Cost Accounting – 12^th Edition

Ch 6 Terms

Activity-based budgeting (ABB) – budgeting approach that focuses on the budgeted cost of activities necessary to produce and sell products and services

Budgetary slack – the practice of underestimating budgeted revenues, or overestimating budgeted costs, to make budgeted targets more easily achievable

Cash budget – schedule of expected cash receipts and disbursements

Continuous budget – see rolling budget

Controllability – degree of influence that a specific manager has over costs, revenues, and related items for which he or she is responsible

Controllable cost – any cost that is primarily subject to the influence of a given responsibility center manager for a given period

Cost center – responsibility center where the manager is accountable for costs only

Financial budget – part of the master budget that focuses on the impact of operations and planned capital outlays on cash. It is made up of the capital expenditures budget, cash budget, budgeted balance sheet, and budgeted statement of cash flows.

Financial planning models – mathematical representations of the relationships among operating activities, financial activities, and other factors that affect the master budget

Investment center – responsibility center where the manager is accountable for investments, revenues, and costs

Kaizen budgeting – budgetary approach that explicitly incorporates continuous improvement during the budget period into the budget numbers

Master budget – expression of management’s operating and financial plans for a specified period (usually a year) and comprises a set of budgeted financial statements. Also called pro forma statements

Operating budget – budgeted income statement and its supporting budget schedules

Organization structure – arrangement of lines of responsibility within the organization

Pro forma statements – see budgeted financial statements

Profit center – responsibility center where the manager is accountable for revenues and costs

Responsibility accounting – system that measures the plans (by budgets) and actions (by actual results) of each responsibility center

Responsibility center – part, segment, or subunit of an organization whose manager is accountable for a specified set of activities

Revenue center – responsibility center where the manager is accountable for revenues only

Rolling budget – budget or plan that is always available for a specified future by adding a period (month, quarter or year) in the future as the period just ended is dropped. Also called continuous budget