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Key Terms

  • Budget: Financial plan for the future period
  • Master Budget: Comprehensive budget including operating and financial components
  • Operating Budget: Budget for revenues and expenses
  • Financial Budget: Budget for cash flows, capital expenditures, and balance sheet
  • Sales Budget: Forecast of sales volume and revenue
  • Production Budget: Plan for units to produce
  • Cash Budget: Plan for cash inflows and outflows
  • Static Budget: Budget based on single activity level
  • Flexible Budget: Budget that adjusts to actual activity levels
  • Rolling Budget: Continuously updated budget (always covers fixed period)
  • Standard Cost: Pre-determined cost based on expected prices and quantities
  • Variance: Difference between actual and budgeted/standard amounts
  • Variance Analysis: Comparison of actual results to standards/budget to identify differences
  • Favorable Variance: Actual results better than budget
  • Unfavorable Variance: Actual results worse than budget
  • Materials Price Variance: Difference due to price paid for materials
  • Materials Quantity Variance: Difference due to quantity of materials used
  • Labor Rate Variance: Difference due to wage rate paid
  • Labor Efficiency Variance: Difference due to hours worked
  • Budget Slack: Intentional padding of budgets
  • Scenario Planning: Creating multiple budget versions based on different assumptions
  • Participative Budgeting: Budgeting process involving lower-level managers