...Week 5 Assignments Chapters 8 and 9 Questions Chapter 8 6. 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...
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... 16. Definition of bep 17. Limitation of bep 18. Benefit of (bep) 19. Assumptions in (bep) 20. Computation of bep in units and in value 21. What is the effect on a firm’s (bep) of a lower income tax rate? 22. Can break even analysis to be used to determine the sales level that is needed in order to earn a target net profit? 23. Break even point graph 24. Definitions of sales mix 25. What’s the effect on the company’s profits? 26. What is the assumption in the basis? 27. How to calculate and example? 28. How does sales mix affect the contribution margin? 29. Definition of mos 30. How to compute of mos? 31. Usefullness of (mos) 32. Can (mos) be negative? BUDGETING 1. What is definition of budget? 2. What is purpose of budgeting? 3. What are the objectives of budgeting? 4. What are the advantages...
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...Competition Bikes Budgeting and Variance Analysis Report Western Governor’s University Competition Bikes Budgeting and Variance Analysis Report Competition Bikes, Incorporated (Inc.) makes bicycles for professional and other highly accomplished riders who compete in bike races, biathlons, and triathlons. Approximately sixty percent of all race winners have been victorious using bicycles designed by Competitions Bikes, Inc. This extraordinary success rate is a topic of conversation among racers and has led to exponential success for founder Larry Ferguson who formed the company in 2001 in his garage. Competition Bikes is known for quality products and is leader in the market with the CarbonLite products they provide. These results are transparent in the budgets from the last few years; however, the most recent budget contained several unfavorable variances that may be an indication that some changes are needed. Budget planning, identifying unfavorable variance, and correcting those variances can make or break the financial position of a company. The following is a summary report that discussed budgetary areas that raise concern in budget planning; evaluates the flexible budget and its variance; recommends corrections actions for areas of concern based on the variance analysis; and discusses how the concept of management by exception could be applied to the variances. Budget Planning, Allocation of Resources, and Management Control ...
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...on materials used in manufacturing and are dependent on an amount of resource that is required. An example of a fixed cost would be depreciation expense or salaries paid. Cost information can determine many variables in a company, the first variable being pricing of products. In most businesses the market determines the price and supply and demand play a big role in this determination. If supply is low and demand is high the price will most likely be a lot higher than if supply is high and demand is low. Businesses also use cost plus pricing where and organization can set its price according to product cost. Budgeting is also a major factor that accountants use to determine costs and pricing. Budgets are important in planning, forecasting production levels and monitoring sales activity. Variable costs and fixed costs go hand in hand with budgeting and price planning. Since variable costs can change from time to time accountants are always monitoring variable costs so they can determine what...
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...materials used, labor applied, and overhead. Fardohnya, therefore, has a total product cost of $110,000 ($70,000 + $35,000 + $5,000).4. Fardohnya Industries, Inc. reports the following information at 12/31/2012: -Acquired $75,000 cash by issuing common stock -Paid $70,000 cash for materials used in the manufacture of 200 units of product -Paid $16,000 cash for administrative salaries -Paid $35,000 cash for factory wages -Recognized depreciation on factory equipment, $5,000 -Collected $160,000 cash on sales made during 2012 -Recognized depreciation on office furniture, $3,500. Fardohnya makes all sales for cash. There are no credit sales. If 15 of the 200 units produced during 2012 are still on hand at 12/31/2012, what will be the gross margin for 2012? (58,250). If the average cost per unit is $550, then cost of goods sold is equal to $101,750 ($550 x 185 units). Gross profit of $58,250 is equal to...
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...EXECUTIVE SUMMARY It is recommended that Jim Peterson use the following outline for the presentation to the board of directors at Midwest Ice Cream Company. Outline for Presentation • Introduction • Identify the problem • Analyse Figure 1 and Illustrations 1 - 3 • Commend the areas that did well • Discuss the corrective actions to consider • Make recommendations • Conclude the presentation The following case study provides Jim Peterson with all the necessary information to make a non-technical presentation to the board of directors. INTRODUCTION Budgeting is a vital element of the management planning and control process. Budgeting is the process that translates corporate intentions into specific tasks, and identifies the resources needed by each manager to carry them out. In the process, budgeting enhances communication and co-ordination of different administrative units, facilitates decision-making, and provides a framework for monitoring and for performance evaluation. All managers are responsible for preparing a budget. Since specific departments play important roles in improving various components of the balance sheet and the income statement, it is critical that they prepare their budgets in a responsible way. Once budgets are in place it is necessary to analyse the difference between the actual and budgeted costs (variance). A variance analysis involves the decomposition of the variance into the individual factors that caused the variance. Managers need...
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...Introduction: JET2 Task 2 Summary Report for Budgetary Planning Competition Bikes, Inc. will be reviewed for its various budgets and for its budgetary planning. Budgets are the main planning tool in all businesses that are used by managers to executive management to make decisions for the company. Cash flow is the bloodline of any organization’s operation including operating activities that determine how much cash stays in the organization called revenues and how much is paid out as an expense or liability. Competition Bikes Inc. makes bicycles for professional riders who compete in road races such as triathlons and biathlons. The bikes have an extraordinary success rate and the product consistently finishes in the winners bracket approximately sixty percent of the time. However, due to the recent economic situation Competition Bikes, Inc. has experience a recent decline of approximately 15 percent in its bicycle sales which the trend expecting to continue for the next thirty six months. This review will provide an analysis and provide recommendation for improving budget planning for the company in a summary report Task: Note: submit a copy of your Excel workbook when submitting your JET2 Task 2 work. . A. Prepare a summary report in which you do the following: 1. Discussion of budgetary areas that raise concern in the budget planning. One of the biggest issues when creating budgets is that there is no absolute way of knowing what next year...
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...The Super Project Case Analysis Dilemma of incremental analysis [Author Name] General Foods is a large corporation organized by Product lines. Corporation was planning to introduce a new product Super – a new instant dessert, based on flavored, water-soluble, agglomerated powder. Super would be offered in four flavors although chocolate was estimated to account for 80% of total sales. The requested capital investment for Super was $200,000, and its production would take place after modifying an existing building, where Jell-O was manufactured and by using available capacity of Jell-O agglomerator. Cost for the key machine was not included in the project. On the basis of test market experience, once the product is introduced, it was expected to capture a 10% of dessert market share, 80% of which would come from growth in total dessert market share and 20% of which would come from erosion of Jell-O sales. There are basically four categories of capital investment project proposals at General Foods corporation: (1) safety and convenience; (2) quality; (3) increase profit; and other. Super project was considered into third category, as a profit-increasing project. Crosby Sanberg, a manager of financial analysis at General Food Corporation calculated return on investment in three different ways of on Super Project. The first technique was Incremental basis, which projected Super project would have an attractive return of 63% in 7 years, which in-turn could directly identify with...
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...the activity involved to make the product, and is a more accurate breakdown of the true costs to make a product (Marx, C., 2009). Since most companies make products with both manpower and technology, using the TBC system causes an inaccurate forecast of determining the costs to make a product. TBC looks at what is spent to make a product but not why it was spent. The activity based costing (ABC) is more accurate for determining the actual costs that are spent to make a product because it does not assume that a product generates costs. ABC looks at the costs for each activity and assigns financials based on those activities. This system can be long and tedious to calculate, but is flexible and allows companies to have a better handle on budgeting and the actual costs to produce a product. ABC does not change the cost to make a product; it only takes into account the manufacturing overhead as well as the nonmanufacturing overhead, where traditional does not include the nonmanufacturing overhead. By...
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...BUDGETING Introduction and main points A comprehensive (master) budget is a formal statement of management’s expectations regarding sales, expenses, volume, and other financial transactions of the organization for the coming period. Simply put, a budget is a set of pro forma (projected or planned) financial statements. It consists of a pro forma income statement, pro forma balance sheet, and cash budget. A budget is a tool for both planning and control. At the beginning of the period, the budget is the plan or standard; at the end of the period it serves as a control device to help management measure its performance against the plan so that the future performance may be improved. International Paper, a large forest-products company, uses key budgets, including sales and expense projections, as the starting point for the developing business strategies. Prior to development of the budget, certain questions must be asked and certain assumptions must be made. What will be the inflation rate be? Where is the competition headed? Will suppliers increase prices? Will costumer tastes change? You also must explore the financial alternatives available for you. For instance, what will occur if you raise your selling price? What will be the effect if one variable (e.g., advertising) is changed? It is important to realize that with the aid of computer technology, budgeting can be used as an effective device for evaluation of “what-if”...
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...describe all details of the profit planning process.) We can get the numbers from the company’s records and its external environment. We can use the following from the company’s records: • Management’s short term and long term plans; • Accounting reports such as financial statements; • Source documents such as official receipts, purchase and sales invoices and vouchers; • Communications/directives from management that affect in one way or another the company’s budgeting process; and • Previous budgets and comparisons with actual performance. The following factors from the external environment can be used: • Trends in the market where the company operates; • Existing economic conditions and issues; • Competition; and • Environmental factors, such as weather conditions. Step 1: Establish standards for selling price, variable expenses, and marginal contribution per gallon. The company’s accounting personnel can use current prices and records for determining material costs. These can be traced trough source documents such as official receipts and invoices. In the problem, advertising expense has been considered as part of the variable cost because management decided to have an allowance of 6 cents per gallon for this expense for the actual number of gallons sold. After the unit variable cost has been developed, this amount is subtracted from the selling price to arrive at marginal contribution per unit. Step 2: Sales forecasts ...
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...The University of the West Indies, St. Augustine Faculty of Social Sciences Department of Management Studies M.Sc. Aviation Management AVMT 6001 – Accounting for Business Decisions AVMT 6001 – Group Project 2 Managerial Accounting - JetBlue Airways Corporation Group Members: Cherrish Bridgemohan - 807001633 Rajiv Debie - 04708006 Israel Duncan - 814004144 Kenrick Duncan - 814002425 Neil Shepherd - 814004177 Signatures: Cherrish Bridgemohan ___________________________ Rajiv Debie Israel Duncan Kenrick Duncan Neil Shepherd ___________________________ ___________________________ ___________________________ ___________________________ November 16, 2014 Table of Contents I. II. Table of Abbreviations ........................................................................................................................ 5 Executive Summary............................................................................................................................ 6 III. Introduction......................................................................................................................................... 7 IV. Background – JetBlue Airways ......................................................................................................... 7 V. Management Accounting Information.............................................................................................. 8 Financial Accounting versus Management Accounting ...........................
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...evaluate the key different types of budgeting within a business as well as the importance of why businesses must keep their costs under control. Firstly it will examine key types of planning and budgeting along with how they are interconnected. Secondly it will focus upon how a business might prepare its annual master budget, including how budgeted balance sheets, cash budget and budgeted income statements affect the overall master budget. Finally it will examine potential behavioural issues that might arise within a business. When managing a company’s finance the use of planning, control and budgeting are all equally important and interconnected with one another. In effect, when a company keeping a tight rein on cash flow, fixed costs and variable costs through the use of planning and budgeting, it will consequently allow the company to better control its profit margin. When conducting research on the importance of planning and control Kay states: Control and planning are interrelated so closely that they cannot be separated from each other. Without control all the planning is fruitless because control consists of the steps taken to ensure that the performance of the organization conforms to the plans. (Kay, 2012) Kay indicates that what has been previously written about within this essay is correct; additionally it suggests that both are directly interconnected with one another. Planning can be broken up into two main...
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...government can fund the theme park. The Hong Kong SAR Government offers many different types of loans and funding schemes to support and promote the development of businesses (SMEs) in Hong Kong. The government makes investment through tax proceeds by applying economic systems. Another way of funding is to investment from general public borrowing. Advantage from the general public borrowing, the expansions of tax deductible that will deliver tax deductibility benefit to them. The community will get an ownership facility. The Innovation and Technology Fund (ITF), administered by the Innovation and Technology Commission, aims to increase the added value, productivity and competitiveness of our economic activities. 1.2 EVALUATE THE CONTRIBUTION MADE BY A RANGE OF METHODS OF GENERATING INCOME WITHIN A GIVEN BUSINESSE AND SERVICES ENVIRONMENT There are lots of opportunities to generate income from the theme park. The revenue can be generated from patronage, goods, sponsorship from the outside promoters and enterprise charges. Sponsorship and parking fees Admission fees Games/rides Merchandise Food and beverage Shopping areas Hotels Convention areas The theme parks usually have a direct revenue generating (e.g. the admission to the rides and attractions) and indirect revenue generating (e.g. restaurants, retail stores, picnic areas etc). Theme parks can generate more income by developing on-site accommodation. For the industry to attract more customers...
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...Providing a comparison between a forecasted budget with previous year’s actual results allows leadership to strategize and plan for the company’s future on past performance. Producing a master budget roadmap for future operations may be done in two ways--by using fixed budget or flexible budgeting processes. There are advantages and disadvantages of each method of evaluation or projection of growth and it is recommended that the leadership of Competition Bikes, Inc, (CBI) consider all options presented to optimize future corporate growth. The CEO of Competition Bikes, Inc. requested a review of current budgetary information (“Year 8”) projection for the upcoming business year. Areas of analysis and management intervention have been reviewed based on data provided by CBI. Competition Bikes, Inc.’s “Year 9” budget (pro forma) has been based on financial information provided based on a current trend analysis from three previous years and focusing on “Year 8” financials. A master budget was created to plan and control revenues and costs for future growth and corporate development for “Year 9.” The benefit to CBI leadership in reviewing “Year 9” financial plans allows for decision-making on planning, coordination of operations, and benchmarking for an evaluation of actual performance at the end of “Year 9.” To review, a static budget does not change after it is developed, however, a flexible budget is one that summarizes revenues and costs from different volumes compared to similar...
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