ACC 2

planning

the process of establishing enterprise wide objectives

budget

a formal written statement of management's plans for a specified future time period, expressed in financial terms (plan ahead, define objectives, early warning system, coordination of activities, management awareness, motivates personnel)

sales forecast

shows potential sales for the industry and the company's expected share of such sales: general economic conditions, industry trends, market research studies, anticipated advertyising and promotion, previous market share, changes in prices, and technology

participative-budgeting

bottom-to-top approach where each level of management is invited to participate in developing the budget

budgetary slack

occurs when managers intentionally undersetimate budgeted revenues or overestimate budgeted expenses in order to make it easier to obtain budget goals

long range planning

identifies long term goals and develops policies and plans to implement the strategies: less detail

master budget

is a set of interrelated budgets that constitutes a plan of action for a specified time period

operating budgets

based off the budgeted income statements: est goals for the company's sales and production per personnel

financial bugets

the capital expenditure budget, the cash budget, and the budgeted balance sheet: focus on the cash resources needed to fund expected operations and planned capital expenditures p393

sales budget

1st prepared: derived from the sales forecast

production budget

shows the units to produce to meet anticipated sales
required production units= bugeted sales units+desired FGunits-Beg FGunits

direct material budget

shows both the quantity and cost of direct materials to be purchased
required direct materials units to be purchased=direct materials units required for production+desired ending direct materials units- beg direct materials units

direct labor budget

contains the quantity(hours) and cost of direct labor necessary to meet production
total labor cost= units to be produced
directlabor time per unit
direct labor cost per hour (determined from the production budget

manufacturing overhead budget

distinguishes between variable and fixed overhead costs

selling and administratie expense budget

classifies expenses as variable or fixed

budgeted income statement

is the important end-produst of the operating budget: expected profitability of operations for the period.

cash budget

anticipated cash flows (cash receipts, cash disbursements, and financing)

cash receipts

receipts from the principal source of revenue: cash sales, and collections from recredit payments. anticipates dividends, proceeds(plant assets, investments, and company capital stock) and receipts of interest

cash disbursements section

expected cash payments: direct materials , DL, and MO, and selling and administrative expenses (projected payments for income taxes, dividends, investments, and plant assets)

financing section

expected borrowings and the repayment of the borrowed funds plus interest.

budgeted balance sheet

is a projection f financial position at the end of the budgeted period (p406)

merchandise purchases budget

shows the est cost of goods to be purchased to meet sales
req merchandise purchases= budgeted COGS+ des ending merch inv-beg merch inv

Activity based overhead rate

est overhead per activity/expected use of cost drivers per activity

ABC

leads to more cost pools, enhanced control over overhead costing, better management decisions: can be expensive and some arbitrary allocations continue

Activity based management

focuses on improving the processes and decision making (value added or non)

value added

increases the worth (engineering design, machining, assembly, painting, and packing, surgery, legal research, delivering packages

non value added

add cost to or increase the time spent on a product without increasing market value (repair, storage, moving of raw materials, assemblies, and fginv, inspections, inventory control, appointments, ads, cleaning, computer repair, ordering supplies)

unit level activities

activities performed for each unit of product

batch level

activities for each batch of products not units

product level

performed in support of an entire product line

facility level

support or sustain an entire production process