Ch 4, Module 5 Flashcards
define operational and tactical planning
process of determining the specific objectives and means by which strategic plans will be achieved
single use plan
apply to specific circumstances during a specific time frame
annual budget
a type of single-use tactical plan
budgets translate the strategic plan and implementatino into a period-specific operational guide.
ideal standards
represent the costs that result from perfect efficiency and effectiveness in job performance
this is the best we think we can ever do
advantage - emphasis on continuous quality improvement
disadvantage - demotivation of employees by the use of unattainable standards
currently attainable standards
costs that result from work performed by employees with appropriate training and experience ( but without extraordinary effort). Provisions are made for normal spoilage and downtime
advantage - fosters the perception that standards are reasonable
disadvantage - required use of judgment and potential manipulation
authoritative standards
set exclusively by mgt
advantage - implemented quickly and will likely include all costs
disadvantage - workers might not accept imposed standards
participative standards
set by both managers and the individuals who are held accountable to those standards
advantages - workers are more likely to accept the stds
disadvantage - -slower to implement
master budget
“annual business plan”
documents specific short term operating performance goals for a period (normally one year or less)
includes an operating (nonfinancial) budget as well as a financial budget that outlines the sources of funds and detailed plans for their expenditure
provide comprehensive and coordinated budget guidance for an org consistent with overall strategic objectives
Limitations of the annual plan/budget
master budget confined to one year at a single level of activity (when in reality, budgets can vary signficantly from actual results)
operating budget
established to describe the resources needed and the manner in which those resources will be acquired
include
- sales budgets
- production budgets
- Selling and admin budget
- personnel budgets
financial budget
define the detailed sources and uses of funds to be used in operations
- pro forma F/S
- cash budget
sales budget
the foundation (starting point)
represents the anticipated sales of the org in units and dollars
based on the sales forecast which is based on numerous factors
- past sales patterns
- general economic conditions
- change in prices
- change in product mix
production budget
prepared for each product or each department based on the amount that will be produced, stated in units
made up of amounts spent on DL, DM, and factory OH
what is required level of production based on?
inventory levels!
calculation for budgeted production
budgeted sales + desired ending inventory - beginning inventory = budgeted production
direct materials purchases budget
represents the dollar amount of purchase of DM required to sustain production requirements
calculation for units of DM to be purchased for the period
Units of DM needed for production period
+ desired end inv. units at end of the pd
- beg inv units at the start of the period
calculation for cost of DM to be purchased
units of DM to be purchased for the period x cost per unit
direct materials usage budget
cost of material used
represents the number of units of DM required for production along with the related cost of those DM
calculation of direct materials usage
beginning inventory cost
+ purchases at cost
- ending inventory at cost
direct labor budget
these anticipate the hours and rates associated with workers directly involved in meeting production requirements
calculation of DL budget
budgeted production (units) x hours (or fraction of hours) required to produce each unit = total number of hours needed x hourly wage rate = total wages
factory overhead budget
includes the fixed and variable production costs that are not direct labor or direct materials
cost of goods manufactured and sold budget
represents the sum of the budgets for each element of the manufacturing as follows
- DM
- DL
- factory OH
calculation of cost of goods manufactured
cost of goods manufactured
+ beg finished goods inv
- end finished goods inv
=COGS
