Budget Notes Oct29 accounting252

Budget Notes Oct29 accounting252 - Budgets Planning...

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10/29/2007 Budgets: Planning + control* (performance measurement) -3 levels of planning *Long-Term (3-5yr): Strategic Plan [High Level] *Short-Term (1yr): Budget (Detail) *Immediate (1month): Forecasting (Mix of LT + ST) ***Companies combine ST + Immediate into a rolling forecast -Continuous Budgeting *you have a budget for the next 12 months…Jan to Jan, then Feb to Feb..etc (always looking at the next 12 months) Planning- -employees - coordinate Mtla -> Prod B -financing ($) Control -Most common measure of performance There are 2 ways a budget gets made. 1. Top Down Budgeting- this is what you are going to spend…. 2. Bottom Up Budgeting- (judged on budget) most likely to cushion budget. 3. Participating Budgeting- Usually the most common. In-between top and bottom. Begin with bottom up, and then managers negotiate it down. 4. Driven by 3 things- 1. Sales units 2. Prior year balances 3. Assumptions 1. Sales Budget a. Production budget i. Materials (direct) ii. Labor (direct) iii. Overhead b. Assumptions (assumptions change {that’s why excel should be used} i. Sales 1.
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