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Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
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Objective 1
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
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Benefits of Budgeting
Sales Budget ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
Purchases Budget ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
Cost of Goods Sold Budget ____ ____ ____ ____ ____ ____ ____ ____
Operating Expenses Budget ____ ____ ____ ____ ____ ____ ____ ____
Budgeted Income Statement ____ ____ ____ ____ ____ ____ ____ ____
Operating Budget
2002 Prentice Hall, Inc. Business Publishing Accounting, 5/E Horngren/Harrison/Bamber 23 - 4
Financial Budget
Budgeted Balance Sheet _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Accounting, 5/E
Budgeted Statement of Cash Flows _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
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Business Publishing
Horngren/Harrison/Bamber
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
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Accounting, 5/E
Horngren/Harrison/Bamber
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Accounting, 5/E
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Accounting, 5/E
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Objective 2
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Accounting, 5/E
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Accounting, 5/E
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Business Publishing
Accounting, 5/E
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Business Publishing
Accounting, 5/E
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Business Publishing
Accounting, 5/E
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Schedule B
April May June July
Cost of goods sold (70% sales) $35,000 $56,000 $42,000 $35,000 Desired ending inventory 32,400 26,800 24,000 32,000 Total required $67,400 $82,800 $66,000 $67,000 Beginning inventory 24,000 32,400 26,800 24,000 Purchases $43,400 $50,400 $39,200 $43,000
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Accounting, 5/E
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Schedule B
How much is the cost of goods sold for the four-month period? April $ 35,000 May. 56,000 June. 42,000 July. 35,000 Total $168,000
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Business Publishing
Accounting, 5/E
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$10,000 $16,000 $12,000 $10,000 4,000 4,000 4,000 4,000 $14,000 $20,000 $16,000 $14,000
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Accounting, 5/E
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Business Publishing
Accounting, 5/E
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Cash budget
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Accounting, 5/E
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The cash budget has the following major parts: cash collections from customers (Schedule D) cash disbursements for purchases (Schedule E) cash disbursements for operating expenses (Schedule F) capital expenditures (not illustrated in this chapter)
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Accounting, 5/E
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Cash Budget
Plantation Sporting Goods Store No. 13 Cash Budget Four Months Ending July 31, 20xx Budgeted cash receipts $239,200 Budgeted cash disbursements Purchases $171,780 Operating expenses 63,800 235,580 Budgeted cash increase $ 3,620
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Business Publishing
Accounting, 5/E
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Business Publishing
Accounting, 5/E
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Business Publishing
Accounting, 5/E
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Responsibility Accounting...
is a system for evaluating the performance of managers and the activities they supervise. A responsibility center is a part, segment, or subunit of an organization whose manager is accountable for specific activities.
Business Publishing
Accounting, 5/E
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Responsibility Center
Cost center
Revenue center
Profit center
Investment center
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Accounting, 5/E
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Business Publishing
Accounting, 5/E
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Management by Exception
Northern California District Manager
Other Managers
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Business Publishing
Accounting, 5/E
Management by Exception
Performance reports show differences between budgeted and actual amounts. Management by exception is the practice of focusing on important variances so that managers can direct their attention to areas that need improvement.
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Accounting, 5/E
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Management by Exception
Plantation Sporting Goods Store No. 13 Monthly Responsibility Report (Budget)
Revenues Cost of goods sold Wages Repairs General Fixed costs Operating income
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Management by Exception
Plantation Sporting Goods Store No. 13 Monthly Responsibility Report (Actual)
Revenues Cost of goods sold Wages Repairs General Fixed costs Operating income
2002 Prentice Hall, Inc. Business Publishing
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Management by Exception
Plantation Sporting Goods Store No. 13 July 20xx, Responsibility Report
Revenues Cost of goods sold Wages Repairs General Fixed costs Operating income
2002 Prentice Hall, Inc.
Actual Variance (F/U) $55,000 $5,000 (F) 37,400 2,400 (U) 7,370 670 (U) 550 1,450 (F) 900 400 (F) 4,000 --$ 4,780 $3,780 (F)
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Business Publishing
Accounting, 5/E
Management by Exception
J.J., manager of Plantation Sporting Goods Store No. 13, will investigate why cost of goods sold and wages were more than budgeted. Cost of goods sold was originally budgeted to be 70% of sales. Wages was budgeted to be 67% of total operating variable expenses or 13.4% of sales.
Management by Exception
Management will determine that cost of goods sold were 68% of sales instead of the 70% originally budgeted. $37,400 $55,000 = 68% Pleasant news!
Business Publishing
Accounting, 5/E
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Management by Exception
Management may investigate why wages were 84% of total variable operating expenses instead of the 67% originally budgeted, although in total they remained 13.4% of sales. $7,370 $8,820 = 84% It will be determined that other variable operating expenses were less than anticipated.
Management by Exception
Broward County Branch Manager Plantation Sporting Stores July 20xx, Responsibility Report Budget Actual Variance (F/U) Branch manager office expense $20,000 $25,000 $ 5,000 (U) Income: Store 13 1,000 4,780 3,780 (F) Others 80,000 95,220 15,220 (F) Operating income $61,000 $75,000 $14,000 (F)
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Management by Exception
South Florida District Manager Plantation Sporting Stores July 20xx, Responsibility Report Budget Actual Variance (F/U) District manager office expense $ 95,000 $ 99,000 $ 4,000 (U) Income: Broward county 61,000 75,000 14,000 (F) Other counties 280,000 325,000 45,000 (F) Operating income $246,000 $301,000 $55,000 (F)
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Objective 7
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Accounting, 5/E
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2
3
Indirect costs are allocated to departments or responsibility centers using the following steps: Choose an allocation base for the indirect cost. Compute an indirect cost allocation rate. Allocate the indirect cost.
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Accounting, 5/E
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Basis Time spent Square feet Square feet Square feet # of employees # of purchase orders placed
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Accounting, 5/E
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Evaluate Performance
Healthy Clinic Departmental Partial Income Statement For the Year Ended December 31, 20xx (in thousands) Total ENT Audiology Service revenue $500 $350 $150 Professional services 250 175 75 Margin $250 $175 $ 75 Rent expense 120 90 30 Other 100 70 30 Operating income $ 30 $ 15 $ 15
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Evaluate Performance
ENT generates a professional margin of $175,000 compared to $75,000 by Audiology. However, the margin per square foot is $175,000 9,000 = $19.44 for ENT and $75,000 3,000 = $25.00 for Audiology.
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Accounting, 5/E
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End of Chapter 23
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Accounting, 5/E
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