ACC221ch09sp08

ACC221ch09sp08 - ACC221 Chapter 9 Profit Planning 1...

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1 ACC221 Chapter 9 Profit Planning 2 Objectives 1. Understand why organizations budget and the processes they use to create budgets. 2. Prepare a sales budget, including a schedule of expected cash collections. 3. Prepare a production budget. 4. Prepare a direct materials budget, including a schedule of expected cash disbursements for purchases of materials. 5. Prepare a direct labor budget.
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3 Objectives 6. Prepare a manufacturing overhead budget. 7. Prepare a selling and administrative expense budget. 8. Prepare a cash budget. 9. Prepare a budgeted income statement. 10. Prepare a budgeted balance sheet. 4 Objective 1 Understand why organizations budget and the processes they use to create budgets.
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5 The Basic Framework of Budgeting Budget - a detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period. Budgeting - the act of preparing a budget. Budgetary control - the use of budgets to control an organization’s activity. Master Budget – summary of a company’s plans that sets specific targets for sales, production, distribution, and financing activities. It represents a comprehensive expression of management’s plans for the future and how these plans are to be accomplished. 6 Planning vs. Control Planning – involves developing objectives and preparing various budgets to achieve these objectives. Control – involves the steps taken by management that attempt to ensure the objectives are attained.
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Advantages of Budgeting 1. Budgets communicate management’s plans throughout the organization. 2. Budgets force managers to think about and plan for the future. In the absence of the necessity to prepare a budget, many managers would spend all of their time dealing with emergencies. 3. The budgeting process provides a means of allocating resources to those parts of the organization where they can be used most effectively. 4. The budgeting process can uncover potential bottlenecks before they occur. 5. Budgets coordinate the activities of the entire organization by integrating the plans of its various parts. Budgeting helps to ensure that everyone in the organization is pulling in the same direction. 6. Budgets define goals and objectives that can serve as benchmarks for evaluating subsequent performance. 8
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This note was uploaded on 06/09/2008 for the course ACC 221 taught by Professor Tribunella during the Spring '08 term at Rochester.

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ACC221ch09sp08 - ACC221 Chapter 9 Profit Planning 1...

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