or services expected to be sold

  Sales Price ↔️ Price per unit of product or service

  Total Revenue ↔️ Sales volume multiplied by sales price
• Total revenue in a sales budget is calculated by multiplying sales volume by sales price
• The Sales Budget helps organizations plan and allocate resources effectively.


  True
• Steps in creating a Production Budget

  1️⃣ Forecast sales targets from the Sales Budget

  2️⃣ Determine production units needed

  3️⃣ Estimate direct materials required

  4️⃣ Calculate direct labor costs

  5️⃣ Include manufacturing overhead
• The Direct Materials Budget ensures production plans are met efficiently.


  True
• A flexible budget adjusts to changes in activity levels.


  True
• The Master Budget provides an overarching plan, while Functional Budgets focus on specific areas
• Match the components of a Production Budget with their descriptions:

  Production Units ↔️ Quantity needed to meet sales

  Direct Materials ↔️ Raw materials for production

  Direct Labor ↔️ Labor hours and costs

  Manufacturing Overhead ↔️ Indirect costs like factory rent
• "Manufacturing Overhead" includes indirect costs such as factory rent, utilities, and maintenance
• What is the primary purpose of the Production Budget?

  Forecast production requirements
• What does a direct materials budget estimate?

  Quantity and cost of materials
• What does a direct labor budget estimate?

  Quantity and cost of labor
• What does a manufacturing overhead budget estimate?

  Indirect production costs
• The manufacturing overhead budget helps organizations accurately forecast and allocate resources for production activities.


  True
• The COGS Budget is essential for calculating the gross profit margin and overall financial performance
• A master budget integrates all individual budgets into a comprehensive plan.


  True
• A fixed budget remains unchanged regardless of activity levels
• The direct labor hours in a direct labor budget represent the total number of hours needed to produce the forecasted output.
• The direct labor budget helps organizations ensure they have the right number of workers with the appropriate skills.


  True
• Match the type of overhead with its description:

  Fixed Overhead ↔️ Remains constant regardless of production volume

  Variable Overhead ↔️ Changes with production volume

  Semi-Variable Overhead ↔️ Has both fixed and variable elements
• The manufacturing overhead budget estimates the indirect costs associated with production.
• What is a budget defined as?

  Quantified plan of action
• A fixed budget remains unchanged regardless of activity levels.


  True
• Functional budgets focus on specific business functions
• What is the purpose of a master budget?

  Comprehensive plan
• What does the sales volume component of a sales budget represent?

  Expected sales quantity
• The Sales Budget is a forecast of future sales volume and revenue
• What does the Production Budget forecast?

  Production required to meet sales
• Match the components of a Direct Materials Budget with their descriptions:

  Direct Materials Required ↔️ Quantity and cost needed for production

  Direct Materials to Purchase ↔️ Quantity and cost to buy
• A budget is a quantified plan of action that helps an organization allocate resources
• Which type of budget remains unchanged regardless of activity levels?

  Fixed Budget
• Steps in creating a Production Budget

  1️⃣ Forecast sales targets from the Sales Budget

  2️⃣ Determine production units needed

  3️⃣ Estimate direct materials required

  4️⃣ Calculate direct labor costs

  5️⃣ Include manufacturing overhead
• What does the term "Direct Labor" refer to in a production context?

  Labor hours and costs
• The Production Budget helps organizations plan resources to meet sales targets efficiently.


  True
• The Production Budget includes forecasts for production units, direct materials, direct labor, and manufacturing overhead
• A direct materials budget helps organizations ensure production plans are met efficiently.

  True
• The direct labor rate in a direct labor budget refers to the hourly wage rate for the direct labor workforce