8-1 HANSEN & MOWEN Cost Management ACCOUNTING AND CONTROL.
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Transcript of 8-1 HANSEN & MOWEN Cost Management ACCOUNTING AND CONTROL.
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HANSEN & MOWENHANSEN & MOWEN
Cost ManagementCost ManagementACCOUNTING AND CONTROLACCOUNTING AND CONTROL
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Budgeting for Planning and ControlBudgeting for Planning and Control
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The Role of Budgeting in Planning and The Role of Budgeting in Planning and ControlControl 1
The Master Budget and Its
Interrelationships
The Master Budget and Its
Interrelationships
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The Role of Budgeting in Planning and The Role of Budgeting in Planning and ControlControl 1
Purposes of Budgeting:
1. Forces managers to plan.
2. Provides information to improve decision making.
3. Sets benchmarks for performance evaluation.
4. Improves communication and coordination.
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The Role of Budgeting in Planning and The Role of Budgeting in Planning and ControlControl 1
Components of the Master Budget
Components of the Master Budget
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The Role of Budgeting in Planning and The Role of Budgeting in Planning and ControlControl 1
The master budget starts with the sales forecast, which is basis for the sales budget.
All other operating and most financial budgets are generated from the sales budget.
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2Preparing the Operating BudgetPreparing the Operating Budget
The first budget is the sales budget which is based on the sales forecast.
Starting point for Production Budget
Schedule 1 (in thousands)
Starting point for Marketing Expense Budget
Goes to Budgeted Income Statement
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2Preparing the Operating BudgetPreparing the Operating Budget
Starting point for Direct Materials Purchases Budget
Schedule 2 (in thousands)
Starting point for Direct Labor Budget
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2Preparing the Operating BudgetPreparing the Operating Budget
Goes to Cost of Goods Sold Budget
Schedule 3 (in thousands)
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2Preparing the Operating BudgetPreparing the Operating Budget
Goes to Cost of Goods Sold Budget
Schedule 4 (in thousands)
Starting point for Overhead Budget
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2Preparing the Operating BudgetPreparing the Operating Budget
Goes to Cost of Goods Sold Budget
Schedule 5 (in thousands)
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aAmounts taken from Schedule 3.
bAmounts taken from Schedule 4.
cAmounts taken from Schedule 5.
dBudgeted fixed overhead (Schedule 5)/Budgeted direct labor hours (Schedule 4) = $1,280/240 = $5.33.
2Preparing the Operating BudgetPreparing the Operating Budget
Goes to Cost of Goods Sold Budget
Schedule 6 (in thousands)
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*Production needs $0.01 = 416,000 $0.01.
2Preparing the Operating BudgetPreparing the Operating Budget
Goes to Budgeted Income Statement
Schedule 7 (in thousands)
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2Preparing the Operating BudgetPreparing the Operating Budget
Goes to Budgeted Income Statement
Schedule 8 (in thousands)
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2Preparing the Operating BudgetPreparing the Operating Budget
Goes to Budgeted Income Statement
Schedule 9 (in thousands)
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2Preparing the Operating BudgetPreparing the Operating Budget
Goes to Budgeted Income Statement
Schedule 10 (in thousands)
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2Preparing the Operating BudgetPreparing the Operating Budget
Schedule 11 (in thousands)
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3Preparing the Financial BudgetPreparing the Financial Budget
Cash flows are critical to managing a business and the lifeblood of an organization. Therefore, the cash budget is one of the most important budgets in the master budget.
The Cash BudgetThe Cash BudgetThe Cash BudgetThe Cash Budget
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3Preparing the Financial BudgetPreparing the Financial Budget
(Continued on next slide)
Schedule 12 (in thousands)
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3Preparing the Financial BudgetPreparing the Financial Budget
(Continued from previous slide)
(Continued on next slide)
Schedule 12 (in thousands)
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3Preparing the Financial BudgetPreparing the Financial Budget
(Continued from previous slide)
Schedule 12 (in thousands)
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3Preparing the Financial BudgetPreparing the Financial Budget
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3Preparing the Financial BudgetPreparing the Financial Budget
Schedule 13 (in thousands)
aEnding balance from Schedule 12.
b30 percent of fourth-quarter credit sales (0.30 $800,000)—see Schedules 1 and 12.
cFrom Schedule 3 (5,000,000 lbs. $0.01).
dFrom Schedule 6.
eFrom the December 31, 2006, balance sheet.
fDecember 31, 2006, balance ($9,000,000) plus new equipment acquisition of $600,000 (see the 2006 ending balance sheet and Schedule 12).
gFrom the December 31, 2006, balance sheet and Schedules 5, 8, and 10 ($4,500,000 + $800,000 +$20,000 + $40,000).
h20 percent of fourth-quarter purchases (0.20 $520,000)—see Schedules 3 and 12.
iFrom the December 31, 2006, balance sheet.
j$6,825,000 + $894,000 (December 31, 2006, balance plus net income from Schedule 11).
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4Flexible Budgets for Planning and Flexible Budgets for Planning and ControlControl
Static budgets are master budgets that are developed around a particular level of activity.
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4Flexible Budgets for Planning and Flexible Budgets for Planning and ControlControl
Performance Report: Quarterly Production Costs Performance Report: Quarterly Production Costs (in thousands) (in thousands)
Performance Report: Quarterly Production Costs Performance Report: Quarterly Production Costs (in thousands) (in thousands)
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4Flexible Budgets for Planning and Flexible Budgets for Planning and ControlControl
Flexible budgets provide expected costs for a range of activity or the actual level of activity.
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4Flexible Budgets for Planning and Flexible Budgets for Planning and ControlControl
Flexible Production Budget (in thousands)Flexible Production Budget (in thousands)Flexible Production Budget (in thousands)Flexible Production Budget (in thousands)
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4Flexible Budgets for Planning and Flexible Budgets for Planning and ControlControl
Managers can locate possible problem areas by examining the variances revealed on a performance report that compares budgeted costs for the actual level of activity to the actual costs for the same level.
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4Flexible Budgets for Planning and Flexible Budgets for Planning and ControlControl
Actual versus Flexible Performance Report: Actual versus Flexible Performance Report: Quarterly Production Costs (in thousands)Quarterly Production Costs (in thousands)
Actual versus Flexible Performance Report: Actual versus Flexible Performance Report: Quarterly Production Costs (in thousands)Quarterly Production Costs (in thousands)
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4Flexible Budgets for Planning and Flexible Budgets for Planning and ControlControl
Managerial Performance Report: Managerial Performance Report: Quarterly Production (in thousands) Quarterly Production (in thousands)
Managerial Performance Report: Managerial Performance Report: Quarterly Production (in thousands) Quarterly Production (in thousands)
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4Flexible Budgets for Planning and Flexible Budgets for Planning and ControlControl
Managerial Performance Report: Managerial Performance Report: Quarterly Production (in thousands) Quarterly Production (in thousands)
Managerial Performance Report: Managerial Performance Report: Quarterly Production (in thousands) Quarterly Production (in thousands)
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4Flexible Budgets for Planning and Flexible Budgets for Planning and ControlControl
Managerial Performance Report: Managerial Performance Report: Quarterly Production (in thousands) Quarterly Production (in thousands)
Managerial Performance Report: Managerial Performance Report: Quarterly Production (in thousands) Quarterly Production (in thousands)
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4Flexible Budgets for Planning and Flexible Budgets for Planning and ControlControl
Activity Flexible BudgetActivity Flexible BudgetActivity Flexible BudgetActivity Flexible Budget
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4Flexible Budgets for Planning and Flexible Budgets for Planning and ControlControl
Activity-Based Performance ReportActivity-Based Performance ReportActivity-Based Performance ReportActivity-Based Performance Report
The activity-based performance report compares the budgeted costs for actual activity usage with the actual costs.
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Activity-Based BudgetsActivity-Based Budgets 5
The activity-based budget begins with output and then determines the resources necessary to created that output. It works backwards from activities and their drivers to the underlying costs.
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5Activity-Based BudgetsActivity-Based Budgets
Traditional Budget for the Secure-Care DepartmentTraditional Budget for the Secure-Care DepartmentTraditional Budget for the Secure-Care DepartmentTraditional Budget for the Secure-Care Department
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5Activity-Based BudgetsActivity-Based Budgets
Flexible Budget for the Secure-Care DepartmentFlexible Budget for the Secure-Care DepartmentFlexible Budget for the Secure-Care DepartmentFlexible Budget for the Secure-Care Department
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5Activity-Based BudgetsActivity-Based Budgets
Activity-Based Budget for the Secure-Care DepartmentActivity-Based Budget for the Secure-Care DepartmentActivity-Based Budget for the Secure-Care DepartmentActivity-Based Budget for the Secure-Care Department
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The Behavioral Dimension of The Behavioral Dimension of BudgetingBudgeting 6
Characteristics of a Good Budgetary System
Frequent feedback on performance
Monetary and nonmonetary incentives
Participative budgeting
Realistic standards
Controllability of costs
Multiple measures of performance
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End of End of Chapter 8Chapter 8