Short-Answer Questions What are three purposes of budgeting? What are the purposes of a master, planned operating, and financial budget?

Short-Answer Questions

1. What are three purposes of budgeting?
2. What are the purposes of a master, planned operating, and financial budget?
3. How does the management by exception concept relate to budgeting?
4. What are five basic principles, which, if followed, should improve the probability of preparing a meaningful budget? Why is each important?
5. Define and explain a budget variance.
6. What are the two major budgets in the master budget? Which should be prepared first? Why?
7. Distinguish between a master budget and a responsibility budget.
8. The budget established at the beginning of a given period carried an item for supplies expense in the amount of $40,000. At the end of the period, the supplies used amounted to $44,000. Can it be concluded from these data that there was an inefficient use of supplies or that care was not exercised in purchasing the supplies?
9. Management must make certain assumptions about the business environment when preparing a budget. What areas should be considered?
10. Why is budgeted performance better than past performance as a basis for judging actual results?