Section 17/18/19 Flashcards
What are the four different resources that need to be forecasted in budgeting?
1) Flexible resources => Var costs
2) Intermediate resources => fixed costs
3) Intermediate & long run increase pot’l of company
4) Long term fixed cost resources
What are the two types of budgets that make up the master budget?
1) Operating budgets - summarize levels of activities including sales, purchasing and production
2) Financial Budget - Balance sheets, income statements, cash flow, summarize projected consequences of results in operating budget
Should projection favors used for budgeting be used for performance?
No, could skew numbers to make work look better
What are the pro forma financial statements?
Cash flow statement, balance sheet and income statement presented as the output of the budgeting process
What are the six components of an operating budget?
1) Planned level of sales
2) Long term capital investments
3) Production plan
4) Materials purchasing plan
5) Labor hiring/training plan
6) Admin/staffing/research/staffing/advertising plan
What is the purpose of preparing projected balance sheets/income statements?
Estimate the financial consequences of investment/production/sales
How do planners use projected cash flow statement?
1) Plan when excess cash will be generated so it can be used for short-term investment
2) Plan how to meet cash shortages
What are some different ways to develop demand forecasts?
- Market surveys
- Statistical models based on economic activity
- Assume based on previous demand levels
Why do most accountants prepare sale/production plans on the computadora
Production plans are heavily based off the sales plan, so using computers can let us explore how changes in the sales plan will effect production
What the pros and cons of using a lot of detail in sales plans
Pros:
- Help identify bottlenecks
Cons:
- Expensive and demanding
What are the two things needed to make the production plan
The inventory policy and the sales plan
What are the two inventory systems that can be used
1) Level - Highly skilled workers and expensive equipment make producing the same amount best
2) Just-in-time - Decide how much to produce based on sales forecast for that period
What drives the Materiels Purchasing plan
- Organization’s cycle of production plan (weekly, monthly etc…)
- Supplier’s production plan
How are labor and training plans put together?
- Work backwards from when you need it to training/onboarding time
What are discretionary expenditures?
Spending not tied to sales/production numbers, rather they are chosen by senior officials
