Budgeted Balance Sheet Notes
The budgeted balance sheet is a projection of financial position
at the end of the budget period.
It is developed from the budgeted balance sheet for the preceding
year and the budgets for the current year.
Budgeting in Nonman
Budgeted Income Statement Notes
The budgeted income statement is the important endproduct in preparing operating budgets.
This budget indicates the expected profitability of operations
and it provides a basis for evaluating company performance.
Case Study Formula for Total Budgeted Costs Notes
From the budget, the formula shown below may be used to
determine total budgeted costs at any level of activity.
For Fox Manufacturing, fixed costs are $30,000, and total
variable costs per unit is $4.00.
Controllable versus No controllable Revenues and Costs
All costs and revenues are controllable at some level of
responsibility within the company. Under responsibility
accounting, the critical issue is whether the cost or revenue
is controllable at
Budgetary Control Notes
The use of budgets in controlling operations is known as
The centerpiece of budgetary control is the use of budget
reports that compare actual results with planned objectives.
The budget reports provide the feedb
Responsibility Accounting for Profit Centers Notes
In a profit center, the operating revenues and variable
expenses are controllable by the manager of the profit
To determine the controllability of fixed costs, however, it is
necessary to distingu
Developing the Flexible Budget Notes
To develop the flexible budget, management should take the
Identify the activity index and the relevant range of activity.
Identify the variable costs and determine the budgeted
variable cost per u
The Concept of Responsibility Accounting Notes
Responsibility accounting involves accumulating and
reporting costs (and revenues, where relevant) on the basis
of the individual manager who has the authority to make the
day-to-day decisions about the items
Static Budget Reports Notes
A static budget is appropriate in evaluating a managers
effectiveness in controlling costs when:
the actual level of activity closely approximates the master
budget activity level, and/or
the behavior of the costs in response t
Return on Investment Notes
The formula for computing ROI for an investment center,
together with assumed illustrative data is shown below.
Operating assets consist of current assets and plant assets
used in operations by the center. Average operating asse
Direct Materials Budget Notes
Because of its close proximity to its suppliers, Hayes
Company has found that an ending inventory of raw
materials equal to 10% of the next quarters production is
The manufacture of each Kitchen-mate requires 2 po
Reducing Average Operating Assets Notes
Assume that average operating assets are reduced 10% or
$500,000 ($5,000,000 x .10). Average operating assets
become $4,500,000 ($5,000,000 - $500,000). Since
controllable margin remains unchanged at $600,000, the