Module 47: Planning, Control, and Analysis
Planning, Control, and Analysis
Flexible Budgeting
Used to estimate revenue, costs, a group of costs, or profits at various levels of activity
- Applies when operating within a relevant range
- Total fixed costs remain the same at all levels within range
- Variable costs per unit of activity remains the same within range
Master and Static Budgets
Static budget—Budget as specific level of activity
- Can be for division of company
- Can be for company as a whole
Master budget—Static budget for company as a whole
Master budget generally includes:
- Operating budget
- Budgeted cash flows
- Budgeted financial statements
Preparing a Master Budget
- Estimate sales volume
- Use sales volume to estimate revenues
- Use collection history to estimate collections
- Estimate cost of sales based on units sold
- Use current finished goods inventory, budgeted ending inventory, and cost of sales to estimate units to be manufactured
- Use units manufactured to estimate material needs, labor costs, and overhead costs
- Use material needs, current raw materials inventory, and budgeted ending inventory to budget purchases
- Use purchase terms to estimate payments
- Analyze expense and payment patterns to complete operating and cash flow budgets
Budgeting Material Purchases and Payments
Units sold | |
+ | Budgeted increase in finished goods |
− | Budgeted decrease in finished goods |
= | Units to be manufactured |
× | Units of raw material per unit of finished goods |
= | Units of ... |
Get Wiley CPAexcel Exam Review 2015 Focus Notes: Business Environment and Concepts now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.