Garrison9ce_Ch09

MANAGERIAL

ACCOUNTING

Ninth Canadian Edition

GARRISON, CHESLEY, CARROLL, WEBB, LIBBY

Budgeting

Chapter 9

PowerPoint Author:

Robert G. Ducharme, MAcc, CA

University of Waterloo, School of Accounting and Finance

Copyright © 2012 McGraw-Hill Ryerson Limited

9-1

The Basic Framework of Budgeting

A budget is a detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period.

1. The act of preparing a budget is called budgeting .

2. The use of budgets to control an organization’s activity is known as budgetary control .

9-2

LO 1


Planning and Control

Planning – involves developing objectives and preparing various budgets to achieve these objectives.

Control – involves the steps taken by management that attempt to ensure the objectives are attained.

9-3

LO 1


Advantages of Budgeting

Communicate plans

Define goal and objectives

Advantages

Coordinate activities

Uncover potential bottlenecks

Think about and plan for the future

Means of allocating resources

9-4

LO 1


Responsibility Accounting

Managers should be held responsible for those items — and

only

those items — that the manager can actually control to a significant extent.

9-5

LO 1


Choosing the Budget Period

Operating Budget

2012 2013 2014 2015

The annual operating budget may be divided into quarterly or monthly budgets.

A continuous budget is a

12-month budget that rolls forward one month (or quarter) as the current month (or quarter) is completed.

LO 1


9-6

Participative (Self-Imposed) Budget

Top Management

Middle

Management

Middle

Management

Supervisor Supervisor Supervisor Supervisor

A budget is prepared with the full cooperation and participation of managers at all levels. A participative budget is also known as a particpative budget .


LO 1

9-7

Advantages of Participative Budgets

1.

Individuals at all levels of the organization are viewed as members of the team whose judgments are valued by top management.

2.

Budget estimates prepared by front-line managers are often more accurate than estimates prepared by top managers.

3.

Motivation is generally higher when individuals participate in setting their own goals than when the goals are imposed from above.

4.

A manager who is not able to meet a budget imposed from above can claim that it was unrealistic .

Participative budgets eliminate this excuse.


LO 1

9-8

Participative (Self-Imposed) Budgets

Participative (self-imposed) budgets should be reviewed by higher levels of management to prevent “budgetary slack.”

Most companies do not rely exclusively upon participative budgets in the sense that top managers usually initiate the budget process by issuing broad guidelines in terms of overall profits or sales.

9-9

LO 1


The Budget Committee

A standing committee responsible for

 overall policy matters relating to the budget

 coordinating the preparation of the budget

 resolving disputes related to the budget

 approving the final budget

9-10

LO 1


Behavioural Factors in Budgeting

The success of budgeting depends upon three important factors:

1.

Top management must be enthusiastic and committed to the budget process.

2.

3.

Top management must not use the budget to pressure employees or blame them when something goes wrong.

Highly achievable budget targets are usually preferred when managers are rewarded based on meeting budget targets.

9-11

LO 1


Zero-Based Budgeting

A zero-based budget requires managers to justify all budgeted expenditures, not just changes in the budget from the prior year.

Most managers argue that zero-based budgeting is too time consuming and costly to justify on an annual basis.

9-12

LO 1


The Budget Committee

A standing committee responsible for

 overall policy matters relating to the budget

 coordinating the preparation of the budget

9-13

LO 1


The Master Budget: An Overview

Sales budget

Ending inventory budget

Production budget

Direct materials budget

Direct labour budget

Selling and administrative budget

Manufacturing overhead budget

Cash Budget

Budgeted income statement


Budgeted balance sheet

LO 2

9-14

Budgeting Example

 Royal Company is preparing budgets for the quarter ending June 30.

 Budgeted sales for the next five months are:

April

May

20,000 units

50,000 units

June

July

August

30,000 units

25,000 units

15,000 units.

 The selling price is $10 per unit.


LO 2

9-15

The Sales Budget

The individual months of April, May, and June are summed to obtain the total projected sales in units and dollars for the quarter ended June 30 th .

9-16

LO 2


Expected Cash Collections





All sales are on account.

Royal’s collection pattern is:

70% collected in the month of sale,

25% collected in the month following sale,

5% uncollectible.

 The March 31 accounts receivable balance of

$30,000 will be collected in full.

9-17

LO 2



9-18

LO 2



9-19


From the Sales Budget for April.

LO 2


9-20


From the Sales Budget for May.

LO 2

Quick Check 

What will be the total cash collections for the quarter? a. $700,000 b. $220,000 c. $190,000 d. $905,000

9-21

LO 2


Quick Check 

What will be the total cash collections for the quarter? a. $700,000 b. $220,000 c. $190,000 d. $905,000

9-22

LO 2



9-23

LO 2


The Production Budget

Sales

Budget and

Expected

Cash

Collections

Production

Budget

Production must be adequate to meet budgeted sales and provide for sufficient ending inventory.


LO 2

9-24




The management at Royal Company wants ending inventory to be equal to 20% of the following month’s budgeted sales in units.



On March 31, 4,000 units were on hand.

Let’s prepare the production budget.

9-25

LO 2



9-26

LO 2



March 31 ending inventory


Budgeted May sales

Desired ending inventory %

Desired ending inventory

50,000

20%

10,000

LO 2

9-27

Quick Check 

What is the required production for May? a. 56,000 units b. 46,000 units c. 62,000 units d. 52,000 units

9-28

LO 2


Quick Check 

What is the required production for May? a. 56,000 units b. 46,000 units c. 62,000 units d. 52,000 units

9-29

LO 2



9-30

LO 2



9-31


Assumed ending inventory.

LO 2

The Direct Materials Budget

Production

Budget

Direct

Materials

Budget

9-32

The direct materials budget details the raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories.

LO 2



 At Royal Company, five pounds of material are required per unit of product.

 Management wants materials on hand at the end of each month equal to 10% of the following month’s production.

 On March 31, 13,000 pounds of material are on hand. Material cost is $0.40

per pound.

Let’s prepare the direct materials budget.

9-33

LO 2



9-34

From production budget


LO 2


9-35

LO 2



March 31 inventory

10% of following month’s production needs.


Calculate the materials to be purchased in May.

LO 2

9-36

Quick Check 

How much materials should be purchased in May? a. 221,500 pounds b. 240,000 pounds c. 230,000 pounds d. 211,500 pounds

9-37

LO 2


Quick Check 

How much materials should be purchased in May? a. 221,500 pounds b. 240,000 pounds c. 230,000 pounds d. 211,500 pounds

9-38

LO 2



9-39

LO 2



9-40


Assumed ending inventory

LO 2

Expected Cash Disbursement for Materials

 Royal pays

$0.40 per pound

for its materials.



One-half

of a month’s purchases is paid for in the month of purchase; the other half is paid in the following month.

 The March 31 accounts payable balance is

$12,000.

Let’s calculate expected cash disbursements.

9-41

LO 2



9-42

LO 2



9-43

Compute the expected cash disbursements for materials for the quarter.

140,000 lbs. × $.40/lb. = $56,000


LO 2

Quick Check 

What are the total cash disbursements for the quarter? a. $185,000 b. $ 68,000 c. $ 56,000 d. $201,400

9-44

LO 2


Quick Check 

What are the total cash disbursements for the quarter? a. $185,000 b. $ 68,000 c. $ 56,000 d. $201,400

9-45

LO 2



9-46

LO 2


The Direct Labour Budget

Direct

Materials

Budget

Direct

Labour

Budget

The direct labour budget is a detailed plan showing labour requirements over some specific time period.


LO 2

9-47


 At Royal, each unit of product requires 0.05 hours (3 minutes) of direct labour.



The Company has a “no layoff” policy so all employees will be paid for 40 hours of work each week.



In exchange for the “no layoff” policy, workers agree to a wage rate of $10 per hour regardless of the hours worked (no overtime pay).

 For the next three months, the direct labour workforce will be paid for a minimum of 1,500 hours per month.

Let’s prepare the direct labour budget.

LO 2


9-48


9-49


From production budget.

LO 2


9-50

LO 2



9-51


Greater of labour hours required or labour hours guaranteed.

LO 2


9-52

LO 2


Quick Check 

What would be the total direct labour cost for the quarter if the company follows its no lay-off policy, but pays $15 (time-and-a-half) for every hour worked in excess of 1,500 hours in a month? a. $79,500 b. $64,500 c. $61,000 d. $57,000

9-53

LO 2


Quick Check 

What would be the total direct labour cost for the quarter if the company follows its no lay-off policy, but pays $15 (time-and-a-half) for every hour worked in excess of 1,500 hours in a month? a. $79,500 b. $64,500 c. $61,000 d. $57,000

April May

Labor hours required 1,300

Regular hours paid 1,500

2,300

1,500

Overtime hours paid 800

Total regular hours 4,500

Total overtime hours 800

Total pay

June Quarter

1,450

1,500 4,500

800

$10 $ 45,000

$15 $ 12,000

$ 57,000

LO 2


9-54

The Manufacturing Overhead Budget

Direct

Labour

Budget

Manufacturing

Overhead

Budget

9-55

The manufacturing overhead budget provides a schedule of all costs of production other than direct materials and direct labour.


LO 2

Manufacturing Overhead Budget

 At Royal, manufacturing overhead is applied to units of product on the basis of direct labour hours.

 The variable manufacturing overhead rate is $20 per direct labour hour.

 Fixed manufacturing overhead is $50,000 per month and includes $20,000 of noncash costs

(primarily depreciation of plant assets).

Let’s prepare the manufacturing overhead budget.

9-56

LO 2



9-57


Direct Labour Budget.

LO 2


9-58

Total mfg. OH for quarter $251,000

Total labour hours required 5,050

= $49.70 per hour *

* rounded

LO 2



9-59

Depreciation is a noncash charge.


LO 2

The Ending Finished Goods Inventory Budget

9-60

Manufacturing

Overhead

Budget

Ending

Finished

Goods

Inventory

Budget

After computing unit product costs, the carrying cost of the unsold units is computed on the ending finished goods inventory budget.


LO 2

Ending Finished Goods Inventory Budget

Production costs per unit Quantity

Direct materials 5.00

lbs.

Direct labour

Manufacturing overhead

Cost

$ 0.40

Budgeted finished goods inventory

Ending inventory in units

Unit product cost

Ending finished goods inventory

Direct materials budget and information.

Total

$ 2.00


LO 2

9-61




lbs.

Direct labour


0.05

$

Cost

0.40

hrs.

$ 10.00





Direct labour budget.

Total

$ 2.00

0.50


LO 2

9-62




Direct labour


0.05

0.05

lbs.

hrs.

hrs.

$

$

$

Cost

0.40

10.00

49.70

Total

$ 2.00

0.50

2.49

$ 4.99





$ 4.99

?

Total mfg. OH for quarter $251,000

Total labour hours required 5,050

= $49.70 per hour *

LO 2


9-63




Direct labour


0.05

0.05

lbs.

$

Cost

0.40

hrs.

$ 10.00

hrs.

$ 49.70

Total

$ 2.00

0.50

2.49

$ 4.99





Production Budget.

5,000

$ 4.99

$ 24,950


LO 2

9-64

The Selling and Administrative Expense Budget

9-65

Ending

Finished

Goods

Inventory

Budget

Selling and

Administrative

Expense

Budget

The selling and administrative expense budget lists the budgeted expenses for areas other than manufacturing.


LO 2

Selling and Administrative Expense Budget

 At Royal, the selling and administrative expenses budget is divided into variable and fixed components.

 The variable selling and administrative expenses are

$0.50 per unit sold.

 Fixed selling and administrative expenses are $70,000 per month.

 The fixed selling and administrative expenses include

$10,000 in costs – primarily depreciation – that are not cash outflows of the current month.

9-66

Let’s prepare the company’s selling and administrative expense budget.

LO 2



9-67

Calculate the selling and administrative cash expenses for the quarter.


LO 2

Quick Check 

What are the total cash disbursements for selling and administrative expenses for the quarter? a. $180,000 b. $230,000 c. $110,000 d. $ 70,000

9-68

LO 2


Quick Check 

What are the total cash disbursements for selling and administrative expenses for the quarter? a. $180,000 b. $230,000 c. $110,000 d. $ 70,000

9-69

LO 2



9-70

LO 2


The Cash Budget

Selling and

Administrative

Expense

Budget

Cash

Budget

The cash budget pulls together much of the data developed in the preceding steps and displays it in four major sections: receipts, disbursements, cash excess or deficiency, and financing.

LO 2


9-71

Format of the Cash Budget

The cash budget is divided into four sections:

1. Cash receipts listing all cash inflows excluding borrowing;

2. Cash disbursements listing all payments excluding repayments of principal and interest;

3. Cash excess or deficiency; and

4. The financing section listing all borrowings, repayments and interest.


LO 2

9-72

The Cash Budget

Royal:

 Maintains a 16% open line of credit for $75,000

 Maintains a minimum cash balance of $30,000

 Borrows on the first day of the month and repays loans on the last day of the month

 Pays a cash dividend of $49,000 in April

 Purchases $143,700 of equipment in May and

$48,300 in June (both purchases paid in cash)

 Has an April 1 cash balance of $40,000

9-73

LO 2


The Cash Budget

Schedule of Expected

Cash Collections.

9-74

LO 2


The Cash Budget

9-75

Schedule of Expected

Cash Disbursements.

Direct Labour

Budget.

Manufacturing

Overhead Budget.

Selling and Administrative

Expense Budget.

LO 2


The Cash Budget

Because Royal maintains a cash balance of $30,000, the company must borrow

$50,000 on its line-of-credit.

9-76

LO 2


The Cash Budget


Ending cash balance for April is the beginning May balance.

LO 2

9-77

The Cash Budget

9-78

LO 2


Quick Check 

What is the excess (deficiency) of cash available over disbursements for June? a. $ 85,000 b. $(10,000) c. $ 75,000 d. $ 95,000

9-79

LO 2


Quick Check 

What is the excess (deficiency) of cash available over disbursements for June? a. $ 85,000 b. $(10,000) c. $ 75,000 d. $ 95,000

9-80

LO 2


The Cash Budget

$50,000 × 16% × 3/12 = $2,000

Borrowings on April 1 and repayment on June 30.


LO 2

9-81

The Budgeted Financial Statements

Cash

Budget

Budgeted

Financial

Statements

9-82

After we complete the cash budget, we can prepare the budgeted income statement and budgeted balance sheet for Royal.


LO 2

The Budgeted Income Statement

Sales Budget.

Royal Company

Budgeted Income Statement

For the Three Months Ended June 30

Sales (100,000 units @ $10)

Cost of goods sold (100,000 @ $4.99)

Gross margin

Selling and administrative expenses

Operating income

Interest expense

Net income

$ 1,000,000

499,000

501,000

260,000

241,000

2,000

$ 239,000

Ending Finished

Goods Inventory.

Selling and

Administrative

Expense Budget.

Cash Budget.

LO 2


9-83

The Budgeted Balance Sheet

Royal reported the following account balances prior to preparing its budgeted financial statements:

•

Land – $50,000

•

Common shares – $200,000

•

Retained earnings – $146,150

•

Equipment – $175,000

9-84

LO 2


Royal Company

Budgeted Balance Sheet

June 30

Current assets

Cash

Accounts receivable

Raw materials inventory

Finished goods inventory

Total current assets

Property and equipment

Land

Equipment

Total property and equipment

Total assets

$ 43,000

75,000

4,600

24,950

147,550

50,000

367,000

417,000

$ 564,550

Accounts payable

Common shares

Retained earnings

Total liabilities and equities


$ 28,400

200,000

336,150

$ 564,550

25% of June sales of

$300,000.

11,500 lbs.

at $0.40/lb.

5,000 units at $4.99 each.

9-85

50% of June purchases of $56,800.

LO 2

Royal Company

Budgeted Balance Sheet

June 30

Current assets

Cash

Accounts receivable

Raw materials inventory

Finished goods inventory

Total current assets

Property and equipment

Land

Equipment

Total property and equipment

Total assets

$ 43,000

75,000

Add: net income

4,600

Deduct: dividends

24,950

147,550

50,000

367,000

417,000

$ 564,550

$ 146,150

239,000

(49,000)

$ 336,150

9-86

Accounts payable

Common shares

Retained earnings

Total liabilities and equities


$ 28,400

200,000

336,150

$ 564,550

LO 2

Static Budgets and Performance Reports

Static budgets are prepared for a single, planned level of activity.

Performance evaluation is difficult when actual activity differs from the planned level of activity.


Hmm! Comparing static budgets with actual costs is like comparing apples and oranges.

LO 3

9-87

9-88

Flexible Budgets


May be prepared for any activity level in the relevant range.

Show costs that should have been incurred at the actual level of activity, enabling “apples to apples” cost comparisons.

Reveal variances related to cost control.

Improve performance evaluation.

Let’s look at CheeseCo.

LO 3


CheeseCo

9-89

LO 3



CheeseCo

9-90

LO 3



CheeseCo

U = Unfavourable variance

CheeseCo was unable to achieve the budgeted level of activity.

9-91

LO 3



CheeseCo

9-92

F = Favourable variance that occurs when actual costs are less than budgeted costs.


LO 3


CheeseCo

9-93

Since cost variances are favourable, have we done a good job controlling costs?


LO 3


I don’t think I can answer the question using a static budget.

Actual activity is below budgeted activity.

So, shouldn’t variable costs be lower if actual activity is lower?

9-94

LO 3



The relevant question is . . .

“How much of the favourable cost variance is due to lower activity, and how much is due to good cost control?”

To answer the question, we must the budget to the actual level of activity.

9-95

LO 3


Preparing a Flexible Budget

To a budget we need to know that:

 Total variable costs change in direct proportion to changes in activity.

 Total fixed costs remain unchanged within the relevant range. Fixed

9-96

LO 3



9-97

LO 3



Machine hours

Variable costs

Indirect labour

Indirect material

Power

Total variable cost

Fixed costs

Depreciation

Insurance

Total fixed cost

Total overhead costs

CheeseCo

Cost Total

Formula Fixed per Hour Cost

8,000

Hours

Flexible Budgets

10,000

Hours

12,000

Hours

$ 4.00

3.00

0.50

$ 7.50

8,000 10,000 12,000

Variable costs are expressed as a constant amount per hour.

$40,000 ÷ 10,000 hours is

$4.00 per hour.

$ 12,000

2,000

Fixed costs are expressed as a total amount.


LO 3

9-98


CheeseCo

Cost Total


8,000

Hours


10,000

Hours

12,000

Hours

8,000 10,000 12,000 Machine hours

Variable costs

Indirect labour


Power


$ 4.00

3.00

0.50

$ 7.50

$ 32,000

24,000

4,000

$ 60,000

Fixed costs

Depreciation

Insurance



$4.00 per hour × 8,000 hours = $32,000

$ 12,000

2,000


LO 3

9-99

9-100


Machine hours

Variable costs

Indirect labour


Power


Fixed costs

Depreciation

Insurance




CheeseCo

Cost Total


8,000

Hours


10,000

Hours

12,000

Hours

8,000 10,000 12,000

$ 4.00

3.00

0.50

$ 7.50

$ 12,000

2,000

$ 32,000

24,000

4,000

$ 60,000

$ 12,000

2,000

$ 14,000

$ 74,000

LO 3

9-101


Machine hours

Variable costs

Indirect labour


Power


Fixed costs

Depreciation

Insurance




CheeseCo

Cost Total


8,000

Hours


10,000

Hours

12,000

Hours

8,000 10,000 12,000

$ 4.00

$ 32,000

Total fixed costs

0.50

4,000 do not change in

$ 7.50

$ 60,000 the relevant range.

$ 12,000

2,000

$ 40,000

30,000

5,000

$ 75,000

$ 12,000

2,000

$ 14,000

$ 12,000

2,000

$ 14,000

$ 74,000 $ 89,000 ?

LO 3

Quick Check 

What should be the total overhead costs for the Flexible Budget at 12,000 hours?

a. $92,500.

b. $89,000.

c. $106,800.

d. $104,000.

9-102

LO 3


9-103

Quick Check 

What should be the total overhead costs for the Flexible Budget at 12,000 hours?

a. $92,500.

b. $89,000.

c. $106,800.

d. $104,000.

Total overhead cost

= $14,000 + $7.50 per hour



12,000 hours

= $14,000 + $90,000 = $104,000


LO 3

9-104



Cost Total


Machine hours

Variable costs

Indirect labour


Power


Fixed costs

Depreciation

Insurance



$ 4.00

3.00

0.50

$ 7.50

$ 12,000

2,000

8,000

Hours


10,000

Hours

12,000

Hours

8,000 10,000 12,000

$ 32,000

24,000

4,000

$ 60,000

$ 40,000

30,000

5,000

$ 75,000

$ 12,000

2,000

$ 14,000

$ 12,000

2,000

$ 14,000

$ 74,000 $ 89,000

$ 48,000

36,000

6,000

$ 90,000

$ 12,000

2,000

$ 14,000

$ 104,000

LO 3

Flexible Budget Performance Report

9-105

LO 4


9-106


CheeseCo

Flexible budget is

Cost Total prepared for the

Fixed Flexible same activity level Cost Budget

8,000 actually achieved.

Variable costs

Indirect labour


Power


$ 4.00

3.00

0.50

$ 7.50

Fixed costs

Depreciation

Insurance




$ 12,000

2,000

Actual

Results Variances

8,000 0

$ 34,000

25,500

3,800

$ 63,300

$ 12,000

2,050

$ 14,050

$ 77,350

LO 4

Quick Check 

What is the variance for indirect labour when the flexible budget for 8,000 hours is compared to the actual results?

a. $2,000 U b. $2,000 F c. $6,000 U d. $6,000 F

9-107

LO 4


Quick Check 

What is the variance for indirect labour when the flexible budget for 8,000 hours is compared to the actual results?

a. $2,000 U b. $2,000 F c. $6,000 U d. $6,000 F

9-108

LO 4


9-109


Machine hours

Variable costs

Indirect labour


Power


Fixed costs

Depreciation

Insurance




CheeseCo

Cost Total

Formula Fixed Flexible per Hour Cost Budget

8,000

$ 4.00

3.00

0.50

$ 7.50

$ 12,000

2,000

$ 32,000

Actual


8,000 0

$ 34,000

25,500

3,800

$ 63,300

$ 12,000

2,050

$ 14,050

$ 77,350

$ 2,000 U

LO 4

Quick Check 

What is the variance for indirect material when the flexible budget for 8,000 hours is compared to the actual results?

a. $1,500 U b. $1,500 F c. $4,500 U d. $4,500 F

9-110

LO 4


Quick Check 

What is the variance for indirect material when the flexible budget for 8,000 hours is compared to the actual results?

a. $1,500 U b. $1,500 F c. $4,500 U d. $4,500 F

9-111

LO 4


9-112


Machine hours

Variable costs

Indirect labour


Power


Fixed costs

Depreciation

Insurance




CheeseCo

Cost Total

Formula Fixed Flexible per Hour Cost Budget

8,000

$ 4.00

3.00

0.50

$ 7.50

$ 12,000

2,000

$ 32,000

24,000

4,000

$ 60,000

Actual


8,000 0

$ 34,000

25,500

3,800

$ 63,300

$ 12,000

2,000

$ 12,000

2,050

$ 14,000 $ 14,050

$ 74,000 $ 77,350

$ 2,000 U

1,500 U

200 F

$ 3,300 U

$ 0

50 U

50 U

$ 3,350 U

LO 4


9-113

LO 4


Static Budgets and Performance

How much of the $11,650 favourable variance is due to lower activity and how much is due to cost control?

9-114

LO 4


9-115


Overhead Variance Analysis

Static

Overhead

Budget at

10,000 Hours

$ 89,000

Let’s place the flexible budget for

8,000 hours here.

Actual

Overhead at

8,000 Hours

$ 77,350

Difference between original static budget and actual overhead = $11,650 F.


LO 4

9-116


Overhead Variance Analysis

Static

Overhead

Budget at

10,000 Hours

$ 89,000

Activity

Flexible

Overhead

Budget at

8,000 Hours

$ 74,000

Actual

Overhead at

8,000 Hours

$ 77,350

Cost control

This $15,000 F variance is due to lower activity.

This $3,350 U variance is due to poor cost control.


LO 4

9-117

Budgeting for Not-for-Profit Entities

With not-for-profit (NFP) entities, there is often no relationship between revenues expected to be received and expenditures expected to be incurred.

Examples of NFP entities: municipal, provincial and federal governments, hospitals, universities, voluntary associations, etc.

The profit motive is replaced with a service orientation in

NFP organizations. Budget information is gathered to assist in decisions regarding what programs and expenditures the entity will undertake.

LO 5


International Aspects of Budgeting

• When a multinational company enters into the budgeting process there are at least three major problems that must be dealt with . . .

1.

Fluctuations in foreign currency exchange rates.

2.

High inflation rates.

3.

Local economic conditions and governmental policies.

9-118

LO 5


End of Chapter 9

9-119


Garrison9ce_Ch09

MANAGERIAL

ACCOUNTING

Managers should be held responsible for those items — and

those items — that the manager can actually control to a significant extent.

A standing committee responsible for

$0.40 per pound

One-half

Royal reported the following account balances prior to preparing its budgeted financial statements:

The relevant question is . . .

To answer the question, we must the budget to the actual level of activity.

To a budget we need to know that:

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Garrison9ce_Ch09

MANAGERIAL

ACCOUNTING

Managers should be held responsible for those items — and

those items — that the manager can actually control to a significant extent.

A standing committee responsible for

$0.40 per pound

One-half

Royal reported the following account balances prior to preparing its budgeted financial statements:

The relevant question is . . .

To answer the question, we must the budget to the actual level of activity.

To a budget we need to know that:

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