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10_Overheads - Objectives for today Types of budgets...

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ACC 333 (Farrell), Fall 2011, Class 10 1 ACC 333 (Farrell) Fall 2011, Class 10 1 Objectives for today Types of budgets Operational budgets – Three different roles of operational budgets • Definitions • Processes Considerations when designing the processes – Conflicts across the different roles In-class activity ACC 333 (Farrell) Fall 2011, Class 10 2 Types of budgets Strategic plans Broad statement of firm’s objectives for markets, products, and pricing, and how to achieve those objectives Capital budgets Long-term plans (up to 10 years) for major investment such as plant & equipment, research & development Financial budgets Budgets of cash flow and balance sheet, usually for the upcoming year Operating budgets Projected income statements and related nonfinancial measures for the next operating cycle (usually one year)
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ACC 333 (Farrell), Fall 2011, Class 10 2 ACC 333 (Farrell) Fall 2011, Class 10 3 Major roles of operating budgets Planning (before) Details of what management hopes to accomplish and how Also a means to communicate those goals Should reflect both current economic conditions and limitations due to current resources Motivation (during) Coordinates actions of multiple individuals and groups Encourages individuals to commit to a plan of action Direction of action (i.e., take these actions as opposed to others) Strength of effort (comes from linking plan to pay, promotion) Evaluation (after) A standard of comparison for actual performance ACC 333 (Farrell) Fall 2011, Class 10 4
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