201-Wk11-Budgeting-F'10 (STUD)

201-Wk11-Budgeting-F'10 (STUD) - Mgmt. 201 - Managerial...

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Chap. 9 - page 1 Mgmt. 201 - Managerial Accounting – Week 11 Budgets Master Budgets Cash Budgets Budgeted Financial Statements Professor Thoman
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Chap. 9 - page 2 Part 2 – DECISION MAKING A. Making the decision - Using the accounting information to make good choices. How does a manager make informed decisions that will increase the firm’s profits? B. Budgeting - Planning for the effect of the firm’s decisions on the firm’s operations and earnings. Given the company’s decisions, how much income can the company expect to earn? What are the company’s targets? C. Performance evaluation - Evaluating the impact of the decisions and making revisions. How well did the company do relative to its targets? Why were targets or goals not attained? What changes should the company make? This week we will: I. Get an overview of the budgeting process: Examine a master budget Study all of the supporting budgets that are a part of the master budget II. For a sample company, construct the master budget with all of the supporting budgets. III. Discuss reasons that firms find budgeting to be critical to their success. IV. Work additional problems.
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Chap. 9 - page 3 Overview of budgets Definitions: Master Budget A formal financial statement of the predicted results for the coming year. The Master Budget includes: Sales Budget —projection of sales and sale prices Production Budget —estimates of number of units of each product to produce Manufacturing Costs Budget s—estimates of amount of inputs/resources will have to purchase to make targeted number of products Selling and Administrative Expense Budget —estimates of selling and administrative expenses Budgeted Income Statement —estimates of earnings Capital Expenditure Budget —estimates of capital purchases Budgeted Statement of Cash Flows —estimates of cash generated Budgeted Balance Sheet —estimates of year’s impact on the firm’s balance sheet Putting together a picture of what the firm expects to accomplish in the next period. Budget will reflect all of the decisions that the firm’s management has made.
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Chap. 9 - page 4 Sales Budget Prediction of sales quantities, selling prices and sales revenues Production Budget Prediction of number of units of each good to be produced Budgeted Manufacturing Costs Prediction of the amounts and costs of the inputs necessary to manufacture predicted production quantities Direct Materials Budget Direct Labor Budget Manufacturing Overhead Budget Selling and Administrative Expense Budget Prediction of all costs required to sell the product and get it to the customer; prediction of all administrative expenses Budgeted Income Statement Cash Budget Budgeted Balance Sheet
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Chap. 9 - page 5 Master Budget for the George Elliot (G.E.) Company The George Elliot Company (G. E.) is a manufacturer of large (100 pound) grindstones used by small flour mills to make specialty whole grain flours. In September of each year, G. E. constructs its Master Budget for the 4 quarters of the following year.
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201-Wk11-Budgeting-F'10 (STUD) - Mgmt. 201 - Managerial...

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