Budgeting Flashcards
What is the order of the framework of budgeting?
SALES, PRODUCTION, MATERIALS, labour, manufacturing -overhead, finished good inventory
Advantages of budgeting?
- Communicate plans
- Evaluate performance of managers
- Motivate managers
Weaknesses of traditional budgeting?
- Requires updates too frequently
- Time consuming
- Concentrates on cost reduction, not value creation.
What are some types of budget-gaming?
- building slack into targets
- virement (moving money from one heading to another)
- Spending spree
Who is responsible for budgeting?
Managers
Responsibility accounting
What are the types of budgets?
- Annual
- Periodic budget
- Continual budget - always 12 months ahead
What is the participative budget?
Bottom up approach
Supervisors - middle managers - managers
What is a master budget?
Single unifying statement for the organisation as a whole that specifies the organisations expectations for future periods
Consists of:
- profit or loss statement
- balance sheet
- cash budget
What is the sales budget?
A detailed schedule showing expected sales for the coming periods
What does a sales budget include?
Budgeted sales
Selling price per unit
Total sales
What is a production budget?
In quantities and takes account of inventories
What is the format of a production budget?
Budgeted sales
+ desired ending inventory
- begging inventory
= required production
What is the format of the direct materials budget?
Required production
X materials per unit (kg)
= production needs (kg)
+ desired ending inventory
- beginning inventory
= materials to be purchased
What is the format of direct labour budget?
Production
X dorect labour hours
= labour hours required
Guaranteed labour hours
Labour hours paid (min or above)
X wage rate
= total direct labour cost
What is the format of the manufacturing overhead budget?
Production
X variable mfg. OH rate
= variable mfg. OH costs
+ fixed mfg. OH costs
= total mfg. OH costs
- non-cash costs
= cash disbursements for manufacturing OH (physical cash)
What is the format of the finished goods budget?
Ending inventory in units
X unit product cost
= ending finished goods inventory
How do you calculate the production cost per unit?
Quantity. Cost. Total £.
Direct materials
Direct labour
Mfg.overhead
( total mfg oh for quarter/total labour hours required. = cost)
What is the formate of a selling and administration expense budget?
Budgeted sales
X variable selling and ads in rate
= variable expenses
+ fixed sleeping and ads expenses
= total expense
- non cash expenses
= cash payments for selling and admin
What is the format for the cash budget?
Opening cash balance
+ cash receipts
= total cash available
- disbursements:
Materials
( work out by materials to be purchased x cost of matierlas per kg)
Direct labours
Mfg. oh
Selling and admin
Equipment purchase
Dividends
= total disbursements
