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Prof. Dr.Dina DreisbachControlling & AuditingSlide 69 (WS 2017 / 2018)3.2 Types of budgetsDifferent types of budgets can be distinguished according to differentcharacteristics.We use the following4 distinction criteria:Fixed versusFlexible budgetsFull-costs basisversus direct costingDecision-taking unit:Functional budgets – Projectbudgets – Sector budgetsBudget validity:Less than one year – one year- More than one year
Prof. Dr.Dina DreisbachControlling & AuditingSlide 70 (WS 2017 / 2018)Types of budgets (ctd)Fixed Budgets:for costsindependent of a benchmarke.g. R&D department (onlyfull costs basis)Flexible Budgets:for costsdepending on a benchmark/employment e.g. inproduction
Prof. Dr.Dina DreisbachControlling & AuditingSlide 71 (WS 2017 / 2018)Types of budgets (ctd)Full-costs basisalso indirect costs which cannot directly be influenced by the business unit;profit is the target figureDirect costingthe contribution margin for each product/service is the target figure
Prof. Dr.Dina DreisbachControlling & AuditingSlide 72 (WS 2017 / 2018)Types of budgets (ctd)Types of budgets according to the decision-taking unit:Functional budgetsProjectbudgets(best case, worst case-estimations) –Sectorbudgets(coordination often challenging)Development ofproject costsover time
Prof. Dr.Dina DreisbachControlling & AuditingSlide 73 (WS 2017 / 2018)Types of budgets (ctd)The cost assignment is often challenging in the context of project-orientedbudgeting; the graphic shows a typical assignment:K0preliminaryplanningplanningprojectplanningrealizationcontrolprojectphaseAllocation of the costs to the phases of a project.
Prof. Dr.Dina DreisbachControlling & AuditingSlide 74 (WS 2017 / 2018)Types of budgets with respect to budget validityBudget validity:The strategic plan provides theoverall framework for thelong-range planwhichhas a time frame of 5-10 years.The long-range plan includes forecasted financialstatements. Long-range planning includes amongothers: design and location of new plants,acquisition of new buildings, deletion / addition ofproduct lines, other long-term commitments.The capital budget details the plannedexpenditures for these topics.(Horngren et al. 2014, p. 295)
Prof. Dr.Dina DreisbachControlling & AuditingSlide 75 (WS 2017 / 2018)Budget validity (ctd)Budgets with a validity of just one quarter or even one month are calledrollingbudget.A rolling budget is a master budget which adds a month or a quarter in the futureasthe month or quarter just ended is dropped.Budgeting becomes an ongoing process.forecastdate 1fineforecastQ1 Y1roughforecastQ2 Y1roughforecastQ3 Y1roughforecastQ4 Y1rough newforecastQ1 Y2fineforecastQ2 Y1rough fore-cast controlQ3 Y1forecastdate 2rough newforecastQ2 Y2Y= yearQ= quarterforecast period 1forecast period 2Principle of rolling forecastrough fore-cast controlQ4 Y1rough fore-cast controlQ1 Y2
Prof. Dr.Dina DreisbachControlling & AuditingSlide 76 (WS 2017 / 2018)Types of budgets with respect to budgetvalidity

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Balance Sheet, Expense, types of budgets, Prof Dr Dina Dreisbach

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