Budgeting as a Key Component in Short and Long- Term Planning Management Budgeting is a process of planning, setting goals and defining the objectives of the management that are needed for a given period of time. It is the tool that provides specific direction and achievements for the company. It also controls the business setting, as well as it helps the management to study the financial aspects of the business and challenges of each department, and learn how to solve these problems
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• Define the difference between forecasting and budgeting. What is the difference between an operating budget and a cash budget? The first that we need to understand is the definition of both forecasting and budgeting. Forecasting explains that it is “a planning tool that helps management in its attempts to cope with the uncertainty of the future, relying mainly on data from the past and present and analysis of trends. Forecasting starts with certain assumptions based on the management’s experience
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Capital budgeting uses cash flows not accounting profits. • To calculate the value of a capital budgeting project, use incremental cash flows, not total cash flows. • Know what items are considered in cash flow analysis for capital budgeting: ▪ incremental cash flows, ▪ indirect effects, ▪ opportunity costs, ▪ changes in net working capital, ▪ shutdown cash flows,) ▪ beaware of overhead costs. Forget sunk costs. • Know when sunk costs are considered in capital budgeting cash flows
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complex production system and significant variation in volume between high and low volume products. On anther hand, Activity-based budgeting (ABB) focuses on the costs of activities that are used to produce and sell products and services, rather than focusing on the functional department costs, as in traditional costing. In addition, Activity-based budgeting is that involves quantitative expression of the activities process of the organization reflection forecasts
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Table of Contents Executive Summary 2 Introduction 3 Issues 3 Budgeting 3 Analysis 3 Sales 3 Recommendations 4 Market Trends 4 Cutting Cost 4 Appendix 5 Budgeting 5 Actual Sales Numbers 5 Memo 6 Executive Summary Marlin Company has been in operation for only a few months. As a whole sale distributor that sells products at a cheaper price than stores it as an advantage when coming to bottom line pricing. Currently the company only sells three products which are; sinks
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Global Diploma Module: AFM Accounting For Manager Lecturer: Mr. David Goh Student name: Nguyen Ngoc Manh Student number: CT 0104754 Class: FM4 The bank balance at each month Feb March April
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Profit Planning (Budgeting) Learning Objectives 1. 2. 3. 4. 5. 6. 7. 8. 9. understand the budgeting process prepare a sales budget and a schedule of expected cash receipts prepare a production budget prepare a direct materials budget, including a schedule of expected cash disbursements for purchases prepare a direct labor budget prepare a manufacturing overhead budget prepare a selling and administrative expense budget prepare a cash budget prepare a budgeted income statement 10. prepare a budgeted
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‘When calculating variances, we in effect ignore differences of volume of output, between original budget and actual, by flexing the budget. If there were a volume difference, it is water under the bridge by the time that the variances come to be calculated’. Variance analysis typically involves the isolation of different causes for the variation in income and expenses over a given period from the budgeted standards. So for example, if direct wages had been budgeted to cost $100,000 actually
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cash flows rather than accounting income are listed in your text. Why do we focus on cash flows as opposed to net income in capital budgeting? I believe in capital budgeting, Net income is considered apparent income (forecasted), whereas Cash flow is considered true income (current). We focus on cash flow because it is more important within capital budgeting because company’s need to know what they have currently to decide if they can or cannot invest in a proposed project. 2. What is the
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Capital Budgeting: Capital budgeting is the process of determining whether or not an investment is worthwhile. Often companies will have several opportunities and must measure each one's potential in order to make a comparison and choose just one or a few. It is the process in which a business determines whether projects such as building a new plant or investing in a long-term venture are worth pursuing. Oftentimes, a prospective project's lifetime cash inflows and outflows are assessed in order
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