Professional Documents
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PowerPoint Presentation by
Gail B. Wright
Professor Emeritus of Accounting
Bryant University
MANAGEMENT
ACCOUNTING
8th EDITION
BY
HANSEN & MOWEN
LEARNING
LEARNING OBJECTIVES
OBJECTIVES
1. Discuss budgeting & its role in planning,
control, & decision making.
2. Define & prepare a master budget, identify
its major components, & outline the
interrelationships of its various
components.
Continued
2
LEARNING
LEARNING OBJECTIVES
OBJECTIVES
3. Describe flexible budgeting, & list the
features that a budgetary system should
have to encourage managers to engage in
goal-congruent behavior.
4. Explain how activity-based budgeting
works.
LO 1
PLANNING:
PLANNING: Definition
Definition
LO 1
CONTROL:
CONTROL: Definition
Definition
LO 1
LO 1
ADVANTAGES OF
BUDGETING
A budgetary system provides the following
advantages:
Forces managers to plan
Provides information that can be used to
improve
improvedecision
decisionmaking
making
Provides a standard for performance evaluation
Improves communication & coordination
LO 2
MASTER
MASTER BUDGET:
BUDGET: Definition
Definition
LO 2
What is a continuous
budget?
A continuous budget is a
moving 12-month
moving
12-monthbudget
budget,
adding a month as each
month expires.
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LO 2
10
LO 2
Sales budget
Production budget
Direct materials purchases budget
Direct labor budget
Overhead budget
Selling & administrative budget
Ending finished goods inventory budget
Cost of goods sold budget
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LO 2
Units to be produced =
Expected unit sales +
Units in ending inventory
Units in beginning inventory
12
LO 2
13
LO 2
FORMULAS: Purchases
Direct materials purchases budget tells
amount & cost of raw materials purchased in
each period.
LO 2
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LO 2
LO 2
FINANCIAL BUDGETS
1. Cash budget
2. Budgeted balance sheet
3. Budget for capital expenditures
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LO 2
LO 2
LO 3
Actual level
may
Actual
levelofofactivity
activity
may
differ from the static budget
level & misrepresent
performance.
20
LO 3
FLEXIBLE
FLEXIBLE BUDGET:
BUDGET: Definition
Definition
21
LO 3
LO 3
What is participative
budgeting?
Participative budgeting
involves subordinate
managers in setting budget
targets to achieve goal
congruence.
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LO 3
CONTROLLABLE
CONTROLLABLE COSTS:
COSTS:
Definition
Definition
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LO 4
ACTIVITY-BASED BUDGETING
Activity-based
Activity-based budgeting
budgeting fits
fits ABC
ABC &
&
ABM
ABM systems.
systems. Budgets
Budgets are
are
developed
developed for
for company
company activities
activities to
to
show
show the
the resources
resources consumed.
consumed. Can
Can
be
be done
done as
as aa flexible
flexible budget.
budget.
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LO 4
EXHIBIT 8-10
Budget can be
developed based on
different activity
drivers.
26
LO 4
FLEXIBLE PERFORMANCE
REPORT
Performance report
provides more
relevant information
when several activity
drivers are used.
EXHIBIT 8-11
27
CHAPTER 8
THE
THE END
END
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