...Budget For Planning and Control An integral part of the modern business enterprise, budgeting not only aids in the planning process, but it also provides an array of accounting measures that can be used to hold managers accountable for the firm's performance. By Richard Sansing A budget is a projected set of consequences of carrying out planned activity. Firms use budgets to facilitate the communication of specialized information from throughout the firm so that an internally consistent production plan can be devised. The budgeted numbers are then used to record certain transactions. Differences between budgeted and actual performance then appear in the accounting records, and can be analyzed so as to evaluate the performance of the firm. The budgeting process interacts with the operations research process in two ways. First, the budget process facilitates the transfer of both accounting and non-accounting information to those involved in operations. This information provides a basis for the formulation of the firm's production plan. Second, the budget reflects the production plan, and becomes a benchmark for subsequent performance evaluation. An analysis of deviations from the budget provides additional information that can be used when formulating the next period's production plan. The Planning Stage Feldman Toy Company makes two types of toys, regular and deluxe. Each toy requires the use of machine time in the production process. To illustrate the way the budget...
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... the divisional managers submit proposed budgets for sales, production and inventory.levels,& expenses. Capital expenditure request also are formalised at this time. he expense budget include direct labour and all factory overheads items, separated into fixed and variable componets.Direct materials are budgeted seperatly in developing the production and inventory schedules.The expense budgets for each division are developed from each plants results, as measured by the % variation from an adjusted budget in the first six months of the currrent year and at arget expense reduction % established by the corporation to determine plant % the plant budget for just completed half year period is revised to recognise changes in operating procedures and cost outsid the control of management(eg labour wage rate changes & product sytle changes).The difference between the revised budget and thee actual expenses is controllable variance , expressed as a % of the actual expenses if un favourable , this expense is added to the corperate target expense reduction %.A favourable plant variance % is subtracted from the corperate target. if a plant had 2% unfavourable contrallable variance the corporate target reduction was 4% , the plants budget for next year should reflect cost proxmately 6% below this year actual cost . Next years final budget for the corporation , its division , and plants are adpoted after coporate analysis of the proposed budgets and a carefull review with each division...
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...Budget Planning and Control Anita Wright Professor Mohamed Gurey ACC556 – Financial Accounting for Managers December 11, 2015 Introduction A company I started working for a couple of months ago as a Finance manager is Home Depot. Since I own a home, I know how expensive it is to maintain. I do a lot of shopping there for various items and appreciate the reasonable prices as well as the valuable advice from my associates. The store has everything one could possibly need to help turn a house into a home. Also, during the holiday season you can find items that will make your home festive and cheerful. Home Depot was founded in 1978 by Bernie Marcus and Arthur Blank. Investment banker Ken Langone and merchandising guru Pat Farrah soon joined the founders in 1979 and that year, the first two Home Depot stores opened in Atlanta, GA (Our History, 2015). They were 60,000 square feet and stocked 25,000 items, much more than the average hardware store at that time. The vision for these stores was to have a place where the do-it-yourselfers could experience one-stop shopping for all of their home project needs (Our History, 2015). From the start, associates offer the best customer service in the industry. Not only do they go through rigorous product knowledge training, but they offer clinics to customers that want to learn to do it themselves (Our History, 2015). Today, with over 2200 stores, Home Depot has revolutionized the home improvement industry by bringing the...
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...conducted • The project was not included in the Annual Procurement Plan (APP) • Right-of-Way (ROW) not unavailable 2. Claims and payments made on early accomplishments were bloated; the contractor eventually abandoned the project 3. Unnecessary work items 4. Incorrect deductions of retention from progress payments due to failure to validate conformance with project schedule 5. Advance payment not recouped or not fully recouped 6. Ghost project 7. Defective project 8. Unauthorized honoraria of BAC Members, BAC TWG and BAC Secretariat 9. Excess construction materials not turned over to the Government 10. Scrap materials / Salvaged construction materials not turned over to the Government 11. Sub-standard or poor quality of work Causes: • Approved Budget for the Contract (ABC) not realistic • The BAC failed to conduct proper post-qualification 12. Excessive project cost Causes: • Inadequate detailed engineering activities • Overestimated quantities of work items • Overestimated quantities of materials • Overestimated construction duration • • • • Excessive prices of materials Excessive labor and/or equipment rental rates Unnecessary variation orders Price escalation granted not in accordance with the prescribed formulae 13. Delayed project completion Causes: • Right-of-Way acquisition not considered • Bidding Documents were not issued according to the required schedule • Pre-procurement...
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...Word Count: 950 The Budget Control Act, signed into law on the 2nd of August 2011, aims to reign in the discretionary spending of the United States, which has grown by at least 40% since 2002 (heritage.org). A key reason as to why the Budget Control Act mainly targets discretionary spending is because it is viewed as being a more flexible fiscal tool than mandatory spending. Discretionary spending covers costs such as federal and military wages and salaries, the purchase and development of public assets, education programs, transportation maintenance and development, etc. To summarize, the Budget Control Act establishes caps on discretionary spending through 2021, as an attempt to reduce the national deficit by more than $2.5 trillion. In 2011, Congress passed a law saying that if the parties cannot agree on methods to cut spending, about $1 trillion in automatic, arbitrary cuts would begin in 2013 (whitehouse.gov). The proposed cuts include a fixed 2% per year decrease of Medicare, cutting non-defense spending such as education by 7.8% in 2013 to 5.5% in 2021, and reducing defense spending to a total of $454 billion (Congressional Budget Office). In FY 2013, military spending accounted for 56.94% of discretionary spending (City Data). That astoundingly large fraction, coupled with the current administration’s shift towards a more hands-off foreign policy, and a survey that shows that 37% of Americans think the government is spending too much on defense, has unsurprisingly...
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...A budget is a financial plan for the future concerning the revenues and costs of a business. However, a budget is about much more than just financial numbers. Budgetary control is the process by which financial control is exercised within an organisation. Budgets for income/revenue and expenditure are prepared in advance and then compared with actual performance to establish any variances. Managers are responsible for controllable costs within their budgets and are required to take remedial action if the adverse variances arise and they are considered excessive. There are many management uses for budgets. For example, budgets are used to: * Control income and expenditure (the traditional use) * Establish priorities and set targets in numerical terms * Provide direction and co-ordination, so that business objectives can be turned into practical reality * Assign responsibilities to budget holders (managers) and allocate resources * Communicate targets from management to employees * Motivate staff * Improve efficiency * Monitor performance Whilst there are many uses of budgets, there are a set of guiding principles for good budgetary control in a business. In an effective budget system: * Managerial responsibilities are clearly defined – in particular the responsibility to adhere to their budgets * Individual budgets lay down a plan of action * Performance is monitored against the budget * Corrective action is taken if results...
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...accounts and see where they can be improved. Also just to say thank you for coming to me with your issues. A budget is an estimate of expenditure for a set period of time. Small businesses like yourself prepare budgets for many reasons, firstly the reason being budgets set targets so then the business can successfully save some of the profit they generate and then can save up for stuff in the short term and long term. This is a very good idea and way of budgeting as if you save up the profit from Riverside then if the business does go into any debts then it can be paid off through this method. Also if either of you two have new ideas that need funding heavily then saving up again, for example out of the budget you can just take one or two hundred pounds out a month that won’t take a massive percentage of the profit out of the business but will add up and be a good savings amount if things go wrong. As on the balance sheet I can see that you are not making profit, so for this moment in time this will not be available so it shall happen when the business starts generating profit again. Another reason why the budget is so important is that with the priorities set out (Priorities set from the balance sheet.) Then everyone in the business knows what the aims and priorities are of the business. As the business isn’t making any money you two need to be able to be in full control of the spending inside and out of the business so nothing gets wasted with spending the wrong amounts or buying...
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...Providence Hospital DC Dictionary Training November 12-14, 2013 9 AM- 5 PM MEDITECH Canton Facility Personnel to attend: Host: Asad Shahid, PCM Applications Specialist Physician Champion PCM Core Team Day 1Session I: November 12, 20139-9:30 AM Opening Session: Introductions Agenda Overview 9:30-10:30 AM Physician Desktop Functionality Demonstration: Desktop Notifications Rounding Lists Provider Coverage 10:30- 12:00 PM Physician Workload Management Dictionaries: MIS Dictionaries User/Provider Module Access PWM Parameters Preferences 12:00-1:00 PM LUNCH Session II: November 12, 20131:00- 3:00 PM Provider Order Management Functionality Demonstration: Order Sets Individual Procedures Medication Ordering 3:00-3:15 PM Snack break 3:15-5:00 PM Provider Order Management Dictionaries: OE Dictionaries Customer-Defined Parameters Toolbox Settings Day 2Session I: November 13, 2013 9:00-11:00 AM Provider Order Management Set Up (Pharmacy Dictionaries and Medication Building): Order String Building Customer-Defined Parameters Toolbox Settings 11:00-12:00 PM Hands-On Exercise: Provider Order Management 12:00-1:00 PM LUNCH Session II: November 13, 2013 1:00-3:00 PM Ambulatory Ordering and Prescription Management Functionality Demonstration: Medication Reconciliation Process Continue from Ambulatory Functionality Discharge Process (Prescriptions, Orders, Referrals...
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...Budgets & Break-even analysis. P6 Illustrate the use of budgets as a means of exercising financial control of a selected company Fixed Costs- The running costs of a business such as rent and wages. Variable Costs- Costs that varies with the level of output or sales.An example of a variable cost would be direct labor costs. The breakeven point to two decimal places is 6.12 (£68) | Fixed Cost | Variable Costs | Total | Revenue | Profit/Loss | 0 | 416 | 0 | 416 | 0 | -416 | 1 | 416 | 12 | 428 | 80 | -348 | 2 | 416 | 24 | 440 | 160 | -280 | 3 | 416 | 36 | 452 | 240 | -212 | 4 | 416 | 48 | 464 | 320 | -144 | 5 | 416 | 60 | 476 | 400 | -76 | 6 | 416 | 72 | 488 | 480 | -8 | 7 | 416 | 84 | 500 | 560 | 60 | 8 | 416 | 96 | 512 | 640 | 128 | 9 | 416 | 108 | 524 | 720 | 196 | 10 | 416 | 120 | 536 | 800 | 264 | Three ways in which the Hotel Excellent can attract more customers for 2011 and reasons why the method would be effective: 1) Cut down on the variable and fixed costs. The hotel’s costs have risen which has resulted in more loss than profit, therefore if the hotel lower their costs there may be more room for profit. The hotel could get their supplies from cheaper suppliers, could switch companies for their electricity, gas, water and lay off staff if a high volume of staff is not essential. 2) To increase sales the Hotel Excellent could advertise and promote themselves more; this will bring publicity and attention to the hotel. Advertising...
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...Samarahan BM 701 Preview of Chapter 10 How budgets are used by management to control operations. Focuses on two management control : I. aspect of budgetary control; and II. responsibility accounting Preview of Chapter 10 Budgetary Control and Responsibility Accounting Budgetary Control Budget report Control activities Reporting System Static Budget Reports Examples Uses and limitation Flexible Budgets Why flexible budgets Development Case study Reports Responsibility Accounting Controllable vs noncontrollabe Performance Evaluation Reporting System Types of Responsibility Centers Cost Centers Profit Centers Investment Centers The content and organization chart of Chapter 10 Learning Objectives Describe the concept of budgetary control. Evaluate the usefulness budget reports. of static Explain the development of flexible budgets and the usefulness of flexible budget reports. Describe the concept of responsibility accounting Indicate the features of responsibility reports for cost centers. Identify the content of responsibility reports for profit centers. Explain the basis and formula used in evaluating performance in investment centers Learning Objectives Describe the concept of budgetary control. Evaluate the usefulness budget reports. of static Explain the development of flexible budgets and the usefulness of flexible budget reports. Describe the concept of responsibility...
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...THE EFFECT OF BUDGETARY CONTROL ON EFFCTIVENESS OF NON GOVERNMENTAL ORGANISATIONS IN KENYA REBECCAH NYAMBURA KIMANI A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTER OF SCIENCE FINANCE, SCHOOL OF BUSINESS, UNIVERSITY OF NAIROBI OCTOBER 2014 DECLARATION I declare that this project is my original work and has not been submitted for examination in any other university. Signed………………………………………Date…………………………………… REBECCAH NYAMBURA D63/71147/2014 This project has been submitted for examination with my approval as the university supervisor Signed………………………………………Date…………………………………… MR. MIRIE MWANGI Lecturer, Department of Finance and Accounting School of Business University of Nairobi ACKNOWLEDGEMENT I am deeply indebted to all those who in their own way contributed to successful completion of this study. First and foremost I thank the almighty God, to whom all knowledge, wisdom and power belong for sustaining me in good health, sound judgment and strength to move on and complete my master’s studies. Special appreciation goes to my supervisor for his dedication, guidance, valuable suggestion and ideas throughout the course of this project. Without his enormous support this study would not have been successful. Thanks to my family who always inspired me in every step to accomplish this study. I am eternally grateful for your love, encouragement and support in all my endeavors. DEDICATION I dedicate this project to my...
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...terminology, “a budget is defined as the quantitative expression of a plan for a defined period of time. It may include planned sales volume and revenues, resource quantities, costs and expenses, assets, liabilities and cash flows.”(CIMA Official Terminology, 2005). This in other word means the set out of a company’s objective for a period of time for an organization and it is usually conveyed in figures term. A budget has its advantages and disadvantages; they help stimulate forward thinking, help in organise the various aspects of the business and encourages performance (Mclaney & Atril, pg.461). However, it can be time consuming, it cannot deal with rapid change and it focuses more on short term target rather than value creation. (Mclaney & Atril, 4th edition, pg.462) Budgeting Method and differences A fixed budget only takes account of budget data for just one volume of activity. The formal definition is “A budget which is normally set prior to the start of an accounting period, and which is not changed in response to subsequent changes in activity or costs/revenues. It serves as a benchmark in performance evaluation” (Costing, T.Lucey, 7th edition, Pg.420) according to CIMA, it is defined as a “budget which is designed to remain unchanged irrespective of the volume of output or turnover attained” a good example is a master budget. Fixed budgets are most efficiently when used for planning purposes (ICSA.org.uk, 2014) A flexible budget is designed to...
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...Budgetary control is the process by which financial control is exercised by managers preparing budgets for revenue and expenditure for each function of the organization in advance of an accounting period. It involves the continuous comparison of actual performance against the budget to ensure the plan is achieved or to provide a basis for its revision. The first disadvantage of budgetary control system is costly. The costs of compiling data and analyzing budgets are another disadvantage of the budgetary control process. Other forms of corporate control rely more directly on the opinions and judgment of senior officials. Budgetary control seeks to moderate this type of human judgment by introducing quantitative arguments, all of which come at a cost. When a business uses its existing operating budgets and financial statements to perform budgetary control, the cost is reduced. However, when leaders commission new financial reports, these costs rise, especially if they require hiring new employees to assist the accounting department. Another disadvantage of budgetary control is that it relies heavily on numerical data, sometimes at the expense of other useful information. For example, a department head who operates under her budget for the quarter may appear successful in a budgetary control analysis. However, if she saved money by reducing her staff and terminating skilled workers, the action may have a more negative, intangible effect on the business as a whole. Decisions...
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...Summary Budgetary Control within public sector entities can be a difficult task due to the complexity of the system. A budget is a financial plan that contains expected revenues and proposed expenditures for a period of time. Every public sector entity needs an operating budget, which is prepared by an executive board and then approved by legislature. One the approved budget is adopted; it becomes a law and cannot be changed. If an entity exceeds its budget, it can be forced to pay hefty fines. The funding for public sector budgets is usually from taxes, loans, revenues, fines, inflation, donations and grants. When controlling revenues, it is important to record revenues as when they are earned. Unearned estimated revenues should remain as unrealized revenues. Budgetary control over expenditures follows the logical cycle: appropriations are recorded, and then encumbrances are recorded, followed by the expenditures, and then payment is disbursed. Public sector entities face both advantages and disadvantages of budgetary control. It is a challenge for such entities to operate within their proposed budgets due to budget cuts, budget surprises, and unforeseen costs, such as emergencies. This is evident in cities such as Detroit, Michigan; Atwater, California; and Fresno California. The most relevant implication of budgetary control was seen in the government shutdown, which occurred on October 1st, and last 16 days. This paper examines the importance of budgetary control and its challenges...
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...Management control systems Solutions to Chapter 16 questions (a) See Chapter 16 for the answer to this question. In particular, your answer should stress: (i) The need for a system of responsibility accounting based on a clear definition of a manager’s authority and responsibility. (ii) The production of performance reports at frequent intervals comparing actual and budget costs for individual expense items. Variances should be analysed according to whether they are controllable or non-controllable by the manager. (iii) The managers should participate in the setting of budgets and standards. (iv) The system should ensure that variances are investigated, causes found and remedial action is taken. (v) An effective cost control system must not be used as a punitive device, but should be seen as a system that helps managers to control their costs more effectively. (b) Possible problems include: (i) Difficulties in setting standards for non-repetitive work. (ii) Non-acceptance by budgetees if they view the system as a punitive device to judge their performance. (iii) Isolating variances where interdependencies exist. (a) See ‘Planning’, ‘Motivation’ and ‘Performance evaluation’ in the section on the multiple functions of budgets in Chapter 15 for the answer to this question. The answer should emphasize that the role of motivation is to encourage goal congruence between the company and the employees. (b) See ‘Conflicting roles of budgets’ in Chapter 15 for an explanation of how...
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