...one point I believed budgets were useless and not beneficial because i always seemed to deviate from the budget that was set. However, over time and as my expenses and lifestyle changed, i began to realize that budgets are very valuable and needed. My husband and I decided to began to become very strict about the budget we have set in place as it helps with our yearly expenses and travel and equips usp to be able to do what we want and need to do. I agree that at times I think a lot of individuals deviate from the set and assigned budget in order to justify a means for why we should and need to spend more money. I know personally, I had a budget just for shopping and I would always find a way to spend more on my credit card than I allotted myself. I would often tell myself that I just had to have a certain item(s) for a certain event or simply because I thought the item was cute and fashionable. Regardless of if I had the same item in a different color....
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...Budget Changes Budget Changes HCS 405 May 20, 2013 Budget Changes How might financial managers budget for unforeseen changes and improvements in information technology that require large capital outlays? A financial manager needs to have a portion of their budgets used as a state of credible advancements for all the systems in the hospital organization. In medical association, an information department consists of a lot of changes over a small period of time. A good facility will need to be familiar with the changes that occur within information technology and should have a set budget available to handle upgrades for the systems. Hospitals need to update their software system every couple of years. Many healthcare institutions will hire a third party company to be in charge of updating the hospital system with the latest information technology. Moreover, financial managers will require to take into consideration the benefits and cost, if the institution decides to transition to a newer system .The latest technology transition in the health care field is the adoption of ICD-10. This system will provide the following benefits: Financial managers must always have a part of their budget to be used as reference for possible upgrades of all the system in a medical...
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...Budget Changes HCS/405 July 29, 2013 Budget Changes Corporations need careful financial statements to achieve his or her objectives. Business’s carry out financial plans and assessments along with possible expenses for the profits on behalf of a precise phase to settle on the majority of well thought-out and efficient lines of attack for manufacturing the cash and changing material goods. Finances agree to industries identifying with command to his or her costs and to assign funds to make the most of proceeds. Therefore, agreeing and letting him or her show his or her work and profits to banks, shareholders, and financiers will include a diagram for everyplace that he or she is going too. Industries usually build up and complete his or her financial statement strategies every year, in a five- stage procedure recognizes the preparation series. First, corporations build up an intentional diagram that concentrates on his or her long-standing objectives and how to attain them. The layout of the graph on average takes in economic predictions and protects a five-year phase. Next productions arrange a once a year process set up that offers a comprehensive viewpoint for the upcoming year. Because things revolutionize after the year begins, companies change his or her tactics, companies sometimes give up his or her everyday ideas. The familiar charts get sudden and unforeseen modifications into deliberation. Businesses frequently build up calculations or unofficial predictions...
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...Flexible Budgets ACC/543 November 17, 2014 Differences between Master and Flexible Budgets There are two main differences between the master and the flexible budgets. The two budgets have different uses and they treat volume changes in different manners. The master budget is the official budget that management has decided to go with. It is their planned volumes, expenses, and revenues that were determined for the upcoming year. It is used as the starting point by which benchmarks are measured. It is the best estimate that the business has decided to go with based on the current facts at the time the budget was made. The master budget does not change after it has been put into place so it does not account for changes in volume. Flexible budgets change as estimates in volume change. It takes different levels of volumes and determines what the expected costs and revenues would be based on the rates budgeted in the master budget. Variable costs would remain the same per unit cost as in the master budget. This is important as a manager might think he is coming under budget when compared to the master budget but when compared to a flexible budget based on the new volume, he might be over budget. Fixed costs would also remain the same so the per unit cost for these would change as volume changed. This allows companies to say what their budgeted costs should be based on the new volume. Using spreadsheets, the company can make changes to the flexible...
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...Discuss the sequence in which the major components of the master budget are prepared. Why is it necessary to prepare the components in such a sequence? The Sequence for a master budget is as follows: A production budget, purchases budget, personnel budget, direct labor budget, overhead budget, selling and administrative budget, capital budget, and budgeted financial statements. Using this sequence to create a master budget a manager has assistance to align activities and resources allocations with organizational goals; it’s a vehicle to promote employee participation, cooperation, and department coordination. It's also a tool to enhance conduct of the managerial functions of planning, controlling, problems solving; basis on which to sharpen management's responsiveness to changes in both internal and external factors; and model that provides a rigorous view of future performance of a business in time to consider alternative measures. 7. Why is a firm’s production budget influenced by the finished goods inventory policy? The production budget follows from the sales budget and is based on information about the type, quantity, and timing of units to be sold. (A retail or service company would not prepare a production budget.) Sales information is combines with beginning and ending Finished Goods (FG) Inventory information so that managers can schedule necessary production. 8. Assume that in preparing the cash budget, the accountant discovers that a cash shortage will likely occur...
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...CASE STUDY Denison Specialty Hospital Denison Specialty Hospital is planning its master budget for the coming year. The budget will include operating, capital, cash, and flexible budgets. The hospital is noted for its three fine programs: Oncology (cancer), Cardia (heart), and Rhinoplasty (nose jobs). Part I. Section A The managers at Denison have been busy working. They have reviewed past records, considered changes in competition, the general economy, and overall medical trends. Using past changes and anticipated rates of medical inflation, they have also made a first attempt at setting their prices. Based on a thorough review and discussion of these data, they have projected that next year will have 240 patients. They expect 120 oncology patients, 80 cardiac patients, and 40 rhinoplasty patients. The charge, or list price, for Oncology patients will average $50,000. Cardiac patients will be charged an average of $40,000, and rhinoplasty, $25,000 per patient. However, those charges often are not the actual amount ultimately received. The amount the hospital receives depends on whether patients pay their own hospital bills or have health care insurance. Assume that private insurance companies pay the full charge or list price. However, Medicare and Medicaid have announced rates they will pay for the coming year as follows: Oncology patients $40,000, Cardiac patients, $30,000, Rhinoplasty $10,000. Self-pay patients are supposed to pay the full charge, but generally...
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...Health Care Budget An operating budget is a strategic initiative for the organizations financial plans over the course of the coming year. The operating budget works directly with the Statement of Activities (SOA) for a fiscal year to accomplish the organization financial goals. To produce an effective operating budget the organization needs to have knowledge of what financial management practices work best for the financial goals they are planning to use. Proper understanding of these concepts is vital for the operating budget to become successful for the upcoming year. Effective Financial Management Practices Effective financial management practices include several types of rules that an organization should follow to create a successful operating budget. Budgeting should focus on income first targeting the reliable income in the budget. Never filling those gaps with income projections to cover expenses can cause a deficit if your organization can not produce the income target within the year. Expenses should be lower than the dependable income total. Each department should be in agreement with this financial management practice. This leaves the additional programs and projects to be set in motion if the revenue allows additional funds (Hamilton, 2010). A financial management practices uses the beginning with the prior fiscal years total, and building the new upcoming year budget on those amounts. This takes calculating percentage of increases and decrease to determine...
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...Definition:--A flexible budget is a budget that is a function of one or more levels of activity. Thus, the budget depends on one or more measures of activity volume rather than being fixed in amount. Purpose:--The purpose of a flexible budget is to develop an estimate or estimates of cost for one or more levels of activity. Activity levels are typically measured in terms of activity inputs, levels, or outputs. Such a budget is flexible in the sense that it depends upon a specified level of activity volume. Acquisition budgets focus on the costs to be incurred to acquire actual or planned levels of resources. Labor budgets, purchasing plans, and similar budgets are resource acquisition oriented. Activity budgets focus on the resources that should be required to maintain activities at specified levels based on expected or desired levels of efficiency. Production budgets focus on the resources that would be required to produce a specified set of products and services. Like activity budgets, production budgets are necessarily based on assumed levels of efficiency. The idea of a flexible budget is applicable to all three types of budgets. Temporal issues:--Flexible budgets can be used as ex-ante forecasts of total cost for various levels of activity volume. Or they can be used as ex-post standards of the costs that should have been incurred for various levels of activity volume (measured in terms of input, activity, or output levels). Context:--Flexible budgets are used in a...
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...Cost, Budgets and Strategic Decision Making in Management Accounting Answer (a) Budgets can be characterized as a quantitative explanation, for a certain time period, which may incorporate arranged incomes, cash flow, costs, resources, and liabilities. Budgeting alludes to the procedure of outlining, actualizing, and working budgets. Budgeting, as a control device, gives an activity plan to guarantee that the association's real exercises are slightest digressed from the planned exercises. Budgets are utilized to give an outline of the organization and procedures performed in it. They are helpful in asset allocation where assets are distributed in such a route, to the point that the techniques, which are relied upon to give the most astounding returns, receive top priority (Libby and Murray, 2010). Budgets are additionally forecast instruments and bring about a significant improvement readied to adjust to changes in business atmosphere. They ought to be produced in such a route, to the point that they consider the key necessities of each of the functions. Budget detailing comprises of an arrangement of exercises: a budget department is created in which a budget controller is appointed, strategies are developed for budget readiness, budget recommendations are created at the department level, the budget is developed for the whole company, financial backing period and key budget elements are decided, the budget is evaluated and approved, growth is observed, and the budget...
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...Russian Budget System: A Move to More Devolved Budget Management? Jack Diamond © 2005 International Monetary Fund WP/05/104 IMF Working Paper Fiscal Affairs Department Reforming the Russian Budget System: A Move to More Devolved Budget Management? Prepared by Jack Diamond1 May 2005 Abstract This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. The Russian federal government has recently initiated a fundamental reform of its budget system, encompassing important policy, procedural, and institutional changes. This paper reviews this reform agenda with reference to the experience of industrial countries that over the past two to three decades have followed a similar reform path toward a more devolved budget management system. From this perspective, the importance of the strength of existing public expenditure management systems to accommodate increased devolution and the scope for employing decentralized agencies is explored. An assessment of the present Russian reform plans in light of this review reveals a number of concerns. First, the speed of the reforms contemplated appears overly ambitious when judged by the experience of other countries. Second, the preparedness of budget institutions...
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...Table of contents Introduction 12 Body 13 3.1 Explain the purpose and nature of budgeting process which should normally be taken in the preparation of budgets for Glentruan Furniture Ltd. 13 Budget 13 Purpose and nature of budget 15 Purpose 15 Nature 15 3.2 Select appropriate budgeting methods for new product line and its need. 16 Incremental budget 16 Zero based budget 16 Different between zero based budgeting and incremental budget 16 Fixed budget 17 Flexible budget 17 Different between fixed and flexible budget 17 Functional budget 18 Sales budget 18 Production budget 18 Direct material usage budget 18 Direct material purchase budget 18 Direct labor budget 18 Factory overhead budget 18 Selling and administration budget 18 Cash budget 19 Master budget 19 3.3 Prepare budgets according to the chosen budgeting methods based on the given information in the scenario. 20 Sales budget 20 Production budget 22 Direct material usage budget 23 Direct material purchase budget 26 Direct labor budget 28 Factory overhead budget 30 Selling and administration budget 34 Departmental budget 35 3.4 Also prepare a cash budget. 38 Cash budget 38 Master budget 42 Budgeted profit and loss 42 Budgeted balance sheet 43 Final review 46 Budget committee 47 Working capital 47 Liquidity ratio 47 ROCE 47 4.1 Calculate variances, identify possible causes and recommend corrective action. 48 4.2 Prepare and operating statement...
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...Davis group Planning a Budget * Davis Service Group PLC employ around 17,000 people. * Its shares are quoted on the London Stock Exchange. * It mainly cleans and maintains things like industrial textiles, such as protective clothing. * They do this for four sectors work wear, healthcare, hotels and restaurants and general facilities. * They are a national company but only in Europe. * Careful budgeting has helped Davis to continue to be a profitable company even through the recession. Building a Budget * Some variables in a business that can be budgeted include: * Sales * Output * Costs * Operating and fixed * Profits * Cash flow * Capital investment. * A business’ budget for the year is based on assumptions of what will happen in the year ahead. * The budget is flexible to a certain extent and can be changed if for example, the manager sees that sales are significantly lower/higher than what was expected. * Zero budgeting is used by some managers and it means that they start every year at zero and then justify each expenditure rather than having a proper budget. * Budgets are most likely yearly but can be longer or shorter. * Davis’ budget runs from January through to December. * Davis Service Group is careful to set budgets in consultation and not to impose them on the different parts of the business. Making Assumptions * A budget needs to make assumptions about how internal and external...
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...covered in detail in chapters one and two. Budgetary control is defined by the Institute of Cost and Management Accountants (CIMA) as: "The establishment of budgets relating the responsibilities of executives to the requirements of a policy, and the continuous comparison of actual with budgeted results, either to secure by individual action the objective of that policy, or to provide a basis for its revision". Chapter objectives This chapter is intended to provide: marketing as a key marketing control technique An overview of the advantages and disadvantages of budgeting Structure of the chapter Of all business activities, budgeting is one of the most important and, therefore, requires detailed attention. The chapter looks at the concept of responsibility centres, and the advantages and disadvantages of budgetary control. It then goes on to look at the detail of budget construction and the use to which budgets can be put. Like all management tools, the chapter highlights the need for detailed information, if the technique is to be used to its fullest advantage. Budgetary control methods a) Budget: activities in a given period of time. -ordinate the activities of the organisation. An example would be an advertising budget or sales force budget. b) Budgetary control: can either exercise control action or revise the original budgets. Budgetary control and responsibility centres; These enable managers to monitor organisational functions. A responsibility centre can be defined as...
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...performance. The current appraisal and reward system is increasing this isolated and non-cooperative working of the different functional units. ▪ The sales department to improve their sales want to have high finished goods inventory ▪ The production department wants to have high inventory of raw material to have uninterrupted production schedule. They are not interested in implementation of Just-in-time inventory methods to reduce the overall cost. ▪ The current control and reporting system does not provide enough good quality data to guide management decision process. For example, no record for work in process is kept in the company. ▪ The accounts department is making the budget without getting any information from functional units. This way the budgets are not realistic and reflect only an accounting necessity rather than a decision making and control tool. ▪ The cash management system of the company is not good and company is facing the cash management problems. Validity and Reasonableness of Letsgo’s Sales Projections: Table-1: Actual and Projected Sales Growth | |Sales |% Increase | |1992 |13,765 | | |1993 |14,880 |8.10% | |1994 |15,991 |7.47%...
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...A budget is a financial plan for the future concerning the revenues and costs of a business. However, a budget is about much more than just financial numbers. Budgetary control is the process by which financial control is exercised within an organisation. Budgets for income/revenue and expenditure are prepared in advance and then compared with actual performance to establish any variances. Managers are responsible for controllable costs within their budgets and are required to take remedial action if the adverse variances arise and they are considered excessive. There are many management uses for budgets. For example, budgets are used to: * Control income and expenditure (the traditional use) * Establish priorities and set targets in numerical terms * Provide direction and co-ordination, so that business objectives can be turned into practical reality * Assign responsibilities to budget holders (managers) and allocate resources * Communicate targets from management to employees * Motivate staff * Improve efficiency * Monitor performance Whilst there are many uses of budgets, there are a set of guiding principles for good budgetary control in a business. In an effective budget system: * Managerial responsibilities are clearly defined – in particular the responsibility to adhere to their budgets * Individual budgets lay down a plan of action * Performance is monitored against the budget * Corrective action is taken if results...
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