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