Ch 10 Student Using Budgets for Planning & Coordination Theme 2.pptx - Using Budgets for Planning and Coordination Contemporary Management

Ch 10 Student Using Budgets for Planning & Coordination Theme 2.pptx

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Using Budgets for Planning and Coordination Contemporary Management Accounting Issues Accounting 586 Chapter 10
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Focus of the Theme Theme 2 examines budgeting & control The last chapter examined MACS particularly with respect to
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Focus of this Chapter This chapter examines budgeting for planning and coordination The budget provides feedback and control
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Importance Budgeting is one of the most universal and visible components of a MACS A budget is a primary source of feedback and control in an organization On budget, over budget, under budget The budget is a practical expression of business strategy If you really want to see what is important in an organization, look at the budget The budgeting process can influence the budget and the implementation of strategy
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Review of Cost Concepts In the short run Fixed costs do not vary with quantity of output Fixed AKA capacity costs or joint costs Expenses on plant, property, & equipment Variable costs change or vary with quantity Only variable costs impact short run decisions In the long run All costs are variable All costs impact decisions
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Background Concepts The annual budgeting process determines planned levels of variable costs The capital budgeting process (long range budgeting) determines expenditures on plant, property, & equipment Provides capacity
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Budgeting Basics Budgeting is a tool for Planning: what we want to have happen Control: standard to which actual performance is compared (is corrective action needed?) The budget illustrates Allocation of resources over a time horizon Expressions of planned inflows & outflows of money over a time horizon Whether planned operations will meet financial goals
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Budgeting Basics The budget is a practical expression of strategy Annual budget: short run strategy Multi-year budget: long term strategy The budget communicates strategy in the organization
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