10014_041910_18 - 1 Always start with Sales Budget($ sales...

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Chapter 9 – Budgeting Responsibility accounting: managers help accountable for items under their control 1. Thru budgeting – future plans in quantitative form 2. Master budgeting – budgets for all areas of company A. Proforma statements (B/S, I/S, Cash Budgets) 3. Budget Process – 1 fiscal year A. 1 st quarter in months Balance: detail only by quarters B. Continuous perpetual budget 12 month budget which rolls forward 1 quarter as current quarter is complete Approach: Traditional – start with last year’s budget and adjust increase or decrease depending on plan o Incremental approach – use last year as baseline Zero-based – must justify ALL budgeted expenditures, not just changes
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Unformatted text preview: 1. Always start with Sales Budget ($ sales and units) and always include expected cash collections 2. Production Budget: Number of units produced to meet sales demand and provide Ending Inventory for each period 3. DM Budget • MUST start with production units – not sales units • Number of DM units must be purchased to meet production demands • Provide desired Ending Inventory for each period • Remember: Production + DM for a quarter o Beginning Inventory = Beginning Inventory for the first month of the quarter o Ending Inventory = Ending inventory for the last month of the quarter...
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