...PART I 1) The effects of the new computerized system The computerized manufacturing system will have deep impact on manufacturing processes and costing. The new system may affect the manufacturing processes by slowing them down like Anh Tran is afraid. As it requires training and reorganizing and will take time for employees to fully get used to it, the production line will be delayed and might not reach the budgeted target. The manufacturing costs will certainly increase as depreciation cost of the new machine will be included in the manufacturing costs. Therefore, it raises the total costs of the production line. Moreover, the application of the new machine will also lead to a different cost allocation approach to Fabrication and Assembly department. In fact, based on Sino “Product and department estimates”, we assume that Fabrication will use machine hours as cost driver whereas Assembly department use direct labor hours. Hence, this will increase the accuracy of cost allocated to each product type, which will be useful for later pricing process. About sustainability issues, for long term, Sino can gain more competitive advantages by its accuracy on cost controlling and pricing; the productivity will also be increased due to the use of machine and technology. 2) Compare, contrast single overhead rate and multiple overhead rate Generally, using either single or multiple overhead rates both results in the same amount of yearly manufacturing overhead. Moreover, both...
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... B Submitted to: Sir Hassan Jabbar Explain the relative merits of the top-down and bottom-up approaches to budget setting? Budgeting Budgeting is a formal process in which a company's expenses and revenues are planned for the future. Top down and bottom up are two most common budgeting techniques. In the top-down approach, upper management prepares budgets with no input from employees or lower-level managers. In the bottom-up budgeting approach, managers and employees at the department level prepare budgets for their individual departments. A final, organizational budget is prepared by consolidating all individual, department budgets. The relative merits of Top-Down Budgeting Financial Control * When upper management evaluates a company's overall financial needs and compares the needs to projected revenues for a year, it gets a clear picture of how much money it can reasonably allocate to different areas. Decisions are made about where finances will have the most positive impact and staffers are given directives on what they have to work with. This approach allows upper managers to maintain complete financial control over a budget. Accountability of Staff * When a staff is given a certain budget to work with, it must make prudent financial decisions about how the money will be used. This may result in greater financial accountability and more comparison-shopping for products,...
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...advantages and disadvantages of the participation in the budgeting process. Other than that, also discuss the reasons why managers may be unwilling to participate in budgeting process. First of all, it had briefly defined the terms, like budget, budgeting planning and control system. A simple way to define budget as it’s a plan for future or any plan for upcoming period. In the study of financial management, budget can be defined as an in depth plan showing how to acquired and utilize the resources during a particular time period. It signifies a plan for the future expressed in measureable, proper terms (Ward, 1994). Generally, there are two broadly used of budgeting, which are top-down budgeting and bottom-up are budgeting. A top-down method to budgeting reflects a controlling style of management. This is meaning of where the senior managers decide the budget with limited input from subordinate employees. Other than that, participative budgeting, also known as bottom-up budgeting, it inspires organization-wide input into the budget process. This is the meaning of where the subordinate employees get involved the decision making of budgeting with the senior managers by providing different levels of opinion to the upper levels in the budget process. Budgeting planning is about the planning process within an organization and it’s considering the role of budgeting within this process. The period of budgeting planning can be differentiating into short-term planning (budgeting)...
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...1) Participative budgeting的概念 Q: Who can tell me the concept of that? A: It refers to the level of involvement lower level managers have in setting their own budget. 2) 两个extreme是什么 Q: As we know, there are also two extremes of participation in the budget process. So what are they? A: “Top-down” and “bottom-up”. Q2 1) Participative budgeting的优点 Q: Firstly, I wonder who knows the advantages of participative budgeting. A: Uses managers’ specific knowledge Encourages communication and coordination between managers Creates “ownership” of the final budget targets. 2) Participative budgeting 的缺点 Q: So what about the disadvantages? A: slow. Opens the firm up to influence costs, especially when budget performance is tied to the reward system. Budgetary slack. 3) 优缺点在case中如何体现 (每人说一点就好) Q: Now go back to this case, what advantages and disadvantages are evident in this case? A: (1) This case says that each BU is responsible for a different product, so maybe it can create “ownership” of the final target budgets. (2) In this case, as Ben said, the managers know so much more about the details of their part of the business than he does, so I think it has the advantage to use the managers’ specific knowledge. (3) In the end, Ben complained about the budgets and cut their expense budgets, this may state that participative budget opens the firms up to influence. Q3 给公司提供advice(每人说一点就好) Q: This question asks us to advise Ben to change his budget process...
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...manipulate the accounting data. 2/ Non-accounting style: the performance is evaluated based mostly on qualitative factors such as consumer satisfaction, quality and timeliness. As this style is similar to the profit conscious style (both emphasise the profit in long run), thus the managers’ behaviours is similar as well. The main difference is that managers would take the accounting information less seriously and pay more attention on the qualitative factors. 3/ Budget constrained style: managers are required to follow the pre-set budgets, which means that they are evaluated on short term performance. Because of the pressure to reduce cost as much as possible within a short period of time, managers are often more stressful and so lead to causing employees not working well together. The focus on short-term profit also encourages managers to do anything to better their performance in that period without caring about the return in the long run. In the DFS case, it is clearly that managers are subjected to budget...
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...Part D i) The success of a budget will be determined in large part by the way in which the budget is developed. Had the budget been imposed on Paulo by top management, it will probably generate resentment and ill will rather than cooperation and commitment. This is due to the fact that there is a tendency to feel increasingly pressured in terms of achieving what has been imposed in the budget from above, as nothing else is deemed to be more important. If the budgets are too high and employees know they are unrealistic, motivation will suffer. If the targets allow too much slack, waste will occur. And unfortunately top management is often not in a position to know whether the targets they have set are attainable. Goals that are perceived as belonging to others are less likely to be internalised, increasing the likelihood of dysfunctional behaviour. For example, in attempting to achieve favourable direct material price variances, Paulo may instruct the purchasing department to purchase larger quantities of materials than needed to obtain quantity discounts. Too much emphasis on shopping around for the lowest prices can also result in a lack of emphasis on quality (i.e. quality of conformance to specifications), excess inventory and an excessive number of vendors. In terms of placing too much emphasis on direct labour rate variances, this might motivate Paulo to assign inexperienced or less qualified workers to the task or not provide workers with the required training...
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...budgeting process: 1. Participative budgeting (bottom up approach) 2. Top-down approach 3. Line-item budgeting (spend up to the specified amount on each line item) Adv: Tight control reduces likelihood of managers doing things for self-interest. Disadv: Inflexible in responding to unanticipated needs. 4. Incremental budgeting (begin with current year’s performance and adjust for expected changes.) Adv: Review focuses on incremental changes and may ignore current inefficiencies. Disadv: Ignores current inefficiencies. 5. Zero-based budgeting (Budget is constructed from scratch each period rather than starting from last period’s actual results.) Adv: Each activity must be justified in terms of its continued usefulness. SO useful when firm is changing strategic direction. Disadv: Time-consuming 6. Budget Lapsing (a requirement that funds allocated for a particular year CANNOT BE CARRIED OVER to the following year) Adv: Tighter control so prevents risk-averse managers from accumulating funds. Disadv: Encourages wasteful spending. 7. Budget Ratcheting (basing this year’s standard of performance on this year’s actual performance) Adv: Performance targets usually adjusted upwards. Disadv: Temper the better-than-budgeted performance, avoid being held to higher standards. SOLN: Use other measures to replace budget targets for performance evaluation. Behavioural effects of budgets: - Budgets create a use-it or lose-it mentality to spend their entire budget to avoid reduction...
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...questions for writing and discussion 1. The master budget has been criticized for the following reasons: it does not recognize the interdependencies among departments, it is static, and it is results, rather than process, oriented. These criticisms are especially apparent when companies are in a competitive, dynamic environment. When the environment changes slowly, if at all, the master budget would do a good job of both planning and control. 2. A static budget is one that is not adjusted for changes in activity. Using a static budget for control can be a real problem. For example, suppose that the master (static) budget is based on the production and sale of 100,000 units but only 90,000 units are actually produced and sold. Further, suppose that the budgeted variable cost of goods sold was $2,000,000 and that the actual variable cost of goods sold was $1,890,000. It looks as if the company spent less than expected for variable manufacturing costs. However, the budgeted variable cost was $20 per unit ($2,000,000/100,000), and the actual variable cost per unit is $21 per unit ($1,890,000/90,000). Not adjusting the budget for changes in activity level can mislead managers about efficiency. 3. A flexible budget is (1) a budget for various levels of activity, or (2) a budget for the actual level of activity. The first type of flexible budget is used for planning and sensitivity analysis. The second type of budget is used for control, since the actual costs of the actual...
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...DESCRIPTION OF BUDGETING Budgeting and Planning and Control 1. A budget is a plan of action expressed in financial terms. 2. Budgeting is a planning and control tool used by managers. |Identify objectives. |Compare actual results with budgeted (planned) amounts. | |Identify actions needed to achieve objectives. |Corrective action can be taken, if needed. | 3. The steps involved in the planning and control process are as follows: ■ Develop a strategic plan. A strategic plan identifies strategies for future activities and operations, generally covering at least five years. ■ Translate the strategic plan into long-term and short-term objectives. ■ From the objectives, develop short-term plans. ■ Develop budgets based upon the short-term plans. ■ Compare actual results with planned (budgeted) amounts. ■ Take corrective action, if necessary. Advantages of Budgeting 4. Advantages of budgeting include the following: ■ Budgets force managers to plan. ■ Budgets provide information that can be used to improve decision making. ■ Budgets provide standards used for performance evaluation and control. Control involves comparing actual results with budgeted amounts and taking corrective action whenever actual performance deviates significantly from planned performance. ■ Budgets improve communication and coordination. ■ encourages participation...
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...Get Assignment help for this module at cduassignhelp@gmail.com at discounted prices of 200 AUD only in 24 hour UNIT CODE: PRBA007 UNIT NAME: ACCOUNTING FOR MANAGERS Assignment Two Information Get Assignment help for this module at cduassignhelp@gmail.com at discounted prices of 200 AUD only in 24 hour Semester 2 2015 Assessment 40% Get Assignment help for this module at cduassignhelp@gmail.com at discounted prices of 200 AUD only in 24 hour PRBA007-assignment2-sem0220155 SUBMISSION REQUIREMENTS. Due Date This assignment may be submitted at or before 12 midnight on Sunday of Study Week 13 (25 October 2015). Lodgement • The Assignment must include a coversheet that shows the student full name, student number, campus, and lecturer’s name. Do not use the standard CDU Assignment Cover Sheet templates. • Assignment must be lodged online via the PRBA007 Learnline Assignment Lodgement link on the CDU PRBA007 Learnline site . • Ensure your file is named using a file naming convention that allows the lecturer to identify to whom it belongs. Failure to use an acceptable file naming convention may result in your assignment lodgement being rejected. • DO NOT LODGE VIA EMAILor FAX - assignments lodged by email or fax will not be accepted. • KEEP A COPY - Ensure you have a copy...
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...There are several approaches that may be used to develop the budget. Managers typically prefer an approach known as participative budgeting. Discuss this form of budgeting and identify its advantages and disadvantages. Ans. Also called bottom-up budgeting or self-imposed budgets, where the initial flow of budget data moves from lower levels of responsibility to higher levels of responsibility. Each person with responsibility for cost control will prepare his or her own budget estimates and submit them to the next higher level of management. These estimates are reviewed and consolidated as they move upward in the organization. Budget estimates prepared by lower-level managers should be scrutinized by higher levels of management. Without such a review, participative budgets may be too loose and allow much "budgetary slack." The result will be inefficiency and waste.. Advantages: 1. Individuals at all level of the organization are recognized as members of the team whose review and judgments are valued by top management. 2. Increase feeling of unit-level ownership in the budget 3. Leads to greater support for the budgetand a greater understanding of goals 4. Greater accuracy of budget estimates. Budget estimates prepared by front line managers can be more accurate and reliable than estimates prepared by top managers who are removed from day to day activities and who have less intimate knowledge of markets and operating conditions...
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...20 EXECUTIVE SUMMARY This paper begins with an exploratory view of what budget is all about. In principal, the budget has been useful in providing a list of financial explanatory information for the top management in organisations to plan and control the organisation’s actual performance against the prediction. In general, budgeting process appears to be a favourite in blueprinting the business operations. In the course of converting objectives and goals into useful data for the top management, justifications on both advantages and disadvantages are made, in evaluating how effective a budget can play its role in achieving greater financial accuracy in practice. Just like other business operations, the involvement of adequate human resource is vital particularly in a budgeting process which often needs to consolidate useful ideas and information from the relevant employees. Understanding the barriers in the human resource involvement, communication is seen as a great tool to shape the correct perception of the individual roles which attempts to align the personal interests to the organisation’s visions and objectives. The formulation and implementation of budgets, namely the imposed and participatory approach, adopts totally different communication flow. The prior approach is traditionally authoritative while the latter is contemporarily democratic. The paper concludes that an excellent budget aligns with the popular acceptance, that it is a very important process that...
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...plans and budgets in comparison with the actual activities. Q21-2. Except in small organizations, budgeting requires formal planning because of the need to coordinate the budget among various levels of the organization. Advantages of formal planning include: improved communication and coordination, provides a guide to action, and provides a basis for performance evaluation. Q21-3. Advantages of the incremental approach stem from the fact that this approach simplifies the budget process, reduces the time to prepare the budget, focuses on changes from the previous budget or previous actual results, and is easy to implement. The disadvantages include not detecting previous inefficiencies in the budget and a tendency to use the previous budget as a base for the next budget. Q21-4. The minimum level approach establishes a base amount for budget items and requires explanation of justification for any budgeted amount above the minimum. Q21-5. A cost objective’s budget is predicted based on the anticipated consumption of cost drivers. Q21-6. The continuous improvement budgeting concept establishes a budget that has improvements built-in throughout the budgeting period. For a given cost category, the expenditures to provide that cost may be reduced each month of the budget period. Q21-7. The cash budget tends to bring together all of the other budgets. Every budget affects either cash receipts or disbursements directly or indirectly. While not all budget schedules...
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...What is Budget? Budget according to Sullivan (2003) is the company's plan of saving and spending (Sullivan, Arthur; Steven M. Sheffrin (2003). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. p502) while according to Bhimani (2008) is a set of action plan that represent in quantitative expression and proposed by the manager for the future period. So it can be concluded that a budget is used in the financial projections and forecast the financial position of a company for their development. Budgeting is an important process of management, mapping the present and he future for a small business. A completely budget can be used to examine the business owner whether the overall plan can be adapted closely. A business owner is allowed to determine how well the firm is operating within the stipulated budget by developing budgets for the present. If the cost used is more that the budgeted, the business owner have to figure out why. (John Tennent, Guide to Financial Management, p179) mentioned that for a business planning on budgeting is a process used by management to create the blueprint for achieving that success. Why a budgeting is needed for a company management the short and long term planning? Budgeting helps to provide a structure for the company, especially giving guidance regarding direction of the company’s further operation and development expenses. Budgeting also aimed to predict cash flows. When a company growing rapidly, such...
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...total cost of $608,000 substitute (PQ-AP) with $608,000. E.g. $608,000 – (PQ-SP) DIRECT MATERIAL QUANTITY VARIANCE = SP (AQ-SQ)……..SQ = standard KG/unit x actual good output (e.g. 38,000 dartboards)……AQ = actual kg of direct material used DIRECT LABOR RATE VARIANCE = AH (AR-SR)……..RATE VARIANCE = (AHxAR) – (AHxSR)….if given ‘total wages for September were $84,000, 90% of which were for direct labor’ then (AHxAR) = 84,000 x 0.9 DIRECT LABOR EFFICIENCY VARIANCE = SR (AH – SH)……..SH = standard hour/unit x actual good output + work 1 VARIABLE OVERHEAD SPENDING VARIANCE = AH (AR-SR) VAIABLE OVERHEAD EFFICIENCY VARIANCE = SVR (AH –SH)…………SVR = standard variable overhead ratio…….SH = actual output x standard quantity of direct labour FIXED OH BUDGET VARIANCE = Actual FOH – Budgeted FOH ……. Budgeted FOH may be given in annual and need to be turned into monthly e.g. X/12 FIXED OH VOLUME VARIANCE = Budgeted FOH – Applied FOH……. Applied = PROHR x standard hours. In order to determine applied need to work out Predetermined OH rate. Done so by (BUDGETED FOH/Budgeted Activity Level)……..Budgeted Activity Level = Budgeted output x standard quantity of direct labour…or machine hours etc. VOLUME VARIANCE IS NEVER FAVOURABLE OR UNFAVOURABLE…….could also be units produced x FOH cost e.g. (5 hours at $3) = 15 VARIABLE OH SPENDING VARIANCE = AH (AR – SR)…….if given VOH e.g. 11,000 then it should look like this. =11,000 – (8,000 x1.50) ….where 8,000 is AH and 1.50 is SR. VARIABLE OH EFFICIENCY VARIANCE...
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