Chapter 8 PPT - Cost Accounting Foundations and Evolutions...

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Chapter 8 The Master Budget Cost Accounting Foundations and Evolutions Kinney, Prather, Raiborn
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Learning Objectives (1 of 2) Explain why budgeting is important Describe how strategic planning is related to budgeting Identify the starting point of a master budget and explain why it is the starting point Prepare various master budget schedules and explain how they relate to one another
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Learning Objectives (2 of 2) Explain why the cash budget is important in the master budgeting process List the benefits provided by a budget (Appendix) Explain how a budget manual facilitates the budgeting process
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Management Planning is the cornerstone of effective management
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Terms Budgeting - Formalizes plans and translates qualitative narratives into a documented, quantitative format Budget - Expresses a commitment to planned activities and resource acquisition and use
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The Planning Process Strategic Planning Tactical Planning Budget
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Strategic Planning Long-term (5 to 10 years) Top-level management Long-range goals, strategies, and policies Foundation for short-term planning Identify and gather information on key variables, both internal and external Strategic Planning
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Strategic Planning Effective strategic planning requires that  managers build plans and budgets that  integrate external considerations and  influences with internal factors Strategic Planning
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External Key Variables Competitor actions U.S. market conditions U.S. political/regulatory climate Emerging technology issues Consumer trends and attitudes International market conditions Demographics International political/regulatory climate Strategic Planning
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Tactical Plans Short-term (1 to 18 months) Top and middle management Specific objectives and means to achieve strategic plans Basis against which results can be measured Tactical Planning
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Budgets Communicate objectives, constraints, and expectations Provide financial predictions Provide nonfinancial performance goals and objectives Identify potential difficulties Determine resource allocation and constraints Permit control through budget-to-actual comparisons Budget
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Budgeting Short-term Top, middle, and operational management involvement Usable guidelines to implement strategic and tactical plans Allocates resources Standard against which performance can be measured Budget
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Chapter 8 PPT - Cost Accounting Foundations and Evolutions...

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