chap07 - David Franz, 2011 CHAPTER 7 FLEXIBLE BUDGETS,...

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© David Franz, 2011 CHAPTER 7 – FLEXIBLE BUDGETS, DIRECT-COST VARIANCES, AND MANAGEMENT CONTROL I. The Static Budget (covered in Chapter 6) versus the Flexible Budget A. Budget planning and control methods are based on variable costing (i.e. Sales-VC=Cont. Margin) not on absorption costing (i.e. Sales-COGS=Gross Margin) B. For performance evaluation compare actual financial and nonfinancial results with budgeted (expected) results - want to connect unexpected changes (variances) with the appropriate department or activity, e.g. marketing, production, research C. In Chapter 6 - Master (static) Budget based on one level of expected sales. See Exhibit 6-2 p. 190. Static Budget: prepared at the beginning of the year based on expected sales, and expected costs. D. Flexible budget is prepared at the end of the period using actual unit sales and budgeted (expected, standard) selling prices per unit , budgeted variable costs per unit , and budgeted total fixed costs. See Exhibit 7-2, p. 231.
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This note was uploaded on 09/29/2011 for the course ACCT 305 taught by Professor Franz during the Spring '07 term at S.F. State.

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chap07 - David Franz, 2011 CHAPTER 7 FLEXIBLE BUDGETS,...

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