CHAPTER 6 MASTER BUDGET AND RESPONSIBILITY ACCOUNTING 6-1 The budgeting cycle includes the following elements: a. Planning the performance of the company as a whole as well as planning the performance of its subunits. Management agrees on what is expected. b. Providing a frame of reference, a set of specific expectations against which actual results can be compared. c. Investigating variations from plans. If necessary, corrective action follows investigation. d. Planning again, in light of
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Introduction There are various strategies that are utilized to control budgets.Through managing budgets organization put themselves in better positions for the financial forecasts. The strategies include the following • Zero based • Activity based • Performance based • Cost variances and benchmarking Zero based budgeting is where expenses are analysed in the organization and the need and cost for each is justified.This strategy of budgeting results in efficient allocation
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the demand for finished goods or services is the starting point for all operating activities. It is the trigger that sets the supply chain in motion including the preparation of: * Capital budgets for plant and equipment and shorter term operating budget * Production plans * Short-term operating cash requirements * Personnel needs either full time, part time or contract basis * Capacity levels of equipment, machines, and buildings * Purchase requirements of raw materials, components
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Managerial Accounting Notes Comparison of Financial and Managerial Accounting Managerial accounting is concerned with providing information to managers—that is, the people inside an organization who direct and control its operations. In contrast, financial accounting is concerned with providing information to stockholders, creditors, and others who are outside the organization. Accounting Recording, Estimating, Organizing, Summarizing (Financial and Operational Data) Financial Accounting
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ACC 312 – Spring 2016 Comprehensive Budget Problem Tom and Linda own Hercules Condiment Company (HCC). Their unique condiment is sold by the gallon to fast food restaurants all over the Midwest. The sales price is currently $5.00 per gallon and they sold 50,000 gallons in Q4 of 2011. Sales are expected to grow 15% each quarter in 2012. Reluctantly they have given us the formula for their final product ½ gallon of Thousand Island dressing plus ½ gallon of mustard makes 1 gallon of “Secret Condiment
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Squirrel Flexible Budgets Introduction The flexible budget is useful for cash forecasting because it is based upon the estimation of a variety of activity volumes. The usefulness of a flexible budget is founded in the ability to compare potential level of performance to the expected level. It is also a better representation of the actual fluctuations that occur in the volume of activity as it is influenced by fixed and variable costs. In comparison, a static budget is based upon the planned
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Davis group Planning a Budget * Davis Service Group PLC employ around 17,000 people. * Its shares are quoted on the London Stock Exchange. * It mainly cleans and maintains things like industrial textiles, such as protective clothing. * They do this for four sectors work wear, healthcare, hotels and restaurants and general facilities. * They are a national company but only in Europe. * Careful budgeting has helped Davis to continue to be a profitable company even through the
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production costs. Improve Cash Flow Budgets are a major part of management accounting. Business owners often use budgets so they have a financial road map for future business expenditures. Many budgets are based on a company's historical financial information. Management accountants will comb through this information and create a master budget for the entire company. Larger business organizations may use several smaller budgets for divisions or departments. These individual budgets usually roll up into
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Problem 9-40 (60 minutes) 1. Sales budget for 20x0: | | | | | Units | Price | Total | Light coils | 60,000 | $120 | $ 7,200,000 | Heavy coils | 40,000 | 170 | 6,800,000 | Projected sales | | | $14,000,000 | 2. | Production budget (in units) for 20x0: | | | Light Coils | Heavy Coils | Projected sales | 60,000
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CHAPTER 6 MASTER BUDGET AND RESPONSIBILITY ACCOUNTING I. LEARNING OBJECTIVES 1. Describe what the master budget is and explain its benefits 2. Describe the advantages of budgets 3. Prepare the operating budget and its supporting schedules 4. Use computer-based financial planning models in sensitivity analysis 5. Explain kaizen budgeting and how it is used for cost management 6. Prepare an activity-based budget 7. Describe responsibility centers and responsibility
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