...Capital Budgeting Ashford University Government Budgeting PPA603 June 16, 2014 Capital Budgeting The main principle of the capital budget is to channel the total distribution of state expenditures for public services. To present the greatest possible outline of current and planned capital investments and assure state governments’ ability to borrow will not increase nor decrease. This paper will discuss how the debt capacity of state is established and then discuss and assess the effect of repaying or reorganizing current debt commitment. This paper will also discuss different funding substitutes that can be used to support debt commitment. This paper will utilized the City of Toledo, whose capital budget is a 4 year plan, which focuses on roads, modernization and police hiring (City of Toledo, 2014). Capital budgeting is the development process used to regulate which of an organization’s extended term assets are worth following according to Devoy & Wise (1979). City of Toledo has one of the most comprehensive capital budgets, encompassing all new construction, including roads and public safety. The City of Toledo policy and process identifies the fiscal year for the City beginning on the first day of January and requires that on or before the fifteenth day of November of each year, the Mayor must prepare a balanced budget estimate of the expenses of conducting the affairs of the City for the following fiscal year (City of Toledo, 2014). While the capital budget...
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...USE AT YOUR OWN RISK MANAC – II VARIANCE ANALYSIS Variances are to be calculated for each department separately. The standard/Budgeted values means the Budgeted Values for actual Output. This Budget is called Flexible Budget ( How to Prepare?) Variances are always the difference between values actually used and Budgeted values for actual output. All variances are in Dollars/Rupees. Any Variance = Some Quantity * Some Price – Another quantity*another price. For any Case, follow the following steps: 1) identify causes for the variance 2) Hold some Department to be responsible for it. 3) Suggest remedial, if possible 2 Golden Rules: Cost Control is always done on Actual Output Inefficiency of one department should never be attributed/overlapped to another department. VARIANCE OUTPUT INPUT SALES Variance MATERIAL Variance LABOUR Variance OVERHEAD Variance USE AT YOUR OWN RISK 1 USE AT YOUR OWN RISK MATERIAL VARIANCE: AQ – ACTUAL Quantity SQ – Standard Quantity AP – ACTUAL Price SP – Standard Price SM – Standard Mix AM – ACTUAL Mix MATERIAL VARIANCE PRICE VARIANCE AQ@AM*(AP – SP) QUANTITY/USAGE VARIANCE SP*(AQ@AM-SQ@SM) MIX VARIANCE SP*(AQ@AM-AQ@SM) YIELD VARIANCE SP*(AQ@SM-SQ@SM) AO AO AO AO AQ AM AP AQ AM SP Price Variance AQ SM SP Mix Variance SQ SM SP Yield Variance Yield + Mix = Usage/Quantity Variance USE AT YOUR OWN RISK 2 USE AT YOUR OWN RISK LABOUR VARIANCE: AH – ACTUAL Hours SH – STANDARD Hours AM...
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...accounting system, an important component of a firm’s information system, includes budgets, data on the costs of each product and current inventory and periodic financial reports. Internal accounting systems serve two purposes: v Provide some of the knowledge necessary for planning and decision making; v Help motivate and monitor people in organizations (control). The most basic control use of accounting is to prevent fraud and embezzlement. Design and use of cost systems An internal accounting system should have the following characteristics: v Provide the information necessary to identify the most profitable products and the pricing and marketing strategies to achieve the desired volume levels; v Provide information to detect production inefficiencies to ensure that the proposed products and volumes are produced at minimum costs; v When combined with the performance evaluation and reward systems, create incentives for managers to maximize firm value; v Support the financial accounting and tax accounting reporting functions; v Contribute more to firm value than it costs. Economic Darwinism (strong organizations will survive) Two caveats must be raised concerning too strict an application of economic Darwinism: v Some surviving operating procedures can be neutral mutations. Just because a system survives does not mean that its benefits exceed its costs. Benefits less costs might be close to zero. v Just because a given system survives does not mean it is optimal. A better system...
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...DETAILS:- Author(s)- Year- Name of Journal- Volume- Issue- Page number | Authors : Yilmaz Guney - University of Hull, Gabriel Vitus Komba - Mzumbe University, School of BusinessDate: October 21, 2015. | - RESEARCH OBJECTIVES(s)-RESEARCH QUESTION(s) | This study investigates into the weak-form efficiency of the Dar es Salaam stock exchange (DSE), a frontier market, in Tanzania. | - HYPOTHESES- VARIABLES:Eg: Dependent variables, Independent variables | The weak-form efficiency of the Dar es Salaam stock exchange (DSE), a frontier market, in Tanzania.Dependent Variable: Weak-form efficiency of DSE | METHODOLOGY:Eg: Scope of study, Respondent type & number, Analysis used | The study covers the period from January 2007 to December 2014. To establish the consistency and robustness of the obtained conclusions, we employ different tests (i.e., Augmented Dickey-Fuller test, variance-ratio test, and Ranks and Sign test) to examine the hypothesis that the returns based on the price and return indices follow a random walk process | FINDINGS & DISCUSSION:Eg: Types of relationships (support or not), Reliability & variance | Wright (2000) shows that ranks and sign tests can be exact, and have better power properties than the conventional variance-ratio tests. Moreover, they demonstrate that rank-based variance-ratio tests have, generally, more power than the sign-based variance-ratio tests. Considering Lo and MacKinlay (1988) variance-ratio tests, Wright (2000) demonstrates that...
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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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...Variance Analysis To complete the following assignment, go to this week's Assignment link in the left navigation. Volume, Risk, and Price Variances Analyze the variances in the following scenario: You are the nursing administrator for a medical group that expects a severe outbreak of the flu this winter. You hire additional staff to treat the patients and administer shots. Your special project budget was for 1,000 hours of part-time nurses’ services at $40 per hour, for a total cost of $40,000. It was expected that these nurses would administer 400 flu shots and treat 1,600 flu patients. The medical group typically charges $50 for a flu shot and $80 for treating a flu patient. Actually, the group had 1,200 patients who received the flu shot and 1,400 who had the flu and received treatment. On average, it was able to collect $55 per flu shot and $70 per flu patient. Compute the volume, mix, and price revenue variances. How did things turn out for the group considering just revenues? How did they turn out from a profit perspective? Use either the approach from chapter 8 or from Appendix 8-A to solve. Clearly label the calculations of the required variances using Excel. Use formulas to calculate the three variances and format the cells to insert a comma if there is more than three numbers and round to the nearest whole number. Explain the meaning of the variances in a two page Word document. Submit to your instructor your two-to-three page Word document...
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...how much profit an entity makes depends largely on how much revenue it earns. Therefore, price and quantity of goods sold are the two most direct influence on the profit of every entity and this makes a not only accurate but also strategic pricing decision a necessity for any business that wants to thrive. There are many methods and models available for managers to use in order to fix price for a varying range of products and services, depending on the position of the company in the market and the strategy associated with the product. For a multinational company that produces electronic products, it is most likely to be a large supplier in a diverse market and great or little, its ability to influence market price is, nonetheless, certain. As a result, managers of said company will most likely take full advantage of this active power to further their strategy for the entity. Usually, the process of arriving at the selling price that is tagged with each product involves coming up with a base price or a marked up price, which are derived from cost information and then, this price will be further adjusted along with other market forces and competition so that a compromise is reached, enabling the company to earn profit and yet, the price is not so high as to drive customers away. Because of its easy-to-apply formulas, cost-plus pricing provides a simple start for managers to set up prices for new products, as Smith, Thorne and Hilton, 2006, p. 972 has suggested that “managers cannot...
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...Question 1: Capital Budgeting (12 + 4 + 4 = 20 marks) | | Forgone Rent | Fitout | Equipment | Operating Expense | Advertising | Revenue | Net Cash Flow | Time Factor | Present Value | Y0 | | -150,000 | -120,000 | | | | -270000 | 1 | -270000 | Y1 | -60,000 | | | -180,000 | -40,000 | 400,000 | 120000 | 0.917 | 110040 | Y2 | -60,000 | | | -180,000 | -40,000 | 400,000 | 120000 | 0.842 | 101040 | Y3 | -60,000 | | 36,000 | -180,000 | -40,000 | 400,000 | 156000 | 0.772 | 120432 | Y4 | -60,000 | | -130,000 | -180,000 | -40,000 | 450,000 | 40000 | 0.708 | 28320 | Y5 | -60,000 | | | -180,000 | -15,000 | 450,000 | 195000 | 0.650 | 126750 | Y6 | -60,000 | 10,000 | 39,000 | -180,000 | -15,000 | 450,000 | 244000 | 0.596 | 145424 | | | | | | | | | At 9% | | | | | | | | | | NPV | 362006 | | 1 mark | 2 marks | 2 marks | 1 mark | 1 mark | 1 mark | 1 mark | 1 mark | 2 marks | | | | | | | | | | | a. Calculate the NPV for the proposed investment [12 marks as indicated in table above] | | | 1. Current rent 5,000 per month ($5000*12 = 60,000) | 2. Café fit-out 150,000; Residual value is 10,000 after 6 years | 3. Computer equipment 120,000; residual value 36,000 after 3 years; new computers purchased at beginning of Year 4 at 130,000; residual at end of Year 6 is 39,000 | | 4. Operating expense - 180,000 all six years | | | 5. Advertising 40,000 in first 4 years and 15,000 in the 2 years after that...
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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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...S T R A T E G I C M A N A G E M E N T - Samenvattingen papers - | Naam | | 1 | Leading Change: Why Transformation Efforts Fail | x | 2 | Conceptual models and the Cuban Missile Crisis | | 2 | The Hidden Traps of Decision making | x | 3 | Control in the age of empowerment | x | 3 | The Real Budget Crisis: Stop Rewarding Forecasting and Negotiating Instead of Real Performance | x | 3 | Note on flexible budgeting and variance analysis | x | 3 | Borealis Case | | 4 | Note on Organization Structure | | 4 | Note on Organization Culture | | 4 | Designing Organizations for Performance: The Alignment of Design and Strategy | | 5. | On the folly of rewarding A, While hoping for B | | 5 | Incentives within Organizations | | 5 | Strategy to implementation: Seeking alignment | | 5 | Measuring performance | | 7 | GE’s growth strategy: The Immelt inititative | | Week 3 Control in Age of Empowerment Creativity and control don’t have to conflict Failure to control employees appropriately Managers can encourage innovation among employees while ensuring adequate control by using four powerful management systems or levers. 1- Diagnostic control systems Traditional monitors of critical performance outcomes such as costs and revenues 2- Belief systems Encompass the company’s values, mission and other statements of philosophy 3- Boundary systems Based on power of negative thinking Tell your employees what not to do 4- Interactive control...
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...Page of notes Variances COST VARIANCE is deemed unfavourable if actual>standard and vice versa DIRECT MATERIAL PRICE VARIANCE = PQ (AP-SP) PRICE VARIANCE = (PQ-AP)-(PQ-SP)…. If given a sentence such as ‘purchased 320,000kg of direct material at a 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……...
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...LO2 Understand business in terms of the elements of cost Elements of cost sales; materials; consumables; labour; overheads; capital; gross and net profits; discount costing Selling prices: product and service costing; formula to achieve a specific gross profit percentage; differential gross/net profit margins; marginal costing; effect of competition; freelance; commission; peak/off-peak trading Control of stock and cash: methods eg storage, purchasing, cash, security, reconciliation, stock-taking Taxation: income tax; Value Added Tax (VAT); corporation tax; schedules; rates; personal/capital allowances; post-tax profits, implications LO3 Be able to evaluate business accounts Trial balance: source; structure eg summary of accounts from sales, purchase and nominal ledgers Final accounts: types eg sole trader, partnerships, limited company, trading account, profit and loss account, balance sheet, adjustments for depreciation, accruals, prepayments, bad debt provision; format eg vertical, double-entry, appropriation account; assets/liabilities eg capital, fixed, current, notes to accounts Profit and cash budgets: purpose; types eg profit, cash flow, operating, master; variance analysis to include sales (volume and average spend), cost variances (raw material, labour, overhead), profit variances (gross and net) LO4 Be able to analyse business performance by the application of ratios Sales...
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...Management Models... 150 Slides Product Promotion Price Customer Service Place People Processes Powered by www.drawpack.com. All rights reserved. Key Words... Break-even – Financing Life Cycle – Economies of Scale – Elasticity – Sales Cycles – Market Potential – Portfolio Matrix – Product Model – Four P’s – Push/Pull Strategy – Marketing Mix – PDCA Cycle – SWOT – Value Chain – Ansoff Matrix – BCG Matrix – 7-S Model – Core Competencies – GE Business Screen – Nine Cell Industry – Risk/Reward Diagram – Porter’s Five Forces – Industry Competition – Generic Strategies – Geobusiness Model – Porter’s Diamond – Matrix Design – PIMS – Leavitt’s Diamond – Belbin’s Team Roles – Theory X/Y – Maslow’s Hierarchy – Herzberg’s Theory – Cultural Web – Pareto Curve – CIM Concept – Value Drivers Markets and Structure of Flow Resources Resources Money Resource markets Money Taxes, goods Services, money Services, money Manufacturer markets Taxes, goods Government markets Taxes Services Consumer markets Services, money Taxes, goods Money Goods and services Middlemen markets Money Goods and services A Company‘s Macroenvironment MACROENVIRONMENT IMMEDIATE INDUSTRY & COMPETITVE ENVIRONMENT Suppliers Substitute COMPANY Rival Firms Buyers New Entrants The Economy at large Break-even Point Value $ Sales Profit Break-even Point Variable costs Total costs Current sales level Fixed costs 0 0 Units sold Break-even...
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...CLASSIFICATION OF COSTS: Manufacturing We first classify costs according to the three elements of cost: a) Materials b) Labour c) Expenses Product and Period Costs: We also classify costs as either 1 Product costs: the costs of manufacturing our products; or 2 Period costs: these are the costs other than product costs that are charged to, debited to, or written off to the income statement each period. The classification of Product Costs: Direct costs: Direct costs are generally seen to be variable costs and they are called direct costs because they are directly associated with manufacturing. In turn, the direct costs can include: • Direct materials: plywood, wooden battens, fabric for the seat and the back, nails, screws, glue. • Direct labour: sawyers, drillers, assemblers, painters, polishers, upholsterers • Direct expense: this is a strange cost that many texts don't include; but (International Accounting Standard) IAS 2, for example, includes it. Direct expenses can include the costs of special designs for one batch, or run, of a particular set of tables and/or chairs, the cost of buying or hiring special machinery to make a limited edition of a set of chairs. Total direct costs are collectively known as Prime Costs and we can see that Product Costs are the sum of Prime costs and Overheads. Indirect Costs: Indirect costs are those costs that are incurred in the factory but that cannot...
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...ANIRUDH K MURTHY MS13A014 SHAILY DAGA MS13A058 SHRIRAM K MS13A060 SOUMY KANTA MISHRA MS13A062 VIKRAM RAMESH BABU MS13A072 4M Monitoring an Email System Explain why the firm needs to allow for variation in the underlying volume. Why not simply send engineers in search of the problem whenever e-mail use exceeds a rate of say 1000 messages? Because the number of messages per day is 7680, there is a high chance that engineers will get false alarms. So the 1000 messages limit is not feasible and even if it is, it requires aggressive monitoring. Explain why it is important to monitor both the mean and the variance of the volume of email on this system It is important to monitor both the mean and the variance because a change in mean implies a change in the number of users using the email system. This is important for diagnostic purposes and identifying the usage patterns of the system. Depending on the shift in mean, the upper control limits and the lower control limits can be modified. A shift in the variance depicts how the number of users vary every hour. By looking at this, we can find out which part of the day there are more number of users and how much deviation is a safe limit. So it is necessary to monitor both the mean and the variance. Because the computer support team is well-staffed, there is minimal cost in having someone check for a problem. On the other hand, failing to identify a problem could be serious because it would allow the problem to grow in magnitude...
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