Chpt_11_outline - CHAPTER 11 FINANCIAL MEASURES OF...

Info icon This preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 11 – FINANCIAL MEASURES OF PERFORMANCE First, a review of Chapter 10 Budgets – Budgets have three main benefits: 1. Planning 2. Coordination and communication 3. Benchmarking Master budget – The master budget has three main parts The operating budget includes – details the company’s value chain activities The capital expenditures budget – details the company’s plan for making capital investments (Chpt. 9) The financial budget – includes the financial statements not yet budgeted and a cash budget Preparing these is quite complicated. It is detailed in Chapter 10. A diagram of the chapter is below.
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
SALES BUDGET PRODUCTION BUDGET Schedule of projected sales DIRECT MATERIALS BUDGET DIRECT LABOR BUDGET MNFG. OVERHEAD BUDGET Production schedule Production schedule Production schedule (if units is the driver ) Production schedule (if DLH is the driver ) FIXED ASSETS (CAPITAL) BUDGET Production schedule CASH BUDGET Schedule of cash outlays Schedule of cash outlays Schedule of cash outlays Capital expenditures BUDGETED INCOME STATEMENT BUDGETED BALANCE SHEET Ending inventory U n i t c o s ts fo r C o G S Schedule of projected sales Retirement and depreciation schedules S, G, & A BUDGET Schedule of projected sales Depreciation on production assets Assets Cash; changes in receivables, liabilities, and equity Retained earnings Selling, general , and administrative expenses Interest expense and S, G, & A cash outlays THE BUDGETING PROCESS: Inputs and Outputs Schedule of cash receipts Now, onto Chapter 11
Image of page 2
Financial performance for cost, revenue, and profit centers Cost and revenue centers tend to rely on budgets for performance measurement. Because profit centers deal with both costs and revenues, they combine cost and revenue budgets into a budgeted net income statement. Static budget For example, Kool-Time Pools predicts they will install 8 pools in the upcoming year. Each pool is expected to earn $12,000, and each pool is expected to cost $10,500 in total (DM + DL + MOH). The master budget for Kool-Time Pools is: Variance – Assume the following actual results for Kool-Time Pools: Actual Master Budget Variance # of pools 10 8 Revenue $121,000 $96,000 CoGS ($105,000) ($84,000) Gross Profit $16,000 $12,000 Variances are either favorable or unfavorable: However, if we look closely, an overall variance does not tell the whole story. In other words, the $4,000 favorable variance for Kool-Time doesn’t tell us why we did well.
Image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern