chapter 10- budget control Flashcards
static budget
a projection on budget data at one level of activity
budgetary control includes
- Developing budgets.
- Analyzing the differences between actual and budgeted results.
- Taking corrective action.
- Modifying future plans, if necessary.
flexible budgets
series of static budgets at different activity levels
- production data
- cost data
developing flexible budget steps
- Identify the activity index and the relevant range of activity.
- Identify the variable costs, and determine the budgeted variable cost per unit of activity for each cost.
- Identify the fixed costs, and determine the budgeted amount for each cost.
- Prepare the budget for selected increments of activity within the relevant range.
management by exeption
means that top management’s reviews of a budget report is focused primarily on differences between actual results and planned objectives
materiality
without quantitive guidelines management would have to investigate every budgets difference regardless of the amount
ROI return on investment
shows the effectives of the manager in using assets in their disposal
ROI formula
controllable margin / average operating assets
ROI judgemental factors
valuation of operating assets
Margin (income) measure
valuation of operating assets
Operating assets may be valued at acquisition cost, book value, appraised value, or market value.
Margin (income) measure
This measure may be controllable margin, income from operations, or net income.