mahm8e chapter08.ab.az
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PowerPointPowerPoint Presentation byPresentation by
Gail B. WrightGail B. WrightProfessor Emeritus of AccountingProfessor Emeritus of Accounting
Bryant UniversityBryant University
© Copyright !!" #homson $outh%Western& a part of #he
#homson Corporation. #homson& the $tar 'ogo& an(
$outh%Western are tra(emar)s use( herein un(er license.
MANAGEMENT
ACCOUNTING
8th EDITION
BY
HANSEN & MOWEN
* BU+GE#,-G /0 P'A--,-G 1 C/-#0/'
STUDENT EDITION
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1. Discuss budgeting & its role in planning,
control, & decision making.
2. Define & prepare a master budget, identifyits major components, & outline the
interrelationships of its various
components.
LEARNING OBJECTIVES
Continued
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3. Describe fleible budgeting, & list the
features that a budgetary system should
have to encourage managers to engage ingoal!congruent behavior .
". #plain ho$ activity!based budgeting
$orks.
LEARNING OBJECTIVES
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P'A--,-G2 +efinition
%ooking ahead to see $hat
actions should be taken to realie
particular goals.
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C/-#0/'2 +efinition
%ooking backward, determining$hat actually happened &
comparing it $ith previously
planned outcomes.
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(here do budgets fit into
planning & control)
Budget are financial plans for
the future, identifying objectives
& the actions needed to achievethem.
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A+3A-#AGE$ /
BU+GE#,-G* budgetary system provides the follo$ing
advantages+
orces managers to plan-rovides information that can be used to
improve decision making
-rovides a standard for performance evaluationmproves communication & coordination
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!"#r$%e dec!!$ "ak!g
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4A$#E0 BU+GE#2 +efinition
Comprehensive financial plan
for organiation as a $hole.
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(hat is a /continuous0
budget)
* c$t!u$u budget is a
moving 12!month budget,
adding a month as eachmonth epires.
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"$%!g '()"$th budget
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4A$#E0 BU+GE#$2 4a5orComponents
'perating budget
Describes income generating activities of a firm
inancial budgetsDetail inflo$s & outflo$s of cash
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*!ac!a+
O#erat!g
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/PE0A#,-G BU+GE#$2 $tepsin the Process
1. ales budget
2. -roduction budget
3. Direct materials purchases budget". Direct labor budget
. 'verhead budget
. elling & administrative budget4. #nding finished goods inventory budget
5. Cost of goods sold budget
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/04U'A$2 Pro(uction Units
Except for JIT systems, production budgets
must meet sales needs & satisfy ending
inventory requirements.
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U!t t$ be #r$duced ,
E-#ected u!t a+e .
U!t ! ed!g !%et$r/ 0
U!t ! beg!!g !%et$r/
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#E6A$ 0E6& ,-C.2 +irect 4aterials
6eas 7e, nc., purchases ( direct
materials 8D9: for production ofits 6eas 7e 6!shirts+ plain 6!shirts
& ink to produce the dinosaur logo.
6eas 7e, nc., purchases ( direct
materials 8D9: for production ofits 6eas 7e 6!shirts+ plain 6!shirts
& ink to produce the dinosaur logo.
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/04U'A$2 Purchases
Direct materials purchases budget tells
amount & cost of ra materials purchased in
each period.
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D!rect "ater!a+ 1DM2 #urchaed ,
DM eeded 3$r #r$duct!$ .
DM de!red ! ed!g !%et$r/ 0
DM ! beg!!g !%et$r/
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;o$ do $e determine the
cost of finished goodsending inventory)
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;o$ do $e project income
from the operating budgets)
#stimate selling &
administrative epenses, then
transfer all information into projected income statement.
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,-A-C,A' BU+GE#$
1. Cash budget
2. >udgeted balance sheet
3. >udget for capital ependitures
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(hat is the purpose of the
cash budget)
Cah budget document the
need for cash & the ability to
repay debt.
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/04U'A2 Cash Bu(get
!ro"ecting the ending cash balance includes
cash collections, payments, & borroings &
includes minimum cash needed.
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Ed!g cah ba+ace ,
Beg!!g ba+ace .
1cah rece!#t 0 d!bure"et2 .
1cah b$rr$w!g 0 re#a/"et2
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(hy are static budgets not
good for performanceevaluation)
*ctual level of activity may
differ from the static budget
level & misrepresent performance.
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Actua+ +e%e+ $3 act!%!t/ "a/
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'E6,B'E BU+GE#2 +efinition
* budget for epected costs of
a range of activity levels.
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;o$ are budgets related to
performance evaluation)
>onuses, salary increases,
promotions are based on
achieving or beating budgettargets.
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(hat is participative
budgeting)
-articipative budgeting
involves subordinate
managers in setting budgettargets to achieve goal
congruence.
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C/-#0/''AB'E C/$#$2
+efinition
*re costs $hose level a
manager can influence
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AC#,3,#7%BA$E+ BU+GE#,-G
*ctivity!based budgeting fits *>C &
*>9 systems. >udgets are
developed for company activities to
sho$ the resources consumed. Can
be done as a fleible budget.
*ctivity!based budgeting fits *>C &
*>9 systems. >udgets are
developed for company activities to
sho$ the resources consumed. Can
be done as a fleible budget.
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AC#,3,#7 'E6,B'E BU+GE#
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E 6 8 , B
, #
E 6 8 , B
, # * % 9 !
* % 9 !
>udget can be
developed based on
different activity
drivers.
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'E6,B'E PE0/04A-CE
0EP/0#
%' "
E68,B,#E68,B,# *%99*%99
-erformance report
provides more
relevant information
$hen several activity
drivers are used.
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THE ENDTHE END
CHA4TE5 8