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Purposes of Budgeting Systems

Purposes of Budgeting Systems. Budget a detailed plan, expressed in quantitative terms, that specifies how resources will be acquired and used during a specified period of time. Planning Facilitating Communication and Coordination Allocating Resources Controlling Profit and Operations

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Purposes of Budgeting Systems

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  1. Purposes of Budgeting Systems Budget a detailed plan, expressed in quantitative terms, that specifies how resources will be acquired and used during a specified period of time. • Planning • Facilitating Communication and Coordination • Allocating Resources • Controlling Profit and Operations • Evaluating Performance and Providing Incentives

  2. Activity-BasedCosting (ABC) Activity-BasedBudgeting (ABB) Activity-Based Costing versus Activity-Based Budgeting Resources Resources Activities Activities Cost objects:products and servicesproduced, andcustomers served. Forecast of productsand services to beproduced andcustomers served.

  3. Types of Budgets Capital budgets with acquisitions that normally cover several years. L o n g R a n g e B u d g e t s Continuous or Rolling Budget 1999 2000 2001 2002 This budget is usually a twelve-month budget that rolls forward one month as the current month is completed.

  4. Exh. 9-1 Sales of Services or Goods Ending Inventory BudgetWork in Process and Finished Goods Production Budget Direct Materials Budget Direct LaborBudget Overhead Budget Selling and Administrative Budget Cash Budget Ending Inventory BudgetDirect Materials Budgeted Financial Statements

  5. Budget Administration The Budget Committee is a standing committee responsible for . . . • overall policy matters relating to the budget. • coordinating the preparation of the budget.

  6. International Aspects of Budgeting Firms with international operations face special problems when preparing a budget. • Fluctuations in foreign currency exchange rates. • High inflation rates in some foreign countries. • Differences in local economic conditions.

  7. Budgeting Product Life-Cycle Costs Product planning and concept Design. Distribution and customer service. Preliminary design. Production. Detailed design and testing.

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