102B Cheat Sheet MT 2 - BUDGETING 1 Cash Budget Actual C < Budget C or Actual R > Budget Framework for judging perf(compare Beginning Cash ending cash

102B Cheat Sheet MT 2 - BUDGETING 1 Cash Budget Actual C <...

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BUDGETING Framework for judging perf. (compare actual & budgeted to see how well you did) Motivates managers/employees (can incentivize workers by compensating them based on the difference btwn actual & budgeted numbers make sure you’re measuring what you truly want to optimize) Promotes coordination and comm among subunits in comp (i.e. if marketing wants to have a promo then operations and merch need to know how that will change demand) Master Budget : quantitative plan for a period of time, needs numbers (not all need to be financial, can be qualitative, i.e. # of customers you want to gain). Operating Budget (best use resources) budgeted income statement Financial Budget (get $) budgeted balance sheet and budgeted state of CF Operating Budget Steps: 1. Sales Budget: (decide p & q) Units : unit sales per period Price : sales price per unit Revenue = units * price 2.Prod. budget (in units), DM usagebudget,DM purchase budget, DL budget, MOH budget, Ending inventories budget (leftovers?) Purchasing Budget: 3. COGS budget, Period costs budget (i.e fixed costs) Budgeted IS: Rev : (total units actually sold) * (selling p) Cost of sales : (^) * (VC/unit) Distribution costs : (^) * (distr. cost/unit) Total margin = (Rev) – (COS) – (Distr Costs) Other costs : fixed costs Net Income = (Total margin) – (Other costs) *Note: if revenues by quarter or cost of materials by quarter vary FIFO/LIFO!!! Financial Budget Steps: 4. Capital expenditures budget (costs that provide benefits over a # of years) Cash Flow from Operations : Revenue : total rev for period Purchase cost : total purchase costs for period from purchasing budget Distribution cost : total distribution costs for period based on units sold in period Other costs (fixed) : total FC all. to the period CFO = (R) – (purch C) – (Distr. C) – (Other C) 1. Cash Budget : Beginning Cash : ending cash from previous period (1 st period= $ invested) Cash from operations : from CFO (R-all C) Ending Cash : (Beginning cash) – (CFO/F/I) Desired min ending cash : put desired/needed ending cash for reference 2. Budgeted Balance Sheet 3. Budgeted Statement of CF IS vs. Statement CF : both important IS : tells you current income based on amount of resources actually used (i.e. cost of gas used vs. amount of money spent on gas- wouldn’t know actual amount used based off S-CF). Accounts for capital equip.

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