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15 Cards in this Set
- Front
- Back
Advantages of Budgeting
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1. Forces managers to plan
2. Improves decision making 3. Standard for performance evaluation 4. Better communication and coordination |
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Master Budget
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financial plan for the organization as a whole
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Continuous Budget
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moving 12 month budget
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Operating Budget
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Describe the income generating activities of a firm: sales, production, finished goods inventory; prepared first
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Financial Budgets
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Detail the cash inflows and outflows and overall financial position
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Preparing the Operating Budget
(S, P, DM, DL, OH, S&A, EI, COGS) |
1. Sales
2. Production 3. Direct materials 4. Direct labor 5. Overhead 6. Selling and administrative 7. Ending inventory 8. COGS |
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Sales Budget
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Units x selling price = budgeted sales
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Production Budget
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Units to be produced= Expected unit sales + units in ending inventory - units in beginning inventory
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Direct materials purchases budget
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Purchases = DM needed for production + desired DM in ending inventory - DM in beginning inventory
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Direct labor budget
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Units to be produced x DL time per unit = total hours needed x average wage per hour = total DL cost
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Overhead budget
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budgeted DL hours x variable OH rate = budgeted variable OH = budgeted fixed OH (includes depreciation) = Total OH
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Ending Finished Goods Inventory Budget
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Units x unit cost
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Unit Cost
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= DM/unit + DL/unit
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Overhead
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Variable (DL/unit x Var. OH rate) + Fixed (DL/unit x (Budg. Fix. OH / Budg. DL hours)
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COGS Budget
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DM used + DL used + OH = Budg. Manufacturing Costs + Beg. Finished Goods = Goods available for sale - End finished goods = Budg COGS
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