Managerial Accounting Chapter 9 2014
Chapter 9
Profit Planning and Activity-Based
Budgeting
McGraw-Hill/Irwin
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning
Objective
1
9-2
Learning objective 1
• List and explain five purposes of budgeting systems. Purposes of Budgeting Systems
Budget
Budget a detailed plan, expressed in quantitative terms, that specifies how resources will be acquired and used during a specified period of time.
1. Planning
2. Facilitating
Communication and
Coordination
3. Allocating Resources
4. Controlling Profit and
Operations
5. Evaluating
Performance and
Providing Incentives
9-4
Types of Budgets
Materials
Production
Covering all phases of a company’s operations. Sales
Master
Budget
Detail
Budget
Detail
Budget
Detail
Budget
9-5
Types of Budgets
Income
Statement
Also called
Pro Forma Financial Statements
Budgeted
Financial
Statements
Balance
Sheet
Statement of
Cash Flows
9-6
Types of Budgets
Capital
Capital budgets budgets with with acquisitions acquisitions that that normally normally cover cover several several years. years. Financial
Financial budgets budgets with with financial financial resource resource acquisitions. acquisitions. Long Range Budgets
Continuous or
1999Rolling Budget2000
2001
2002
This
This budget budget is is usually usually aa twelve-month twelve-month budget budget that that rolls rolls forward forward one one month month as as the the current current month month is is completed. completed. 9-7
TYPES OF BUDGETS
• Long-range budgets cover periods longer than a year.
• Short-range budgets cover a year, a quarter, or a month
– Rolling budgets are continually updated by periodically adding a new incremental time period, such as a quarter, and dropping the period just completed.
– Also called revolving budgets or continuous budgets Learning
Objective
2
9-9
Learning objective 2
• Describe the similarities and differences in the operational budgets prepared by manufacturers, service-industry
Profit Planning and Activity-Based
Budgeting
McGraw-Hill/Irwin
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning
Objective
1
9-2
Learning objective 1
• List and explain five purposes of budgeting systems. Purposes of Budgeting Systems
Budget
Budget a detailed plan, expressed in quantitative terms, that specifies how resources will be acquired and used during a specified period of time.
1. Planning
2. Facilitating
Communication and
Coordination
3. Allocating Resources
4. Controlling Profit and
Operations
5. Evaluating
Performance and
Providing Incentives
9-4
Types of Budgets
Materials
Production
Covering all phases of a company’s operations. Sales
Master
Budget
Detail
Budget
Detail
Budget
Detail
Budget
9-5
Types of Budgets
Income
Statement
Also called
Pro Forma Financial Statements
Budgeted
Financial
Statements
Balance
Sheet
Statement of
Cash Flows
9-6
Types of Budgets
Capital
Capital budgets budgets with with acquisitions acquisitions that that normally normally cover cover several several years. years. Financial
Financial budgets budgets with with financial financial resource resource acquisitions. acquisitions. Long Range Budgets
Continuous or
1999Rolling Budget2000
2001
2002
This
This budget budget is is usually usually aa twelve-month twelve-month budget budget that that rolls rolls forward forward one one month month as as the the current current month month is is completed. completed. 9-7
TYPES OF BUDGETS
• Long-range budgets cover periods longer than a year.
• Short-range budgets cover a year, a quarter, or a month
– Rolling budgets are continually updated by periodically adding a new incremental time period, such as a quarter, and dropping the period just completed.
– Also called revolving budgets or continuous budgets Learning
Objective
2
9-9
Learning objective 2
• Describe the similarities and differences in the operational budgets prepared by manufacturers, service-industry