Week 6: Budgeting and Standard Costing Discussion
Budgeting (graded)
How does a company effectively use budgets in the planning and control process?
Responses
Responses are listed below in the following order: response, author and the date and time the
response is posted.
Response
Author
Date/Time
Class Let's
Start The
Week By
Discussing
The
Following:
Professor Backman
11/29/2012 5:23:35 AM
What are budgets?
Discuss the use of budgets in planning and control.
What internal and external factors would influence your budget forecast?
I hope everyone had a great week. We are on the final stretch Keep working hard.
Thanks for the effort.
RE: Class
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By
Robert Russo
Discussing
The
Following:
12/9/2012 2:19:33 PM
A budget is a projection of what the company will use over a certain period of
time to maintain all of the different parts of each company.
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Irene Turay
Discussing
The
Following:
12/8/2012 9:26:34 PM
Planning and control has to do with manufacturing including material
scheduling
machines and people. it also has to do with coordinating suppliers and
customers.
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Irene Turay
Discussing
The
Following:
12/7/2012 7:51:56 PM
budget forcast is prepare a customer profile for your product
or service. The purpose for this is to predict a company project income and
expense.
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Stephanie Motak
Discussing
The
Following:
12/5/2012 6:05:46 PM
The capital budget is defined in chapter 9 as the process of evaluating the
investment opportunities is referred to as capital budgeting, and the final list
of approved projects.
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The Week Glen Souder
By
Discussing
12/5/2012 10:59:07 PM
The
Following:
Modified:12/5/2012 11:13 PM
Budgets are financial plans including a list of planned expenses and
revenues. Investment decisions are also referred to as budgets. In
companies, a budget allows you to plan, control and make decisions related to
the assets, resources and financial commitments of that business.
When creating a business budgets, there are many things that you need to take
into consideration. A budget is constantly changing and being modified,
because your business is constantly growing, changing, and improving.
However, there are also external influences that you need to take into
consideration when creating or modifying your business budget. There are
lots of different kinds of external influences which include Competition,
political/legal influences, taxes, social influences, technology influences
and economic influences. Internal influences affecting budgets are wages,use
of expenses, capital spending, sales/marketing funding, allocated overhead,
building expenses (rent), production, labor allocation and even procurement
spending per quarter or year.
Glen Professor Backman
12/8/2012 7:14:25 AM
How exactly does a business allow the budgeting process to trickle
down?
RE:
Glen Casey Agans
12/8/2012 5:07:50 PM
Professor,
The trickle down effect in regards to a budget is simply the
top-down approach. The senior managers are basically
creating a budget and passing it down
the hierarchical structure of the organization. Although this
form of budgeting does exist, bottom-up managing is
becoming more common place due to the knowledge of
costs incurred from individual departments.
RE:
Glen Glen Souder
12/9/2012 7:24:35 PM
Modified:12/9/2012 7:36 PM
Once the overall organizational goals, strategies and sending
are decided, the "budget process" usually flows from top to
the lower levels
One example of businesses allowing the budgeting process
to trickle down is by allocated those budgets across various
departments, manufacturing or spending. Our organization's
CFO and Finance team allocates spending across
various departments. This includes purchasing and
how expenses are controlled. Our finance team also
monitors and control against the budget using assigned GL
codes. Every quarter we obtain a AOSP (Approved
Operation Supplier Purchase) guideline which
designates spending limits from the hire level budget plan.
We see evidence of more horizontal management approval
structures being set in place today. As apposed to the old
school vertical management structure. This makes
the implementation of budget, allocation and approval easier
to "trickle down" from Executive to Mid-Level or front-line
management.
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Irene Turay
Discussing
The
Following:
12/6/2012 6:20:07 AM
Budget is an estimate or itemized of expected income and
expenses for a given period in the future.
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Mike Beckta
Discussing
The
Following:
12/6/2012 7:12:23 AM
Modified:12/6/2012 7:13 AM
Discuss the use of budgets in planning and control? The use of
budget planning and control is to set a limit for what it is going to be
the cost of doing business for the fiscal year. There are many factors
that contribute to the number that is reached, like projected sales
forecasts, current economy, fixed and variable costs of materials, and
manufacturing costs. The number that is reached needs to be some
what variable to a certain degree not to high and not to low to allow
for any projected inflation of variable and fixed costs.
Mike
Well Professor Backman
Done
12/7/2012 3:55:04 AM
Why is there an inherent conflict between the planning and control
uses of budgets?
RE:
Mike
Well Alison Richards
Done
12/8/2012 4:50:08 PM
When we think about budgets the terms planning and control
comes to mind as the entirety of the process in means
surrounding planning and controlling is built around
budgets. When budgets are used for planning one can expect
that both the communication along with the coordination
will both be enhanced. While still under planning many
things need to be taken into consideration when developing
a budget. Some of these factors stream from the involving
goals, objectives, and the specification in means of
achievement. Under control budgets being utilized in means
of providence for evaluation of performance. This
evaluation is thus compared to the various performance such
as the actual, planned, and the budgeted performances.
RE:
Mike
Well Jodi Serino
Done
12/7/2012 7:53:33 PM
Modified:12/7/2012 7:54 PM
Our reading for this week, on page 360, shows that the three
potential causes for the conflicts are that the budget was
poorly put together to begin with; that conditions might have
changed such as maybe there just wasnt as many sales as
was projected; or there was just poor managing of
operations. In either case, though the purpose of budgeting is
to help one to plan for the expenses and to do so in as cost
efficient a manner as possible, the truth of the matter is that
no matter how one plans the outcome is a gamble and not
guaranteed.
As the second reason for significant deviations expresses, it
doesnt necessarily have to be the fault of an employee. It
could simply be that the market turned out to not be what
was expected and the reasons could be inflation, or simply
that consumers just didnt want the product.
Therefore I would say that the inherent, unavoidable,
conflict between planning and control is that no matter how
much one plans ahead, the actual outcome really cannot be
controlled.
RE:
Mike
Well Mike Beckta
Done
12/7/2012 7:09:12 AM
The conflict between the planning and control uses of
the budget are derived from the employees, and their
ability to kind of throw a wrench in the budget by
wanting raises, bonuses for sales, etc. Managers
will try to plan for budget slack so that if there are
any deviations from the planned budget there will still
be room for profit.
RE:
Mike
Well Casey Agans
Done
12/8/2012 5:13:43 PM
Mike,
I certainly agree with what you said regarding
managers. After all, people can become motivated
by self interest and defy ethical standards. I recall
our course text discussing situations where
managers will shift income from one period to
another to ensure goals are more attainable and they
get their desired bonus!
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By
Leon Kiyonga
Discussing
The
Following:
12/6/2012 3:47:01 PM
Planning is another purpose of budgeting, and is arguably its
primary purpose. Budgeting allows a business to take stock
of revenue and expenses from the previous period, and judge
where the business will be in future periods. It also allows the
organization to add and remove products and services from
its plan for the future period. In larger organizations, the
budgeting process may be completed by individual business
units and compiled to form a master budget for the
organization. This allows top management to get a picture of
the entire business so they are able to better plan
accordingly.
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By
Alison Richards
Discussing
The
Following:
12/5/2012 8:31:27 PM
The term budget can be used in more than one means. When we use budget
with a business eye we look at the planned allocation of funds that is at a state
of availability for a company within each of it's departments. The ultimate
purpose of budgeting is to be able to get a grasp overspending especially in
areas that's less beneficial than the areas that are beneficial. In the results of
that given area being more beneficial then more of its assets tends to go into
this destine areas to be able to generate the income needed. In terms of
budgeting for me it means the estimation of my monthly living expenses in
reflection to bills needing to be paid and the wages that I am in receipt of.
Flexibility and inflexibility are the success means and keys to budgeting. The
overall goal of budgeting is to be to a state where more money is coming in
than the monies that are going out.
RE: Class
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By
Casey Agans
Discussing
The
Following:
12/8/2012 5:18:47 PM
Alison,
I used to work for Citi Mortgage and each interaction with a
customer involved discussing their income/expenses which can prove
to be very personal for some - especially when they know they are
operating at a deficit. What is your take on families who cannot treat
themselves to items such as theater outings but spend $7 monthly on
say, Netflix? Is each working family and their children entitled to
entertainment or is this something that should be cut out if it puts
them over their budget?
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By
Thomas Ponce
Discussing
The
Following:
12/5/2012 8:36:07 PM
Generally speaking a budget is an estimation of the revenue and expenses
over a specified future period of time. Commonly people use budgets to
control how much they spend on food or other expenses.
Budgeting in planning and control allows one to keep track of his/her
company financially. By setting caps and goals on expectations, performance,
and resources any company can thrive (well there are other factors at play
with the success of any company but let’s say it was a company that was
having a modest run).
Internally I’d have to say that staff and equipment used would influence my
budget the most. With the staff, setting expectations and quotas (depending
on the work) would drive my favorite saying “some problems you can’t solve
by throwing more people at it”. Externally the major influences would have
to be my competitors and economy. Competitors because well…I’d have to
stay competitive if I wanted to survive in any environment and the economy
simply plays a major part in anyone’s life including businesses.
RE: Class
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By
Casey Agans
Discussing
The
Following:
12/8/2012 5:20:55 PM
Is that, "The Law of Diminishing Returns?"
Thomas Professor Backman
12/6/2012 2:50:00 AM
Do you think that management will deliberately inflate or buffer a
budget so they have some flexibility?
RE:
Thomas Thomas Ponce
12/6/2012 8:07:09 PM
It really depends on how management handles the budget;
theoretically they can create a buffer by regulating certain
costs. Overhead costs like electricity, water, and gas costs
could be cut by enforcing strict rules on their usages. I can’t
imagine management doing such a thing unless they were
trying to accomplish something without the approval of
headquarters.
RE:
Thomas Nicole Rochester
12/7/2012 8:59:14 PM
I do believe management may deliberately inflate or buffer a
budget so they have some flexibility because especially in
inflating it it allows room in case of any emergencies. For
example, if office equipment becomes antiquated and all of
sudden shuts down, then there has to be money in the budget
to accommodate that.
RE:
Thomas Thomas Ponce
12/8/2012 8:39:37
PM
I thought about that Nicole but I would think that
corporate would contingency plans for those type of
situations, plans that would use a separate budget
that management (floor/warehouse managers)
wouldn’t have to calculate for. Though that’s just a
theory but I never have worked for a company that
allowed management to make such calls…unless
they were embezzling the money lol.
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By
Ashley Taylor
Discussing
The
Following:
12/5/2012 8:44:45 PM
Budget's are "A formal document that quantifies a company’s plan for
achieving its goals." (Jiambalvo 560) Budget's are used to help companies
account for spending and keep them on track so they can still turn a profit. It
helps control the company. The economy would influence a budget.
Minimum wage and any regulations. The price of product and material would
impact a budget.
Jiambalvo. Managerial Accounting, 4th Edition. John Wiley & Sons.
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By
Stacey Wilson
Discussing
The
Following:
12/4/2012 7:07:07 PM
Budgeting in planning allows for a more useful planning process because it
enhances communication and coordination with the development of a formal
plan which makes managers focus more and considers what their goals and
objectives are and how they will achieve them effectively within the budget.
In the control process they give a basis in evaluating their performance
making sure they are on the correct path and being efficient. Budgets pretty
much allow people to have a plan in how they will develop, achieve, and
control their goals.
RE: Class
Nicole Rochester
12/4/2012 9:12:46 PM
Let's Start
The Week
By
Discussing
The
Following:
Budgets are a quantitative plan of action or formal business plan (Lecture
Wk6). In other words it is a specific amount that has been allotted for
spending; however, the money must be monitored and controlled so that one
does not go over the amount they can spend.
Budgets are used in planning and control because they aid in keeping
organization within a company. By giving a specific amount for each
department/division in a company to spend over a period of time, is a method
of planning and control because each department has to look at what the
money can actually go to and they have to make sure that there isn't excessive
spending, hence control. At the previous company I worked for, each
department was given a budget which went to hiring any employees they felt
necessary, it went towards equipment, any supplies that had to be purchased,
etc.
Competition with other organizations is definitely an external factor that
would influence a budget forecast. Internally you have wages, office
supplies, rent, and the like that could influence a budget. For instance, many
business are affected by raises in rented spaces and I have seen where it has
caused business to either shut down or move because the rent had to be
increased, but the increase was so much that some companies could not afford
it.
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By
Leon Kiyonga
Discussing
The
Following:
12/4/2012 9:45:18 PM
Budgets are very effective tool to which is effectively used in
the planning and control process by the companies. Business
budgeting is a basic and essential process that allows
businesses to attain many goals in one course of action.
There are several goals that many businesses seek to achieve
(or should be trying to work toward) when they create and
implement a budget. These goals include control and
evaluation, planning, communication, and motivation.
Leon Professor Backman
12/5/2012 1:54:54 PM
What are the psychological impact of a budget that is too tight or too
loose?
How does participation in the budgeting process impact how
employees view a budget?
RE:
Leon Darion Maynor
12/5/2012 10:20:50 PM
I think psychological impact of a budget could have a wide
range of effects whether tight or loose. For example, a tight
budget could bring out the best in an employee. It could
cause his performance to increase because of the pressure or
it could cause an employee to meltdown because they are
afraid to make a mistake. In the same light, a loose budget
could increase an employees performance because they are
trying to show that they can save the company money or it
could decrease an employees performance because mentally
they know they have money to spare.
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By
Darion Maynor
Discussing
The
Following:
12/4/2012 10:12:09 PM
Whether for a business or personal use, a budget is a specific amount that has
been set aside for spending. In planning, a budget would be given to a
company, group, department, etc. for spending over a certain time frame
whether it is a month, quarter, or fiscal year. A budget is used in controlling
as a way to evaluate a manager’s performance. Budgets are used in planning
and control because they aid in keeping organization within a company. By
giving a specific amount for each department/division in a company to spend
over a period of time, is a method of planning and control because each
department has to look at what the money can actually go to and they have to
make sure that there isn't excessive spending, hence control. At the previous
company I worked for, each department was given a budget which went to
hiring any employees they felt necessary, it went towards equipment, any
supplies that had to be purchased, etc.
Darion Professor Backman
12/6/2012 2:51:13 AM
What is the first budget or forecast that a business will calculated
during the budgeting process? What factors should be considered
when forecasting this budget?
RE:
Darion Darion Maynor
12/7/2012 10:30:30 PM
The first step in the budget process involves preparation of
sales forecasts and development of a sales budget. This
budget comes first because other budgets cannot be prepared
without an estimate of sales. For example, managers
preparing the production budget must have an estimate of
future sales before they can determine what level of
production will be necessary to meet demand. One of the
major factors that contribute to budget forecasts are the
customer’s needs. When they began to estimate budgets you
have to take in an analysis of what the customer needs, how
much do you expect them to buy, and how frequently they
will buy.
Jiambalvo. Managerial Accounting
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Leon Kiyonga
Discussing
The
Following:
12/5/2012 2:48:38 AM
It is a comprehensive, formal plan that estimates the
probable expenditures and income for an organization over a
specific period. Budgeting describes the overall process of
preparing and using a budget. Since budgets are such
valuable tools for planning and control of finances, budgeting
affects nearly every type of organization-from governments
and large corporations to small businesses-as well as families
and individuals. A small business generally engages in
budgeting to determine the most efficient and effective
strategies for making money and expanding its asset base.
Budgeting can help a company use its limited financial and
human resources in a manner which best exploits existing
business opportunities.
Leon Professor Backman
12/8/2012 6:57:22 AM
To add to your post. A flexible budget can be forecasted and it helps
a business prepare for unexpected events. It forces a company to plan
for different revenue forecasts and then plan expenses around the
revenue forecast. So a flexible budget does help do a better job of
anticipating unexpected events. Thanks for the input.
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By
Mike Beckta
Discussing
The
Following:
12/5/2012 6:43:22 AM
A "budget" is the management's detailed financial outline for the
organization or a company and enhances communication and
coordination between departments. While the budgeting process can
be quite lengthy, sometimes taking several months to complete
depending on the size of the company or project.
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By
Sandrea Igess
Discussing
The
Following:
12/4/2012 10:14:35 AM
Budgets help people keep track of their incomes and
plan their expenses. Sometimes budgets need to be
revised in order to plan for big expenses or to deal
with unexpected costs. Individuals, companies, and
national governments all use budgets. Using a budget
will help you plan ahead and save money for the
future.
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Britney Womble
Discussing
The
Following:
12/4/2012 10:58:38 AM
I agree with you Sandrea
Britney Professor Backman
12/5/2012 1:55:55 PM
Once a budget is formed the budget becomes the standard in
which a business will compare the actual results to. A
business will compare the budget to actual costs or revenue
in order to determine a variance. Then the variance will be
analyzed to determine corrective action.
Do you think variance should be used to reward
performance?
RE:
Britney Cadette Batie
12/5/2012 5:38:20
PM
Prof;
I think the answer to this question is an emphatic
YES!! WHY? Because without the variance you
cannot see whether or not the manager went over
budget or not or whether the manager produced
under or over budgeted expectations. The budget is
designed to give the company a blueprint so to
speak, as to how the next period, no matter how
long or short, the company operate and gives it a
financial layout of how much to request or expect to
sell. When sales are forecasted and the manager
exceeds that number,chances are that particular
manager will receive a bonus or a promotion if
however a different manager in the same company
is expected to produce a certain number of products
then at the end of the period that manager only
produces half of what is expected then higher
management in he company needs to look at why
this is the case such as poor management, costs
hikes from suppliers or even mismanagement of
materials. Variances can show all this and then the
proper decisions can be made.
RE:
Removing Glen Souder
variance
12/7/2012 11:35:20
PM
Modified:12/7/2012 11:38 PM
In TQM and Operations. the objective is to identify
and remove any variance. The predicted or
forecasted budget should be close as possible to the
actual. Efforts to save cost under a budget can be
good, however not as a result of miscalculation or
over budgeting in your plan. "Analysis to determine
a corrective plan" is key.
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By
Britney Womble
Discussing
The
Following:
12/4/2012 10:52:49 AM
"Budgets are the formal documents that quantify a company’s plans for achieving its goals.
The entire planning and control process of many companies is built around budgets. Budgets
are useful in the planning process because they enhance communication and coordination.
The process of developing a formal plan—that is, a budget—forces managers to consider
carefully their goals and objectives and to specify means of achieving them. Budgets are
useful in the control process because they provide a basis for evaluating performance. one is
which is that managers have an incentive to pad a budget and create budget slack—that is, a
budget with targets that are easy to achieve. The second problem relates to the fact that
managers who are evaluated with respect to the budget may have an incentive to shift income
from one period to another." (Jiambalvo)
Source: Jiambalvo (). Managerial Accounting [4] (VitalSource Bookshelf),
Retrieved from http://devry.vitalsource.com/books/9781118091050/id/P10-818
Britney Professor Backman
12/8/2012 6:58:19 AM
How would the economy, interest rates, unemployment, and
competition impact a budget forecast?
RE:
Britney Casey Agans
12/8/2012 5:29:27 PM
Each of those factors could have a significant impact on a
budget, I'll use economy as an example:
If the economy takes a noise dive, then your sales may
experience the same fall. In a rising economy, sales may
actually be more than anticipated - which lets not forget also
increase variable costs.
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Rachel Labs
Discussing
The
Following:
12/2/2012 4:06:40 PM
I like describing budgets as "money maps"
Budgets help you visualize and calculate cash flows - Income and outcomes.
THey are really a planning tool for money - where to spend it within a certain
time period.
Internal factors that affect a budget forecast could be as simple as how many
people are employed - if you lost or gained employees it will throw the
outcome (how much you pay) of the budget.
An example of external factors could be a natural disaster like a hurricane that
prohibits the company to be open or make sales, etc.
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Elizabeth Erdos
Discussing
The
Following:
12/2/2012 4:15:24 PM
Budgets are useful in the control process because they provide a basis for
evaluating performance. Budgets are prepared for departments, for divisions
of a company, and for the company as a whole. The group within the
company that is responsible for approval of the budgets are the budget
committee. Ion order to created a budget forecast you need to have an
estimate of sales.
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By
Bobbie O'Neal
Discussing
The
Following:
12/3/2012 6:53:55 AM
What are budgets? A budget allows you to plan, control and make decisions related to the
assets, resources and financial commitments of the business. Without a budget, your business
may run the risk of spending more money than it is generating in revenue, or not spending
enough to allow your small business to grow. In this week's lecture we find that budgets are
used in the control process as a means of performance evaluation. To ensure that the
company is operating efficiently and heading in the right direction, it is important to evaluate
the performance of managers and the operations they are responsible for. Actual performance
is often compared to budgeted performance as part of the evaluation.
Class
and
Professor Backman
Bobbie
12/3/2012 7:59:15 PM
Considering our current economic conditions should a business or a
person create a flexible budget? What are the advantages of a flexible
budget? How does a business create flexible budgets?
RE:
Class
Stephanie Motak
and
Bobbie
12/8/2012 11:56:29 AM
A flexible budget is a set of budgeted relationships that can
be adjusted to various activity levels. They take into
consideration the fact that when production increases or
decreases, the varible costs change. On the other hand, fixed
costs will remain the same during the changes in
productivity.
RE:
Class
Nicole Rochester
and
Bobbie
12/7/2012 10:03:09 PM
Considering our current economic conditions a business or
person should create a flexible budget because of inflation
which has raised food and gas prices in particular so you
want to make sure you have enough within your budget to
cover you in case prices do increase; if prices increase then
there is a surplus and that should be held onto for
emergencies. Buy what you really need and save the rest.
RE:
Class
Casey Agans
and
Bobbie
12/8/2012 5:32:28 PM
For dividends!?
RE:
Class
Ashley Taylor
and
Bobbie
12/7/2012 10:51:10 PM
A flexible budget is just a budget that can be adjusted for the
level of activity. I do feel businesses should use a flexible
budget in times like these. The economy is starting to come
back a little.Black Friday was a bigger hit than almost
anybody had thought. My personal feeling, from my
experience as a retail employee, is this would be a great idea
for our company. They have such a tight budget that they do
not allow for barely any staffing because they base there
budget off the last couple years. However, this year we have
broken our sales almost everyday. It causes a major problem
because there are not enough people yo provide customer
service because it is incredibly busy but we did not need as
many people last year. A flexible budget would allow the
company to look at sales and adjust to allow more staffing or
more product etc. which in times like this would be a huge
help! To create a flexible budget a company would just
create different budgets with different variable costs.
Flexible
Budgets Casey Agans
12/4/2012 3:32:42 PM
A flexible budget to many would be considered ideal in a
surging economy, or an economic downturn. The benefit of
creating a flexible budget is that it allows for contingency
planning and adjustments where as a rigid budget does not
offer as much freedom. One of the more simpler ways to
showcase this is through an individual losing their
employment status yet having the means to continue his/her
current lifestyle on a planned and flexible budget. If not
enough had been saved to account for a catastrophic event,
the budget would have to be more rigid and possibly cut out
current expenses.
The following website presents an outline for establishing a
flexible budget:
http://www.accountingtools.com/flexible-budget
RE:
Flexible Bobbie O'Neal
Budgets
12/4/2012 8:06:27
PM
A flexible budget allows a business to see more
variances than a static budget. Making a static
budget involves the use of assumptions and
predictions about sales, the market, economic
conditions and other factors that impact a business
before the budget period begins; these assumptions
might not be correct. The information from the
flexible budget is based on actual results, allowing
the business to adjust the static budget for accuracy
and compare results. The business compares actual
line-by-line costs and profits from the flexible
budget with the estimations made in the static
budget.
http://smallbusiness.chron.com/would-companyflexible-budget-variance-informative-34699.html
Bobbie
Well
Professor Backman
Done
12/8/2012 6:59:35
AM
What can a business do to improve cash
collections? What are some things a
business can do to improve the cash flow
of a business?
RE:
Alison Richards
12/9/2012 8:56:48
Bobbie
Well
Done
AM
In order for a business improve on
cash collections that business
needs to come up with a way to get
customers to pay them as soon as
possible. This can be done in
numerous way, for example that
business can opt to offer discounts
to its customers who are loyal and
who pay before the date that it is
due. Saving money will help them
to encourage them to pay on-time.
There are other options such as if a
customer places an order in order
to place an order a down payment
will need to be made
beforehand. This protects the
business and improve your cash
collections just in case something
obstructs one from paying on time.
In doing so that company also
lessens its exposure. Another
option would be the establishing of
a credit policy for customers that
can be utilized for credit
limitations and the application of it
being consistently. There are
couple other options which can
slow move inventory in hopes of
conversion of cash quickly from
such mark downs. The company
can also turn to monitoring its
receivables by the identification of
become due or become overdue
called immediate action.
RE:
Class
Britney Womble
and
Bobbie
12/4/2012 10:55:24 AM
I think everyone should have a flexible budget no matter what the
economy is like. "A more appropriate analysis of performance would
make use of a flexible budget, which is a set of budget relationships that
can be adjusted to various activity levels. Thus, flexible budgets take
into account the fact that when production increases or decreases,
variable costs change." (Jiambalvo)
Source: Jiambalvo (P374). Managerial Accounting [4] (VitalSource
Bookshelf), Retrieved from
http://devry.vitalsource.com/books/9781118091050/id/P10-725
RE:
Class
Bobbie O'Neal
and
Bobbie
12/4/2012 7:46:28 PM
I think a company can create a flexible budget by
determining their fixed costs and overhead, such as rent,
taxes and employee wages. Als by determining their your
unknown or variable costs, such as production, supplies,
utilities and equipment. While they may not know exactly
how much their production or supplies will cost they
should examine the previous costs to create a reasonable
range. Compare this budget with previous expenses, costs
and income from your previous records to determine the
reasonableness of the flexible budget.
RE:
Class
Cheryl Hurdle
and
Bobbie
12/4/2012 6:08:23 PM
A small business should use flexible budgets based on the
economy because it recalculates your expenses based on
revenue. The advantage of flexible budgeting is small
business owners can consider built in expense flexibility in
areas that they can quickly change based on conditions other
than revenue.
A business can create a flexible budge by developing an
estimate or estimates of cost for one or more levels of
activity. Businesses implement flexible budgeting whenever
a reasonably strong relationship exist between total cost and
some measure of activity volume
fisher.osu.edu
Cheryl Professor Backman
12/6/2012 2:52:27
AM
Why is the cash budget so important in business?
What are the components of the cash budget? What
is more important cash flow or net income?
RE:
Cheryl Cheryl Hurdle
12/8/2012 3:23:29
PM
A cash budget shows the expected flow of
cash for a business, cash flows are crucial
to any entity and therefor the cash budget is
very important to any business entity as it
involves planning, coordination, etc.
Cash budgets contain three general parts:
Time Period
Desired Cash Position
Estimated Sales and Expenses
The time period specifies how long the
given cash budget will apply, such as six
month or two years.
The desired cash position shows how much
cash you should have on hand.
Estimated Sales and Expense represents
most complex parts of cash budgets.
Cash flow is more important that net
income because it takes cash not
accounting earnings to fund growth.
http://seekingalpha.com
RE:
Cheryl Rachel Labs
12/6/2012 6:04:43
PM
As our text book states that cash budgets
are important because they make managers
aware of potential problems ahead of time.
In this way, management buys some time
to consider taking out loans or other
funding arrangements. (Jiambalvo 370)
All components in a cash budget deal with
cash flow...focusing on out come - receipts,
material costs, labor costs, etc.
While Net income tells us how much we
have at any given point, a cash budget
maps out cash flow and helps us see cash
flow problems in advance so there is time
to do something about them.
Jiambalvo. Managerial Accounting, 4th
Edition. John Wiley & Sons.
<vbk:9781118091050#outline(10.4.11)>.
RE:
Class
Joshua Robinson
and
Bobbie
12/4/2012 5:01:19 PM
A flexible budget is a set of budget relationships that can be
adjusted to various activity levels. Thus, flexible budgets
take into account the fact that when production increases or
decreases, variable costs change.
I do think a business should be willing to use as necessary a
flexible budget. Finances are all about being flexible. The
text states that "Comparison of actual overhead costs with
the overhead costs in a flexible budget is potentially more
revealing about the manager’s ability to control costs."
Flexible budgets should be used because they present
amounts adjusted to the actual level of production.
Comparing actual performance with a static budget is not
very useful because variable costs are expected to differ
from the budget if actual production is different from the
production level indicated in the static budget.
RE:
Class
Sharon Garcia
and
Bobbie
12/5/2012 1:03:32 PM
A flexible budget seems to be the more accurate choice for
all needs. It allows for problems to occur or added expense
“just in case”. How does a Company create flexible
budgets? They
Add all the fixed cost and variable costs.
Sharon Professor Backman
12/8/2012 7:00:42
AM
What is the first budget to be forecasted? What
factors should be considered when determining that
budget?
RE: Class
Let's Start
The Week
By
Robert Kampen
Discussing
The
Following:
12/3/2012 9:51:54 AM
Planning: According to the readings, Budgets are useful in the planning
process because they enhance communication and coordination. The process
of developing a formal plan—that is, a budget—forces managers to consider
carefully their goals and objectives and to specify means of achieving them.
Budgets become the vehicle for communicating information about where the
company is heading, and they aid coordination of managers’activities. For
example, the marketing department may prepare a budget that includes
estimates of sales for each month of a future year. The production department
may use the information contained in this budget to schedule workers and
material deliveries. Thus, the necessary coordination of product sales and
product production is achieved.
Control: Budgets are useful in the control process because they provide a
basis for evaluating performance. To control a company—to make sure it is
heading in the proper direction and operating efficiently—it is essential to
assess the performance of managers and the operations for which they are
responsible. Often performance evaluation is carried out by comparing actual
performance with planned or budgeted performance.
http://devry.vitalsource.com/books/9781118091050/id/P10-10
Robert Professor Backman
12/5/2012 1:57:15 PM
What internal and external factors should a business consider when
forecasting a budget? What is the first budget that a business must
prepare? What is a master budget?
RE:
Robert Hind Ganz
12/5/2012 7:24:22 PM
A master budget should be done first and is for forecasting
all financial aspect of the business. The operational budget
should follow that which covers the day to day revenues and
expenses for the core of the business. A cash flow budget
tells you about the in and out flow of cash. The financial
budget allows you to examine where you spend and receive
money on a corporate scale.
source: http://smallbusiness.chron.com/five-types-budgetsmanagerial-accounting-50928.html
RE:
Robert Elizabeth Erdos
12/6/2012 6:21:50 AM
The master budget is a one-year budget planning document for the
firm encompassing all other budgets. It coincides with the fiscal year
of the firm and may be broken down into quarters and, further, into
months. If the firm plans for the master budget to be an ongoing
document, rolling from year to year, then normally a month is added
to the end of the budget to facilitate planning. This is called
continuous budgeting.Source http://bizfinance.about.com/od/businessbudgeting/qt/budgetplanning-what-is-a-master-budget.htm
The master budget is the first budget that you should create.
RE:
Robert Sandrea Igess
12/6/2012 4:11:36 PM
When considering a budget the internal and
external factors that should be considered when
forecasting are revenue, expenditures,money
market conditions, and legislative changes.
When revenues aren't received like originally
expected the predictions are impacted. There may
be external negative factors like economic turn
down,unexpected competition. Internal factors
may be collections and poor accounts receivable
practices.
Expenditures can include a high turnover rate
and salary/benefits can be changed with unions,
the rent could increase as well causing
unexpected.
The market conditions may change with
inflation/stock market can directly affect net
work.
Sandrea Professor Backman
12/8/2012 7:08:21
AM
How should budgets be used in performance
evaluations? Should budgets be used for
compensation?
RE:
Robert Hind Ganz
12/8/2012 12:21:14
PM
You made some excellent point, lets now consider
how to use budgets for financial compensation. I
would rewarded based of a bonus pool which was
made up of revenue and remaining money from a
budget. In most cases, a financial compensation is
based off seniority, but its also based off what you
contributed to the company. In my departments, I
would allocate extra money for financial
compensation, but for me it was more of a party
budget. The money set aside was used to motivate
employees to work harder in order to receive cash
incentives.
RE: Class
Let's Start
The Week
By
Joshua Robinson
Discussing
The
Following:
12/3/2012 12:56:19 PM
The financial plans prepared by managerial accountants are referred to as
budgets
Budgets can be used for planning. For example, a profit budget indicates
planned income, a cash-flow budget indicates planned cash inflows and
outflows, and a production budget indicates the planned quantity of
production and the expected costs.
Budgets can be used for control: For example, a budget may be prepared to
see how well management is controlling their employees and department.
They can also be used for controlling operations: Operations are evaluated to
provide information as to whether they should be changed or not (i.e.,
expanded, contracted, or modified in some way). An evaluation of an
operation can be negative even when the evaluation of the manager
responsible for the operation is basically positive.
RE: Class
Let's Start
The Week
By
Sharon Garcia
Discussing
The
Following:
12/3/2012 2:56:30 PM
A budget is managements plan for organization in financial terms.
Planning budgets are useful to help managers carefully consider their goals.
Budges are useful for planning because it help all the managers consider with
each other to show where the
Company is going. Budgets are useful in the control processes because they
are good for evaluating
performance
RE: Class
Let's Start
The Week
By
Cheryl Hurdle
Discussing
The
Following:
12/3/2012 4:58:22 PM
A budget is a formal document that quantifies a company's plan for achieving
its goal.
The budget can be defined as a financial plan showing how the organization
will acquire resources and use them in operations during a specified time
period usually once a year.
A formalized budgeting system forces managers at all levels to plan and
control the critical review of their proposed budget at higher managerial
levels raises questions about the way things are being done at lower levels.
Internal and External influences on budgeting forecast are as followed:
External
Political and legal influences
Social Influences
Technological influences
Internal
Employees
Capital
Cash flow
www.flexstudy.com
www.villagemall.com
Class
Well
Done
Professor Backman
12/3/2012 7:57:59 PM
What is the difference or similarities between budgets, goals, mission statements?
So how important is it to have participation in budgeting?
Would you be more likely to support a budget that you had input in?
Once a budget is formed does the budget become the standard?
RE:
Class
Well Hind Ganz
Done
12/4/2012 10:20:36 AM
A companies budget is also their financial goal, where as a mission statement
reminds employees why its essential to meat our goals. Participation in
budgeting is crucial because it fosters communication and helps coordinate a
organized financial plan. The budgets for one year is rarely the same for the
following year, it all depends on where the company is financially, the impact
of the economy, and what each department needs.
What
Do You Professor Backman
Think??
12/4/2012 3:41:32 PM
Class let's go beyond the initial step of budgeting. I agree it is
important to have a budget to predict things. However, if budgets
become the company standard what should a company do when
market conditions change during the year.
What can companies do to adjust a budget when market conditions
change?
What should a business do when a forecast and market conditions are
way off, which in turn causes the budget to be off?
RE:
What
Do You Robert Kampen
Think??
12/5/2012 7:52:30 AM
Consider implementing a rolling forecast. One way to match
forecasts more closely to market dynamics is by moving to a
rolling forecast. "The accountant's view is the fiscal year,
and this is why, historically, companies had a year-end
forecast," says Roemer. "But the process should not be
accounting driven; it should be business driven. And the
business doesn't end at the end of the fiscal year. If you talk
to someone in sales or production, for example, they don't
have the December 31 wall which people usually have in
accounting." Currently around 40 percent of large
companies in Europe use a rolling forecast. The technique is
less popular in the United States, where it has been adopted
by around one-third of large organizations. And that
percentage hasn't changed much since 2004, according to
Hackett.
Source:
http://businessfinancemag.com/article/what%E2%80%99swrong-forecasting-%E2%80%94-and-how-fix-it-0206
RE:
What
Do You Jodi Serino
Think??
12/5/2012 12:06:46 AM
To adjust a budget when market conditions change, one
must first account for why there is a change in order to know
how to adjust the budget.
On a positive note, say that the budget needed to be adjusted
because there was an increase in sales that was not
anticipated. Then what needs to be done is a flexible budget
that will be based not on what was anticipated, like the static
budget is, but will be based on actual sales.
The variable costs will also be adjusted but the fixed costs
will not because they are not expected to change.
Once a flexible budget is prepared a company will best
know how to proceed.
I guess this would be what to do when forecast and market
conditions are way off - a flexible budget needs to be created
instead of making judgments based off of the static budget
in which the conditions are shown to be way off
see pages 373-374 in which a performance evaluation was
being done of a manager who initially was going to be fired
because it was felt that he did not do a good job in
controlling costs because of how he did in comparison to the
static budget that was prepared. But when the administration
took into account that the reason that the amounts were
much higher than budget is because more units were
produced, they decided to do a flexible budget based off of
the actual amounts produced and what they found was that
the manager who initially was up to be fired actually saved
the company money.
Class
If You
Have A
Chance Professor Backman
Please
Read
12/8/2012 7:10:00
AM
Too add to everyone's post.
Cash flow is so important in the overall success in a
business. The timing of cash receipts will affect the
cash payment side of the business. I know of
supplier that was called by a major manufacturer.
The manufacturer told the supplier that they were
going to delay payment for the supplies by an
additional 60 days.
By doing this the manufacturer was trying to
improve their cash flow. As far as the supplier it
hurt their cash flow. This is just one example of
what companies are doing to improve cash flow.
Remember cash is "KING" in any business. Thanks
RE:
What
Do You Robert Kampen
Think??
12/5/2012 7:55:02
AM
I think youn make a great point here in that "a
flexible budget needs to be created instead of
making judgments based off of the static budget in
which the conditions are shown to be way off" I
read an article (link posted above) in which the
author says basically the same and also adds that
having a "rolling forecast" allows for much more
flexibility.
RE:
What
Do You Richard Astin
Think??
12/5/2012 11:55:55 AM
Assuming the company uses budgets, when conditions
change throughout the year, adjustments can be made to
refocus the budget for the remainder of the period. A
flexible budget would account for such changes. Take for
example the rapid increase in fuel charges a couple years
ago. Gas prices went from $2 to almost $4 and the federal
mileage rate went from (a hypothetical) $0.45 per mile to
$0.55 per mile. For a company where travel is an integral
part of the business, perhaps the budget was set at $2 *
30,000 gallons = $60,000, yet halfway through the year the
cost of gas doubled. Or, the other scenario where a
company reimburses employees for miles traveled at $0.45
per mile for about 72,000 miles in a year or $32,400 set in
the budget and then the federal price is adjusted to $0.55 per
mile halfway through the year adding an additional $3,600
expense. If the costs are related to a value that can be billed
to the customer, then prices for products can
increase. However, in the case of internal training,
computer repairs or such internal costs that must be
distributed to revenue generating departments, such
expenses need to be accounted for rapidly to avoid loosing
profit.
Here is an interesting whitepaper that discusses changing
from annual budgets to rolling forecasts:
http://www.cognizant.com/InsightsWhitepapers/Replacing-
the-Annual-Budget-with-Rolling-Forecasts.pdf
Richard Professor Backman
12/6/2012 2:53:22
AM
When looking at a master budget, what budgets
would help a business manage their cash flow?
RE:
Richard Richard Astin
12/7/2012 3:27:47
PM
First off a Sales Budget would help
determine estimates for revenue. The
Production Budget would help to determine
that the business is meeting sales demands
based on the Sales Budget. From the
Production Budget, a Direct Labor and
Direct Production Budget can be used to
keep spending in line with
estimates. Then, for various overhead,
there is the Manufacturing, Selling,
Administrative and Expense Budget that
will account for the additional costs. All of
this information can then be pulled together
to create a Budgeted Income Statement
based on the values estimated. A Capital
Acquisition budget that outlines estimated
long-term purchase expenses can be
generated. With this all in mind, and
together with the Budgeted Income
Statement, a Cash Budget can be created
that outlines the cash flows. Finally, a
Budgeted Balance Sheet can be created.
To answer your question, a Cash Budget
would be very helpful to a business
manager understand what times throughout
the year cash should be on hand and when
cash may be low.
RE:
What
Tabitha Hofstetter
Do You
12/6/2012 4:14:16
PM
Think??
Richard,
I completely agree with what you are saying
especially about the gas prices. When I first got my
license gas prices here in Texas was about 1.50 then
with in 3 years of driving I was paying 2.75 in gas.
The economy factors play a huge roll in some
companies. When the economy is slowed down like
it is now then businesses need to be able to have a
flexible budget to account for these types of
changes.
RE:
Class
Well Robert Kampen
Done
12/4/2012 3:26:14 PM
Once a budget is formed does the budget become the standard? The short
answer is YES. The company financial employees analyze company finances
and forecast events like sales, interest and expenses to create a projected
budget of all the expenses the business will incur, and all the revenues it will
create. Once this budget is formed, the company will enact it, basing all
current spending decisions off the budget in order to meet its projected levels.
Robert Professor Backman
12/8/2012 7:11:16 AM
Do you think budgets improve the performance of a business?
RE:
Robert Robert Kampen
12/8/2012 11:02:02 AM
In short...yes they do. When you manage recources and
control budget it leads to saving costs for the business.
Likewise, when the business has less costs,then it means
there is higher profit. As an example, the business has 12
employees ,when they only need 10 employee, so they may
consider laying off two staff that has least experience or are
not good at their job at all. So they will pay for the
redundancy but then they will save two staff salary as well.
Another example the marketing department used to receive
$10k but now after we have done alot of research and looked
at they are spending on and how they are spending the $10k
, we realised they dont need that much of money when they
can use the resources already available to them. so we
minimise the cost by offer them $6k instead and ask them to
use the recourses properly, again the business is saving
costs. The point is this: THE LESS THE COSTS THE
MORE THE BUSINESS MAKES PROFIT. if the business
makes profit, they would reinvest, they would offer bonus to
their staff so performance does becomes good! everyone is
happy!
RE:
Class
Well Stephanie Motak
Done
12/9/2012 9:20:30 AM
The master budget is a comprehensive planning document that incorporates a
number of individual budgets. Typically, it includes budgets for sales,
production, direct materials, direct labor, manufacturing overhead, selling and
administrative expenses, capital acquisitions, and cash receipts and
disbursements, as well as a budgeted income statement and a budgeted
balance sheet. A goal is more of an action that the company strives to
achieve. For example, the company could have a monthly or quarterly goal to
reach a certain profit number.
RE:
Class
Well Nicole Rochester
Done
12/9/2012 4:58:04 PM
Budgets are monetary goals that an organization desires to achieve.
Goals are accomplishments that a company sets in order to gain profit as well
as maintain organizational integrity.
Mission statements is a clause that states the organizational goals; it informs
stakeholders what the company desires to accomplish and what they stand
for.
It is highly important to have participation in budgeting because budgeting
helps to achieve the goals the company has made and helps it to keep in line
with its mission.
I believe once a budget is formed it becomes standard, but eventually as the
company grows and increases in revenue there will have to be some changes
made to the budget to accomodate for either up-to-date office equipment,
hiring new employees, etc.
Planning
and
Control
Cadette Batie
12/3/2012 8:12:09 PM
Prof and Class;
Planning is exactly what you think it is. Planning is the process that provides the
framework for making decisions by setting goals, objectives, and strategies. It is
aimed at the future with the present decision making.
RE:
Planning
Bobbie O'Neal
and
Control
12/4/2012 8:55:13 PM
Cadette, I agree planning means setting performance expectations and goals
for groups and individuals to channel their efforts toward achieving
organizational objectives. It also includes the measures that will be used to
determine whether expectations and goals are being met, also what needs to
be done, why it needs to be done, and how well it should be done.
Class
You Are
Off To A
Professor Backman
Great
Start.
Thanks
12/4/2012 3:40:19 PM
What are the psychological aspects of budgeting?
Can budgets be too tight or to loose?
What are some of the problems with budgeting that you have seen at work? Provide
some practical examples of how your company budgets.
RE:
Class
Elizabeth Erdos
You Are
12/4/2012 5:15:00 PM
Off To
A Great
Start.
Thanks
I think when making a budget people get a little carried away and start
trimming where they shouldn't just to save a bit of money.
Budgets can be too tight or too lose, I think you should always leave room
one way or another for accidents or for unforeseen things.
Some of the problems I've seen is people getting to far ahead of themselves
and not thinking about how the company (employees) will handle the budget
cuts. When they start getting into pay cuts for employees they have to think
about morale and how the workers are going to handle it. Some will last
through the tough cuts, but not everyone will.
RE:
Class
You Are
Off To William Hines Iv
A Great
Start.
Thanks
12/6/2012 10:01:41 PM
One of the psychological aspects of budgeting is fear. A manager may fear
that if they are not able to perform up to the budget that they may lose their
incentives or even their job. This can lead to the next psychological problems
such as cheating or lying. The budget creator may end up generating a budget
that may create such a cushion that would make them look good. They may
also move things around into different quarters if they were going to go over /
under budget. Problems with budgets that are to tight is that they do not
anticipate variables such as defects or increase in price of materials.
Class
Professor Backman
12/5/2012 1:53:50 PM
What are pro forma statements?
What is the purpose of the cash receipts and cash payments budgets? How important
is the forecast of the cash budget?
What is more important in a business net income or cash flow???
RE:
Class Britney Womble
12/7/2012 11:38:47 AM
The last component of the master budget that we consider is the budgeted balance sheet. This
budget is simply a planned balance sheet (sometimes called a pro forma balance sheet).
Managers can use this budget to assess the effect of their planned decisions on the future
financial position of the firm. (P. 371)
Cash budget, managers plan the amount and timing of cash flows. Budget is a necessary
supplement to the information presented in the budgeted income statement. It is quite
possible for a company to project a substantial amount of net income and still face financial
distress because its entire set of plans imply more cash outflows than cash inflows. However,
the cash received in payment for the sale may not arrive for many months or consider a
company that makes a major equipment purchase. Although cash reserves may be reduced
immediately by the total cost of the equipment, current period income will be reduced by
only a fraction of the cost of the equipment. By carefully planning cash receipts and
disbursements, companies can anticipate cash shortages and arrange to borrow funds to
enhance their cash positions. Or if cash surpluses are anticipated, companies can seek
additional investment opportunities or consider paying higher dividends to shareholders.
(P.370)
Cash flow is more inportant because "it is quite possible for a company to project a
substantial amount of net income and still face financial distress because its entire set of
plans imply more cash outflows than cash inflows." (P. 370)
Source: Jiambalvo (). Managerial Accounting [4] (VitalSource Bookshelf), Retrieved from
http://devry.vitalsource.com/books/9781118091050/id/L10-2-19
RE:
Class Christy Vaflor
12/6/2012 2:49:53 PM
Cash flow is very important, careful planning of cash receipts
and disbursements can anticipate cash shortages and arrange to borrow funds
to enhance their cash position. A cash budget alerts management to potential
problems, like fluctuation in cash flow, well in advance which gives
management sufficient time to arrange a loan on favorable terms.
Pro
Forma Casey Agans
12/5/2012 3:40:07 PM
Professor,
In the course text I show one section referring to pro forma balance sheets, or
otherwise known as budgeted balance sheets.Essentially what this does is
allow managers to check if their planned decisions may have had an effect on
a firms future financial position. Is this what are you referring to?
Class The
Discussion
Has Been
GREAT Professor Backman
This
Week.
12/8/2012 7:13:07 AM
Thanks!!
To add another point to budgets. There is a difference in budgeting
between a profit and non-profit organization. What I have seen is that
many nonprofit organizations feel obligated to spend their entire
budget every year. One reason for this is if they do not spend all the
money the budget for next year may be cut.
A profit company takes a different approach where they will try not
be spending money unnecessarily. Thanks for the input.
RE:
Class Joshua Robinson
12/5/2012 3:41:28 PM
A proforma statement is a budget tool that can be used to assess the effect of
their planned decisions on the future financial position of the company.
In the cash budget, managers plan the amount and timing of cash flows. The
information in this budget is a necessary supplement to the information
presented in the budgeted income statement. They are important because
by carefully planning cash receipts and disbursements, companies can
anticipate cash shortages and arrange to borrow funds to enhance their cash
positions. Or if cash surpluses are anticipated, companies can seek additional
investment opportunities or consider paying higher dividends to shareholders.
The cash flow is more important than net income because it indicates how
much excess cash is on hand. Cash is vital to operations.
RE:
Class Bobbie O'Neal
12/5/2012 7:54:13 PM
Joshua, I agree cash flow is the money flowing in and out of a
business from sales, expenses, investments, debts collected and credit
extended. Identifying a company’s cash flow can help you predict the
company’s future success. Cash flow is composed of cash inflows
and outflows based on three types of activities: operating activities,
investing activities and financing activities.
RE:
Class Laurie Claus
12/5/2012 4:05:07 PM
Pro forma statements is a projected or estimated financial statement that
attempts to present a reasonably accurate idea of what a firm'sfinancial
situation would be if the present trends continue or certainassumptions hold
true. Pro forma statements are used routinely in preparing 'what if' scenarios,
formulating business plans,estimating cahs requirements, or when submitting
financing propasals, this is also called projected statement.
Read more: http://www.businessdictionary.com/definition/pro-formastatement.html#ixzz2EDnpRxHY
Laurie
I
Professor Backman
Agree
12/6/2012 2:54:28 AM
If you were managing cash flow what would be some techniques you
could use to improve the collection of cash receipts?
RE:
Laurie
Britney Womble
I
Agree
12/7/2012 11:32:10 AM
Keep the receipts and take a picture of them or scan them to
put them on the computer so you can enter them into the
system
RE:
Laurie
Laurie Claus
I
Agree
12/7/2012 7:25:10 PM
That's exactly what I would do Britney, I would
take a scan the receipts and input them into a
database. I would also keep hard copies of the
receipts in a filing system,categorize by dates. This
way it ensures a way to double check the input in
the database for human error. All this could be
done on a cash flow spreadsheet or software
program like quickbook.
RE:
Laurie
Britney Womble
I
Agree
12/9/2012 9:46:10
AM
Or that new scanner that helps you
organize things.
RE:
Class Bobbie O'Neal
12/5/2012 7:19:46 PM
What is the purpose of the cash receipts and cash payment budget? The
purpose of the cash receipt is to keep track of sales, having cash receipts
allows companies to keep track of sales paid in cash. Cash receipts also come
in handy for customer refunds. Many retail businesses only allow refunds
when customers show cash receipts.
The purpose of cash budget is to helps management keep cash balances in
reasonable relationship to its needs. It aids in avoiding idle cash and possible
cash shortages. The cash budget typically consists of four major sections: (1)
receipts section, which is the beginning cash balance, cash collectionsfrom
customers, and other receipts; (2) disbursement section comprised of all cash
payments made by purpose; (3) cash surplus or deficit section showing the
difference between cash receipts and cash payments; and (4) financing
section providing a detailed account ofthe borrowings and repayments
expected during the period.
Source: http://www.allbusiness.com/glossaries/cash-budget/49500681.html#ixzz2EF3F3lm9
WK 6 DQ
1 Response Tabitha Hofstetter
12/5/2012 6:12:30 PM
Businesses use budgets effectively in the planning and control process by knowing
their business trends and being able to properly set budgets based on company history
and business trends. Planning for a budget allows you to see what the cost is going to
be to run your business weekly, monthly, or quarterly. Budgeting and planning go
hand in hand which also gives the company control over inventory, sales, etc. When I
worked at Popeye's we did counts everyday at the end of the business day and reorder
inventory once a week. Counting daily allowed us to pick up or notice trends in how
good sales are. When everything works together effectively business can learn how to
make their budget even better to save money.
Budgeting
William Hines Iv
12/5/2012 6:45:05 PM
Budgets, as referred to in the text, are blue-prints of a business. It works like a forecast
of finances. Companies use them to show what they think costs and spending will be
over a certain period of time whether it is monthly, quarterly, or annually. They work
there way through the businesses different areas. Here they can forecast estimates of
sales, materials, labor, costs of parts, and more. Then they can compare at the end of
the time frame too determine if there calculations were correct.
RE:
Budgeting Bobbie O'Neal
12/5/2012 7:41:18 PM
A budget is a plan expressed in dollar amounts that acts as a road map to
carry out an organization’s objectives, strategies and assumptions.The
purpose of a budget is to give you a visual description of the expected
financial results of your business activities.
RE:
Budgeting Rachel Labs
12/9/2012 3:13:07 PM
Bobbue you are correct in saying that budgets are business plans
expressed in dollar signs - however - I believe looking back today in
our text book (I forget where - sorry) I read something about more
contemporary businesses have added non-monetary goals into their
budgets as well. If I stand correctly the example they gave was of a
company that added a standard amount of customers complains that
they wanted to stay under. I found this idea very interesting and I
think it would help business co-workers to have this goal written
beside how much capital they would like to attain - both come handin-hand.
Class
Share
Professor Backman
Your
Thoughts
12/7/2012 3:53:45 AM
How would performance be evaluated if there were no budgets?
RE:
Class
Share
Britney Womble
Your
Thoughts
12/7/2012 11:30:54 AM
I think there could be no performance evaluation with no budget. I
feel they might go wild and charge the client a ton of money and
blow it giving them a bad name and never be used again
RE:
Class
Share
Sandrea Igess
Your
Thoughts
12/8/2012 12:58:52 AM
Without performance information linking inputs
to outputs, any justification of spending cuts
or reordering priorities is extremely
difficult and likely to subject those doing
the cutting and reordering to charges of
political favoritism.
RE:
Class
Share
Tabitha Hofstetter
Your
Thoughts
12/8/2012 1:04:05 PM
It wouldn't. There would be nothing to evaluate if there were no
budgets. You'd end up with a business nightmare and not know what
you are spending versus making until it's too late and you already
have so much debt that revenue and owners equity won't cover it.
RE:
Class
Share
Ashley Taylor
Your
Thoughts
12/9/2012 8:42:53 PM
I think you could still perform evaluations without a budget. You
could set a goal for sales or something. However, I do think that
without budgets it would be hard to hold people accountable. People
could steal from the company or lie to make themselves or their
department look better. I do understand that budgets help evaluate
but I also think they help reign in the aspects of the business. If their
was no budget then managers could hire all kinds of people. If they
had unlimited spending they would just throw caution to the wind
and make but investment decisions. Potentially, without a budget, the
company could be taken down and go out of business.
Budgeting
Christy Vaflor
12/5/2012 8:02:40 PM
A company's planning and control process are built around its budget. Budgets help
with the communication and coordination in planning, by providing a formal plan for
all departments to coordinate and communicate off of. Budgets help with the control
process by providing something to base evaluation of performance off of. By keeping
in check with the budget companies can make sure they are headed in the right
direction.
Class
Professor Backman
12/6/2012 2:48:46 AM
What are the differences in the budgeting process between a profit company versus a
non-profit company?
I have asked this question in an early post but it is a very important concept in
business.
What is the purpose of the cash receipts and cash payments budgets?
How does accounts receivable and accounts payable impact the cash budget?
What is involved and how important is the forecast of the cash budget?
What are companies doing in today's economy to improve cash flow in a business?
RE:
Class Cadette Batie
12/6/2012 9:10:32 PM
Prof;
To answer your first question here I would have to say that in a for profit
organization, the budget is designed to show the company what the financial
situation is expected to be for the next period be it a month,quarter,year or
two to five year period, The management team then uses this money in the
coming time frame to try and meet the projected service outcome or
production goal either at or under budget however in a non profit the goal of
the budget is to help the organization see what amount of service can be
provided with the money that is expected to flow in and to do so with either
less staffing or current staffing, unless of course more money flows in that
expected which can help pay for extra workers or even provide more services.
RE:
Class William Hines Iv
12/9/2012 4:01:31 PM
With accounts payable and receivable, it shows a company where expenses
go, the payable part, and the money coming in, the receivable. This could be
an important area for a company to look at what could provide insight to
fixed expenses, such as being on a budget plan with utilities. From here they
can attempt to provide an idea as to what expenses will be or what money
may come in from what companies or customers depending on the type of
business.
Here Are
Some
Exercises
To Help
Professor Backman
With The
Concepts
This Week
12/7/2012 3:52:33 AM
Try exercises 10-7, 10-9, 10-11, 10-12, 10-13 and 10-14.
Once someone has answered a specific question move on to the next question. Thanks
RE: Here
Are Some
Exercises
To Help
With The Christy Vaflor
Concepts
This
Week
12/9/2012 2:12:15 PM
"EXERCISE 10-9. Direct Labor Budget [LO 2] Prepare quarterly direct labor budgets for
Roehler Industrial for 2012 using the production information in Exercise 10-8. It takes 2.0
hours of direct labor to produce each finished unit of product. Direct labor costs are $25
per hour. Each employee can work 450 hours per quarter."
(Jiambalvo)
Jiambalvo. Managerial Accounting, 4th Edition. John Wiley & Sons.
<vbk:9781118091050#outline(10)>.
Direct Labor Budget For the Year ending December 31 2011
Second
Fourth
First Quarter
Third Quarter
Year
Quarter
Quarter
Direct labor hours
2.0
2.0
2.0
2.0
2.0
per unit
Labor rater per hour $
25 $
25 $
25 $
25 $
25
Direct labor cost per
50
50
50
50
50
unit
Units to be produced
45,000
41,000
49,000
38,000
173,000
Direct labor cost
$ 2,250,000 $ 2,050,000 $ 2,450,000 $ 1,900,000 $ 8,650,000
Total hours
Average hours per
quarter per employee
Apporximate number
of employees
needed
90,000
82,000
98,000
76,000
450
450
450
450
200
182
218
169
RE: Here
Are Some
Exercises
To Help
With The Christy Vaflor
Concepts
This
Week
12/7/2012 12:36:22 PM
EXERCISE 10-7. Production Budget [LO 2] VitaPup produces a vitaminenhanced dog food that is sold in Kansas. The company expects sales to be
13,000 bags in January, 14,900 bags in February, 19,400 bags in March, and
21,900 bags in April. There are 1,300 bags on hand at the start of January.
VitaPup desires to maintain monthly ending inventory equal to 10 percent of
next month’s expected sales.
Required
Prepare the production budget for VitaPup for the months of January,
February, and March. (Jiambalvo 385-386)
Jiambalvo. Managerial Accounting, 4th Edition. John Wiley & Sons.
<vbk:9781118091050#outline(10.18)>.
Production Budget for January, Febuary, March
January Febuary March Total
Unit sales
13000 14900 19400
47300
Plus desired ending inventory
1490 1940 2190
5620
Total needed
14490 16840 21590
52920
Less beginning inventory
1300 1490 1940
4730
Units to be produced
13190 15350 19650
48190
Wrap Up
For
Budgeting
Professor Backman
Budgeting Wrap Up:
12/8/2012 6:55:28 AM
Budgets are forecasted for several different time periods. Operating budgets cover a
one year period, Medium term budgets are from
1-5 years, and long term budgets are 5 or more years into the future. Budgets are
forecast based on past experience and other external economic factors as competition,
interest rates, unemployment, and inflation. The first budget to be forecasted is the
sales budget. All other budgets then are based on this sales forecast.
A budgeted income statement is the last budget and is sometimes called a pro forma
statement. The composite of all budgets make up the master budget. Cash flow is very
important to the overall success of a business. So the cash flow budget will determine
the cash needs of a company. Budgets are very important in the planning and
controlling phase. The budgets become are goals. Actual data will be compared to the
budget (standard) to determine are deviations from our plan. Zero base budgeting is a
method of budget preparation that requires budgeted amounts to be justified by each
department at the start of each budget period. Flexible budgets are budgets created
over a number of different activity levels.
Management by exception is when management will investigate variances outside
predetermined acceptable ranges. Finally, most management personnel’s
compensation package will be tied to the overall performance of a business.
RE: Wrap
Up For
Jodi Serino
Budgeting
12/8/2012 7:34:42 PM
Modified:12/8/2012 7:37 PM
Since we are wrapping up a discussion on budgeting, I noticed that zerobased budgeting was not discussed in the threads. As I was reading over it in
chapter 10 (page 363) it surprised me that this technique was called "timeconsuming and expensive".
I actually like this technique and used it in my last job as Administrator for
the church I worked at that had a membership of approximately 125
parrishoners and of which I would still be employed if we had not moved.
Before becoming Administrator of the entire church and their Chief Financial
Officer, I first served as Minister of the Sound Media Department. In this
department they generated their own supply of funds apart from what was
collected at each service. They made and sold CD and DVD recordings of
services. Enough funds was coming through this department in order to pay
for supplies needed weekly to operate this department. What I didnt know at
the time in which I served over this department is that funds were also being
set aside and collected for my department but we never saw it because it went
into the general account of the church and I never had to ask the church for
funds to cover any of the basic needs because of how I budgeted.
(sorry about the story but here is the point) every month I did a breakdown of
all of the monies collected and spent. I also did a breakdown of the cost of
supplies and how many were sold on each day of service.At the end of the
month I would tally out. What I mean by this is that I would add up all that I
collected in sales and subtract the amount of receipts from expenditures then
to that amount I would add my starting amount and it should balanced out to
what I was showing that I currently had as well as the count that I actually did
have. Second, I would, in order to double check myself, add up the number of
cds that I had recorded as being sold and it should equal the amount of cash I
showed as being deposited.
After doing this, any amount that I would have over $50. I would send down
to the church Admin office in order to be put into what I thought was a
savings account for the church. What I didnt know is that those who worked
in the main office was watching how I was handling the Sound Media
Department and because of this I was promoted to the main office as
Administrator and later promoted again to Chief Financial Officer.
Though the lesson says that the zero-based budgeting technique is timeconsuming and expensive, I beg to differ because it was by means of using
this technique that I was able to create and build a savings. I believe that this
technique helps in keeping close watch on how funds are being handled.
YET, I would only suggest this technique for smaller mom&pop businesses
and not for huge corporations.
RE:
Wrap Up
Richard Astin
For
Budgeting
12/9/2012 6:41:17 PM
Jodi, as I understand it, a zero-based budget requires approval of
every line item basically every period (such as annually). It differs
from traditional budgets where the previous years amounts are
adjusted up or down. When a budget committee sits down to look at
a budget, they might look at previous years budgets and focus on the
changes being requested. In a ZBB, the people would have to look at
every line item and approve each line based on its individual
justification. That is why a ZBB is time consuming and can be
costly.
"So-called zero-based budgeting is a method of budget preparation
that requires budgeted amounts to be justified by each department at
the start of each budget period, even if the amounts were supported
in prior budget periods. That is, managers must start from zero in
developing their budgets. This results in a fresh consideration of the
validity of budget amounts, but the technique is time-consuming and
expensive" (Jiambalvo 363).
Jiambalvo. Managerial Accounting, 4th Edition. John Wiley & Sons.
<vbk:9781118091050#outline(10.3.3)>.
RE:
Wrap Up
Britney Womble
For
Budgeting
12/9/2012 9:45:12 AM
Thanks for posting Jodi. I like the story, helps understand everything
RE: Wrap
Up For
Britney Womble
Budgeting
12/9/2012 9:44:17 AM
Thanks for posting this Professor.
RE: Wrap
Up For
Tabitha Hofstetter
Budgeting
12/9/2012 4:47:01 PM
With having a compensation package tired to overall performance I think that
would potentially lead to some unethical behavior especially when it's time to
crunch the numbers. But I think it's good that companies provide the positive
reinforcement to it's employees especially when business is doing well. I
think more businesses should be aware of budgeting issues and try to get
errors fixed asap.
RE: Wrap
Up For
Casey Agans
Budgeting
12/9/2012 2:54:17 PM
I was a little surprised to see the book took such a strong stance against a 5
year budget but it makes perfect sense. So many changes can occur over that
long of a time period that it's just difficult to keep everything on pace with
standards from the past.
RE:
Wrap Up
Laurie Claus
For
Budgeting
12/9/2012 6:07:53 PM
I agree with you, business has changes drastically in the past 5 years,
it would be difficult to keep everything on pace with standards from
the past.
budgets
Marvette Williams
12/9/2012 11:45:15 PM
Budgets allow a manager to have limitations. When planning the budget let's you
know how much you have to spend and depending on how detail the budget is a time
frame to use a certain amount. This gives more control over what is being done and
when. When creating budgets it's important to have accurate information because you
don't want to create a budget that is too low or too high this could cause unnecessary
waste for the company.