Daniel Aberle

4/12/2017
HW # 12

3. The essentials of effective budgeting are as follows. Budgeting depends on a sound organizational
structure, with authority and responsibility for all phases clearly defined. Budges must be based on
research and analysis so goals will be realistic and will contribute to the growth and profitability of a
company. Finally, the effectiveness of a budget depends on its acceptance by all levels of
management.

6. There are three differences between budgeting and long-range planning. First is time, budgets are
usually prepared for a month, but no more than a year, while long-range planning takes places over at
least 5 years. Second is emphasis, since budgeting focuses on achieving specific short-term goals. On the
other hand, long-range planning identifies long term goals, selects strategies to achieve those goals, and
develops policies and plans to implement the strategies. In long-range planning, management also
considers anticipated trends in the economic and political environment and how the company should
cope with them. The third difference is the amount of detail presented. Budgets can be very detailed,
while long-range plans contain considerably less detail. The data in long-range plans are intended more
for a review of progress toward long-term goals than as a basis of control for achieving specific results.
The primary objective of long-range planning is to develop the best strategy to maximize the company’s
performance over an extended future period.

10. The sales budget is prepared first in preparing the master budget. If the sales budget is inaccurate,
may adversely impact the net income by either under or overestimating demand. Underestimation will
result in lost revenues, while overestimation may result in overstocked inventories having to be sold at a
discount.

12.

Budget sales units 160,000

Add: Desired ending finish goods units 15,000

Less: Beginning finished goods units 20,000

Required production units 155,000