3 Two major features of a budgetary program are 1 the accounting techniques

3 two major features of a budgetary program are 1 the

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3. Two major features of a budgetary program are (1) the accounting techniques which developed it and (2) the human factors which administer it. The human factors are far more important. The success of a budgetary system depends upon its acceptance by the company members who are affected by the budget. Without a thoroughly educated and cooperative management group at all levels of responsibility, budgets are a drain on the funds of the business and are a hindrance instead of help to efficient operations. 4. Manufacturing overhead costs are budgeted at normal operating capacity, and the costs are applied to the products using a predetermined rate. The predetermined rate is computed by dividing a factor that can be identified with both the products and the overhead into the overhead budgeted at the normal operating capacity. Budgets may also be used in costing products in a standard cost accounting system. 18-271
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Chapter 18 Application of Quantitative Techniques in Planning, Control and Decision Making - II 5. The production division operates to produce the products that are sold. Production and sales must be coordinated. Products must be manufactured so that they will be available to meet sales delivery dates. Activity of the production division will depend upon the sales that can be made. Also, the sales division is limited by the capabilities of the production department in manufacturing products. Successful operations depend upon a coordination of sales and production. 6. Labor hour required for production can be translated into labor pesos by multiplying the number of hours budgeted by the appropriate labor rates. The rates to be used will depend upon the rates established for job classifications and the policy with respect to premium pay for overtime or shift differences. 7. A long-range plan for the acquisition of plant assets is broken down and entered in the current budget as the plan unfolds. The portion of the plan which is to be executed in the next year is included in the budget for that year. 8. A budget period is not limited to any particular unit of time. At a minimum, a budget should cover at least one operating cycle. For example, a budget should not cover a period when purchasing activity is high and omit the period when sales volume and cash collection are relatively high. The budget period should encompass the entire cycle extending from the purchasing operation to the subsequent sale of the products and the realization of the sales in cash. Ordinarily, a budget of operations is prepared for a year which in turn is divided into quarters and months. Long-term budgets, such as budgets for projects or capital investments, may extend five to ten years or more into the future. 9. A rolling budget or a progressive budget or sometimes called continuous budget, is a budget which is prepared throughout the year. As one month elapses, a budget is prepared for one more month in the future. At any one time for example, the company will have a budget for one year into
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