...| Budgeting| RJET Task 2| C.Smith-Barber4/16/2013| A1. Budget Concerns A fiscal document used to plan future revenue and expenditures is a called a budget (Murray, n.d.). The overall process of whether or not the company can continue to run with the projected revenue and expenditures is called budgeting (Murray, n.d.). It is valuable because it helps an organization consume the inadequate financials and human capital for which is best to achieve current business opportunities. A company is also capable of formulating both long-term and short-term strategies for help in implementation and constant assessment of its performance. Competition Bikes (CB) has made a master budget for Year 9 after being on a roller coaster for Year 6-Year 8. Due to the economic downturn, the company experienced a 15% decline in sales during Year 8. It has been budgeted that CB will sale 3510 units at a selling price of $1495 in Year 9 which brings some concern. The number of units has increased compared to the previous year and of Year 6 especially when there has been an economic situation. With the change of the amount of units sold that will also alter the budgeted dollar amount for its raw materials- components’ total cost is $965,250 and the total cost for frame materials is approximately $1.3 million. The accounts payable at $229,203 is too high. CB has always done a better job in paying debts in the past; in Year 6, Competition Bikes had net sales of about $4.5 million...
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...Ch. 9: Standard Costing: A Functional-Based Control Approach Performance Reports - Budget to Actual Variances: Favorable Occurs When: Actual production is greater than budget. Actual revenue is greater than budget. Actual costs are less than budget. Unfavorable occurs for the opposite: Actual production is less than budget. Actual revenue is less than budget. Actual costs are greater than budget. Static vs. Flexible Budgeting: Static is for a designated level of activity. Flexible budgeting can provide different scenarios (expected). Flexible budgeting adjusts what costs should have been based on actual level activity (actual). Standard Cost: expected or budgeted cost of materials, labor, and manufacturing overhead required to produce one unit of product (Unit Std Cost = Price Standard * Quantity Standard) Price Standard: price that should be paid per unit of input (such as pound of material). Input (Quantity) Standard: quantity of input allowed per unit of output (for example, pounds of material allowed per one unit of product). Standard Cost Sheet: calculates the total standard cost for one unit of product. Why Use Standard Costing? To improve planning and control. To facilitate product costing. When to investigate variances? If variances are material, and the benefits will exceeds costs of investigation and corrective action. Which variances to investigate? F or U?? How to record variances? How are they closed out? 79 STANDARD...
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...Task 8 3.1 Explain the purpose and nature of the budgeting process. Task 8 IN business,budget can be defined as a plan for an organization is outgoing expenses and incoming revenues for a specific time period. Budgets are used in many organizations to Track and control spending The purpose is to ensure that available funds are used according to plan,within preset limits and not exceeding available funds. Support funding requests The purpose is to justify the use of funds and to help plan future spending accurately by describing how funds will be used. The budgeting process: Companies and organizations typically develop and implement budgets on a periodic basis at fixed intervals. The norm in private industry is to produce a plan for each fiscal year. Some government organizations also prepare annual plans, but two-year (biennial) budgets are also common in government. Although plans are sometimes adjusted in "real time" (that is, they are treated as flexible budgets after start of the planning period they cover), such changes are exceptions to the normal rule, which is to keep the forecast intact (static) once implemented. In the period of time between issuance of one budget and the next, planning-related decisions and plans are referred to as the budget cycle or process. In large companies, large educational institutions and non profit organizations, and in government organizations, the process normally extends across months, if not the entire period...
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...Management Accounting IEX Prof. Dr. Michael Lederer . Dr © Copyright : Prof. Dr. Michael Lederer Hochschule Furtwangen – Furtwangen University © Copyright : Prof. Dr. Michael Lederer Page 1 Contents overview management accounting A. Introduction and basic concepts A.1 Cost terms A.2. Costing systems and cost allocation A.3 Cost-volume-profit analysis A.4 Operations accounting 5 11 26 63 78 B. The budgeting process B.1 Budgeting B.2 Variance analysis © Copyright : Prof. Dr. Michael Lederer 87 88 114 C. Relevant cost and decision making 136 D. Marketing and pricing decisions 157 © Copyright : Prof. Dr. Michael Lederer Page 2 Recommended literature • • • • • • • • • • Horngren/Datar/Rajan: Cost Accounting. A Managerial Emphasis, Pearson Global Edition Collier: Accounting for Managers, Wiley Horngren/Bhimani/Datar/Foster: Management and Cost Accounting. FT Prentice Hall Atrill & McLaney: Management Accounting for Decision Makers, Pearson Davis/Davis: Managerial Accounting. Wiley Cooke: The McGraw-Hill 36-Hour course in Finance for Non-Financial Managers. McGraw-Hill Bragg: Controller’s Guide to Planning and Controlling Operations. Wiley Roehl-Anderson, Bragg: Controllership - The Work of the Management Accountant. Wiley Blocher/Chen/Lin: Cost Management - A strategic emphasis, McGraw-Hill Professional Dictionary, Accounting; Tax; Banking; German-English/English-German, Schäffer© Copyright : Prof. Dr. Michael Lederer Poeschel ...
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...Revised Fall 2012 CHAPTER 8 FLEXIBLE BUDGETS, STANDARD COSTS, AND VARIANCE ANALYSIS Key Terms and Concepts to Know Static or Planning Budgets Used for planning purposes Prepared at the beginning of the period Based on one projected level of activity Flexible Budgets Used for control purposes Prepared at the end of the period “Flexed” to accommodate actual level of production Use costs (variable and fixed) and revenue formulas from static budgets Revenue Variance Difference between how much the revenue should have been at the actual level of activity and the actual revenue for the period. Favorable revenue variance occurs when the revenue is greater than expected at the actual level of activity for the period. Unfavorable revenue variance occurs when the revenue is less than expected at the actual level of activity for the period. Spending Variance Difference between how much anexpense should have been at the actual level of activity and the actual amount of expense incurred. Favorable spending variance occurs when the cost is less than expected at the actual level of activity for the period. Unfavorable spending variance occurs when the cost is greater than expectedat the actual level of activity for the period. Page 1 of 26 Revised Fall 2012 Standards: Standards are benchmarks or “norms” for measuring performance. Standards relate to the quantity and costs of inputs used in manufacturing goods or providing services. Price Standards...
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...“LetsGo Travel Trailers: A Case for Incorporating the New Model of the Organization into the Teaching of Budgeting,” by Sally Wright, Cases from Management Accounting Practice, Vol. 14, Montvale, NJ: Institute of Management Accountants, 1998). Note that part 2 of this case requires the use of Excel. 10-3 Building Processes for a Solid Foundation: The Case of Community Health Initiatives (Source: Sandra Richtermeyer, Strategic Finance, August 2007, pp. 52-57. Note: this case was the case used as the 2008 IMA Student Case Competition. The Student Case Competition is sponsored annually by the IMA to provide an opportunity for students to interpret, analyze, evaluate, synthesize, and communicate a solution to a management accounting problem.) 10-4 Academic Advising at Bay State (Source: Janice E. Bell and Shahid L. Ansari, Strategic Finance, September 2008, pp. 44-51. Note: this case was the case used as the 2009 IMA Student Case Competition. The Student Case Competition is sponsored annually by the IMA to provide an opportunity for students to interpret, analyze, evaluate, synthesize, and communicate a solution to a management accounting problem.) Readings 10-1: “How to Set Up a Budgeting and Planning System” by Robert N. West and Amy M. Snyder, Management Accounting (January 1997), pp. 18-20, 22, 24. This article demonstrates the setting up of a budgeting and planning system for Penn Fuel Gas Inc., a public utility holding company that provides natural gas storage...
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...Budgeting and Control MHRM 502-2 Supported Distance Program June 2015 Addis Ababa Table of Contents Title Page Unit One: Overview of Budgeting and Control .............................................................................. 2 1.1. The Basic Concepts of Budget and Budgeting ................................................................ 2 1.2. Definition of Budget ........................................................................................................ 3 1.3. Budgeting and Forecasting .............................................................................................. 4 1.4. Budgeting and Management ............................................................................................ 6 1.5. Budgeting and Planning ................................................................................................... 6 1.5.1 Purposes of Planning and Budgeting systems ................................................................. 7 1.5.2 Limitation of Budgeting................................................................................................. 10 1.5.3 Planning Cycles ............................................................................................................. 11 1.6. Budgeting process (Budget cycle) ................................................................................. 14 1.6.1 Designing the budget ...............................................................................
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...budget c. Production budget d. Budgeted balance sheet ____ 11. The most useful measure for evaluating the performance of the manager of an investment center is a. contribution margin. b. controllable margin. c. return on investment. d. income from operations. ____ 12. Which of the following capital budgeting techniques takes the time value of money into consideration? a. Annual rate of return b. Internal rate of return c. Net present value d. Both (b) and (c) above ____ 13. The cost classification scheme most relevant to responsibility accounting is a. controllable vs. uncontrollable. b. fixed vs. variable. c. semivariable vs. mixed. d. direct vs. indirect. ____ 14. TJ Enterprises’ equipment account increased $43,000 during the period; the related accumulated depreciation increased $14,000. New equipment was purchased at a cost of $58,000 and used equipment was sold at a loss of $4,000. Depreciation expense was $19,000. How much is proceeds from the sale of the used equipment? a. $10,000 b. $15,000 c. $6,000 d. $14,000 ____ 15. A flexible budget a. is also called a static budget. b. can be considered a series of related static budgets. c. can be prepared for sales or production budgets, but not for an operating expense budget. d. typically uses an activity index different from that used in developing the predetermined overhead rate. Use the following information for questions 16 and 17. DyanChrome estimates its sales at 12,000 units...
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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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...JET2 TASK 2 1 JET 2 TASK 2: Financial Analysis Theo Adams Western Governors University MBA Program JET2 TASK 2 2 (A1) Budget Concerns Investopedia defines Budget as an "estimation of the expenses and revenues over a specific future period of time. Budgets can be made for a group of people, family, person, country, business, government, organization or anything else that makes or spend money. The budget is a micro economic concept that shows the trade-offs made when one good is exchange for another." When looking at the year 9 budget for CB first thing that jumped out at me was the sales goal of 3510 is a 5247450. This is my first immediate concern considering that the storyline has clearly stated it is a down market due to the reductions in monies for sponsored professional riders from their sponsors. This is the main sources sales for the Carbonlite model from CB. The professional riders not having the same resources they had in year 7 when sales went to 4000 from the 3000 sold in year 6. which meant CB's revenue went from 4485000 in year 6 to 5980000 in year 7. This 33.3% jump was followed by 15% drop from 4000 units sold in year 7 to 3400 units sold in year 8. Again this drop was due to the cut in sponsorship money for the professional riders which ended up reflecting at the drop in revenue as well from year 7 to 8 of 5980000 to 4485000. These facts do not seem to warrant an increase in sales from 3400 units to 3510 units and an Increased Revenue to 5247450. Even...
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...Unit 1: Role and Scope of management accounting 1.1The Role of the Management Accountant |Content |CLP |Text |Worked Example/Activity Ref | | | | | | |What is it? Provision of info financial and non-financial to decisions makers usually in|Pg 9 | |Activity 1 - the role of the| |the organisation | | |decision maker | | | | | | |Thought Process: | | | | |understanding what is required | | | | |calculating or compiling the information required | | | | |analysing, interpreting or understanding the information obtained | | | | |Making recommendations and drawing conclusions | | ...
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...Chapter 15 Operational Performance Measurement: Indirect-Cost Variances and Resource- Capacity Management Cases 15-1 Berkshire Toy Company (Source: Dean Crawford and Eleanor G. Henry, “Budgeting and Performance Evaluation at the Berkshire Toy Company,” Issues in Accounting Education, 15 (2) (May 2000), pp. 283-309.) 15-2 The Mesa Corporation (Source: Robert Capettini, C. W. Chow, and J. E. Williamson, “Instructional case: the Proper Use of Feedback Information,” Issues in Accounting Education, 7 (1) (Spring 1992) pp. 48-56.) Readings 15-1: “Using Enhanced Cost Models in Variance Analysis for Better Control and Decision Making,” by Kennard T. Wing, Management Accounting Quarterly (Winter 2000), pp. 1-9. This article points out that oversimplifications of fixed and variable costs can result in the standard costing system not being used or, if used, can lead to bad decisions. That is, misclassifications of cost behavior patterns make variance analyses “paper tigers.” For variance reporting to be useful, financial managers need to develop cost models that reflect how costs actually behave. Discussion Questions: 1. Describe the implications for variance analysis of analyzing a semi-variable cost as either a variable or fixed cost. 2. Describe the implications for variance analysis of analyzing a step-fixed cost as either a variable or fixed cost. 3. Describe the implications on operating decisions of analyzing an operation with mixed costs...
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...Accounting, Organizations and Society 28 (2003) 127–168 www.elsevier.com/locate/aos Management control systems design within its organizational context: findings from contingency-based research and directions for the future Robert H. Chenhall Department of Accounting and Finance, Monash University, Clayton, Victoria 3168, Australia Abstract Contingency-based research has a long tradition in the study of management control systems (MCS). Researchers have attempted to explain the effectiveness of MCS by examining designs that best suit the nature of the environment, technology, size, structure, strategy and national culture. In recent years, contingency-based research has maintained its popularity with studies including these variables but redefining them in contemporary terms. This paper provides a critical review of findings from contingency-based studies over the past 20 years, deriving a series of propositions relating MCS to organizational context. The paper examines issues related to the purpose of MCS, the elements of MCS, the meaning and measurement of contextual variables, and issues concerning theory development. A final section considers the possibility that contingency-based ideas could encompass insights from a variety of theories to help understand MCS within its organizational context. # 2002 Elsevier Science Ltd. All rights reserved. 1. Introduction The three purposes of this paper are to provide a review of empirical, contingency-based research as it has developed...
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...Finance Theories Taxonomy 1 Finance Theories Taxonomy 2 Finance Theories Taxonomy This document presents a taxonomy of selected finance theories developed in past 5 decades by academics, practitioners and scholars in the United States, Europe, Asia and Latin America. A total of 14 theories and models are synthesized in this work, organized in five tables with the same structure: Theories of capital structure; capital budgeting and cost of equity; asset valuation, financial behavior and international finances. Each table contains theories organized alphabetically with an indication of its germinal or current character. The description of the theory is accompanied by current examples of empirical research that updates or contradicts the theory and additional information about limitations, scope and opportunities of research. Finance Theories Taxonomy 3 Table 1 Finance Theories Taxonomy: Theories of capital structure Theory General description Current examples of the theory Other attributes Modigliani and Miller Germinal theory of corporate finance A review of the theory by Criticism against flaws of M& M theory Theory of investment proposed by Miller and Modigliani Miller himself, offers a new (Ball, 2001) (1958) argues that “the value of a firm view about the so called ‘junk 1. Market perfection. M&M assumed is independent of its capital structure” bonds’ which were considered information was...
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...The Star Model (1) The Star Model provides a framework to assess and design organisations which successfully implement strategy. This model helps us to see the way in which all the elements of an organisation need to be aligned to deliver strategy. It is a combination of technical issues like the actual design of structures, processes, procedures and systems; and the social factors such as culture, capabilities, attitudes and values. The Star Model was developed by Jay R Galbraith and the descriptions in this paper are adapted from his book 'Designing Organisations' Strategy Strategy is the company’s formula for ‘winning’. It specifies the short and long term goals and objectives to be achieved as well as the values and mission to be pursued. It sets out the basic direction of the company. The strategy specifically outlines: * The products or services to be provided * The markets to be served * The value to be offered to the customer * The source of competitive advantage * What activities are most necessary (core work processes) It should also allow for experimentation and opportunism. Thus strategy should be shaped as broad framework to guide choices and decisions rather than a fixed set of plans and actions. Strategy should contain within it that which is fixed in terms of the core business and ideology of the organisation and that which is to change in terms of the challenging aspirations which will stimulate progress. It should never be expressed...
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