ACCT 203 Lecture Notes - Lecture 11: Budget, Unit, Webct

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27 Jul 2016

School

George Mason University

Department

Accounting

Course

ACCT 203

Professor

Harley

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Document Summary

Budgetary control is simply management"s use of budgets to monitor and control the company"s operations. Think of the budget as a report card on how management is doing in the effort to deliver revenue and control expenses. Therefore, the budgetary control process involves: develop the budget from planned objectives, compare actual results to budgeted amounts and analyze and differences. Comparison is generally done on a monthly and quarterly basis and of course obviously on the annual basis. Variances and are either favorable or unfavorable to the. 3. take corrective and strategic actions based in part on the budget variances: establish new planned objectives and prepare a new budget (the cycle of budgeting never ends!!! In a fixed budgetary control system, the master budget is based on a single. Prediction for sales volume or other activity level being budgeted. Therefore, the budget for each type of cost assumes that specific (fixed) level of sales will occur.

Related Questions

Several years ago, Westmont Corporation developed a comprehensive budgeting system for planning and control purposes. While departmental supervisors have been happy with the system, the factory manager has expressed considerable dissatisfaction with the information being generated by the system.

A report for the company's Assembly Department for the month of March follows:

Assembly Department Cost Report For the Month Ended March 31
	Actual Results		Planning Budget		Variances
Machine-hours		15,000		20,000

Variable costs:
Supplies	$	10,200	$	10,800	$	600	F
Scrap		36,400		39,000		2,600	F
Indirect materials		104,600		124,500		19,900	F
Fixed costs:
Wages and salaries		81,100		76,000		5,100	U
Equipment depreciation		106,000		106,000		â
Total cost	$	338,300	$	356,300	$	18,000	F

After receiving a copy of this cost report, the supervisor of the Assembly Department stated, âThese reports are super. It makes me feel really good to see how well things are going in my department. I canât understand why those people upstairs complain so much about the reports.â

For the last several years, the companyâs marketing department has chronically failed to meet the sales goals expressed in the companyâs monthly budgets.

Required:

1. The companyâs president is uneasy about the cost reports, identify at least two reasons.

2. What kind of reports should be used to give better insight into how well departmental supervisors are controlling costs?

3. Complete the new performance report for the quarter, based on Flexible Budget Performance approach.

4. Were costs well controlled in March?

prepare a new performance report for the quarter, (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Westmont Corporation
Assembly Department
Flexible Budget Performance Report
For the Month Ended March 31
	Actual Results	Flexible Budget	Planning Budget
Machine-hours (q)	15,000		20,000

Supplies	$10,200		$10,800
Scrap	36,400		39,000
Indirect materials	104,600		124,500
Wages and salaries	81,100		76,000
Equipment depreciation	106,000		106,000
Total	$338,300		$356,300

Required 2

greyleopard313

Due Week 9 and worth 200 points

Before approaching this assignment, be sure that you have watched the following video.

https://www.youtube.com/watch?v=frh3I2rVDzs. YouTube. PLEASE USE DATA FROM VIDEO OR MAKE UP YOUR OWN DATA

Babycakes, a specialty bakery, is the company that will be considered for all parts of your budget planning and control report. For this assignment, you will develop a three to four (3 â 4) page paper in which you address the following.

Briefly discuss the ways a realistic budget will benefit the owner of Babycakes versus having no budget at all. Be sure to use Babycakes as the company and any specific product details in your explanation.

Prepare a sales budget for the LA Babycakes store for the 4th quarter of 2016. Present the number of units, sales price, and total sales for each month; include October, November, and December, and a total for the quarter. Use one-half of the Valentineâs Day sales as the basis for a usual day in the new quarter. Use 30 days for each month. Calculate the total sales for each month for October, November, and December.

Create three (3) new products, one (1) for each of the three (3) holiday seasons in the 4th quarter. Estimate the sales units, sales price, and total sales for each month. Describe the assumptions used to make these estimates. Include an overview of the budget in the report, presenting the actual budget as an appendix with all data and calculations. Add these amounts to your sales budget.

The owner of Babycakes is interested in preparing a flexible budget rather than the static budget she currently uses. She does not understand why, when sales increase, her static budget often shows an unfavorable variance. Explain how a flexible budget will overcome this problem. Use the details of your newly prepared budget for the 4th quarter of 2016 to address her concern.

Imagine that Babycakes is facing a financial challenge that is causing the actual amount of money that it spends to become significantly more than its budgeted amount. Include a discussion of your own unique cause of the overspending. Explain the corrective actions needed to address these challenges.

Integrate relevant information from at least three (3) quality academic resources in this assignment. Note: Please do not use your textbook as an academic resource. Also, Wikipedia and other Websites that are unreliable do not qualify as academic resources.

Your assignment must follow these formatting requirements.

Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; references must follow APA or school-specific format. Check with your professor for any additional instructions.

Include a cover page containing the title of the assignment, the studentâs name, the professorâs name, the course title, and the date. The cover page and the reference page are not included in the required page length.

An abstract is not required.

The specific course learning outcomes associated with this assignment are:

Evaluate management control systems and examine their relationship with accounting and planning, including feedback and non-?nancialperformance measurements.

Evaluate decision-making tools for capital investments, budgeting, and budgeting controls.

Analyze financial accounting tools and techniques that convert financial accounting data into information for decision making.

Use technology and information resources to research issues in financial accounting for managers.

Write clearly and concisely about financial accounting using proper writing mechanics.

Grading for this assignment will be based on the quality of your responses, logic and organization of the paper, and language and writing skills. Please review the Rubric for the Assignment: Budget Planning and Control.

1. T or F: Standardsare set for units; budgets are expressed in total dollars.

2. T or F: The standard cost per unit iscomputed by multiplying the standard quantity or hours by the

standard price or rate.

3. T or F: When actual revenue is above budgetor actual cost is below budget, a favorable variance

occurs.

4. T or F: Anunfavorable cost variance occurs when actual cost is higher thanbudget cost.

5. T or F With a flexible budget a manager can determine whatcosts should have been attained at a

given level of activity.

6. T or F : In a standard costing system wherethe denominator activity for the predetermined

overhead rate is labor-hours, overhead costs are applied to work inprocess on the basis of

actual hours worked.

7. T or F: A volumevariance and an efficiency variance are computed for fixed overheadcosts.

8. T or F: The budgetvariance represents the difference between the actual fixedoverhead cost

incurred during a period and the budgeted fixedoverhead cost.

9. T or F: Under theabsorption costing method, a company can increase profits byincreasing

production rather than by increasing sales.

10. T or F: Profitsmove in the same direction as sales when variable costing is usedif selling prices,

thesales mix, and the cost structure remain the same.

11. T or F: Thesalary of the CEO of Wal-Mart is a traceable fixed cost of thevarious WM stores.

12. T or F: Indirectcost is not traced directly to specific cost objects (products,jobs, or customers).

13. T or F: A costthat has already been incurred and therefore cannot be changed byany alternatives

issunk cost.

14. T or F:Generally, a product line should be dropped when the fixed coststhat can be avoided by dropping the product line are less than thecontribution margin that will be lost.

15. When the amount assigned to aresponsibility center is significantly influenced by the actions ofsomeone within the responsibility center, the item of cost is a_____________________.

16. In a _____________ cost system,every unit of product moving along the production line bears thesame amount of overhead cost, regardless of how much time itactually takes to process a particular unit.

17. In _______________ costing, nofixed overhead costs are charged to individual units of product, sono overhead rate for the fixed component of overhead costs need beused in the cost accounting system.

18. A cost that is incurred to supporta number of costing objects but cannot be traced to themindividually is a ___________________.

19. _______________is often regardedas the best approach to the transfer pricing problem, particularlyif transfer price negotiations routinely become bogged down.

20. A _______________ is simply thedifference between a predetermined norm or standard and the____________ results. Management wants to know not only what theamounts of the differences were but also, and more important, whythese occurred to take corrective action.

21. A _______________ center is anybusiness segment whose manger has control over both cost andrevenue. However, it generally does not have control overinvestment funds.

* Words banks for theabove Q15 through Q21: Absorbed, Actual, Budgeted, Common cost,Controllable cost, Cost, Full, Market price, Negotiated transferprice, Profit, Standards, Transfer price, Variable, &Variance.

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ACCT 203 Lecture Notes - Lecture 11: Budget, Unit, Webct

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