1. Define 'budget'.

2. List and briefly explain the 5 benefits of budgeting.

3. Complete the following statements a-d regarding the operating budget elements of

the master budget:

a. The first step in preparing the master budget is the ____________ budget.

b. The ____________ _______________ budget shows dollar amounts estimated to be

spent to purchase additional plant assets and any cash expected to be received from

plant asset disposals.

c. A ___________ budget shows expected cash inflows and outflows during the budget

period.

d. A merchandiser usually expresses a _____________ ______________ budget in

both units and dollars.

4. For each of the following items a-e, indicate 'yes' of the item is an important

budgeting guideline or 'no' if it is not.

_____ a. Employees should have the opportunity to explain differences from budgeted

amounts.

_____ b. Budgetary goals should be attainable.

_____ c. Goals in a budget should be set low so targets can be reached.

_____ d. Budgets should include 'budgetary slack'.

_____ e. Employees impacted by a budget should be consulted when it is prepared