1102AFE Lecture Notes - Lecture 7: Participatory Budgeting, Cash Flow Statement, Decision-Making

72 views7 pages

harlequingnat161

30 May 2018

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Week 7 Accounting for Decision Making Lecture Notes

Budgeting

1. Management accounting

• From now on the topics in this course will focus more on the internal operations

of a firm, rather than on the preparation of external financial reports based on

actual business transactions

• You will from now on hear only occasional references to income statements,

balance sheets, and A=L+OE. They are still very relevant, but no longer our focus

• Management accounting prepares reports for internal management of the firm.

o The focus of management accounting is:

▪ Planning/ budgeting

▪ Control/variance analysis

▪ Decision making issues

2. Business Budgets

• Most people are familiar with the concept of budgeting, as budgets are not just

related to accounting

• Individuals may prepare a household budget, a holiday budget etc.

• Sports clubs prepare budgets for various functions

• Almost all organizations, in whatever field you are employed, are likely to have to

prepare budgets of some kind

• For example:

o Budgetig oes fo a estauat

o Forecasting sales for a marketing firm

o Budgeting labour costs for the HR section of an organization

o Budgeting travel costs for a global firm

Features of budgeting

• What budgets are prepared? Basically, whatever the firm wants to prepare

• Budgets use estimated figures (forecasts)

• Time period? Any length of time

• Linked with the strategies of the firm

Liks ith fi’s stategies

• Strategic planning: longer term planning (3-5 years). Typically incorporated in a

business plan

• Carried out by senior management

• Relates to oad issues elated to the usiess’s dietions for future, such as:

o Expansion plans

o Addition or deletion of business segments

o Radical product/ service development

Short term budgets

• Operationalize strategic plans

• Ae a uatitatie epessio of a etit’s oeall usiess pla

• Are a quantitatie epessio of a etit’s oeall usiess pla

• Show how management intends to acquire and use resources to achieve

objectives in the plan

• Preferably NOT carried out by senior management

find more resources at oneclass.com

Unlock document

This preview shows pages 1-2 of the document.
Unlock all 7 pages and 3 million more documents.

Already have an account? Log in

• Budgets are typically accompanied by control elements to ensure that plans are

achieved

How budgets are prepared

• Budgets are prepared based on management assumptions regarding such things

as:

o State of the economy for planning period

o Adding, deleting or changing product lines

o Nature and degree of competition

o Effects of government regulation

• It is common to use past data, adjusted for future expectations

Is the preparation of budgets complex?

• Do you think that estimating $ figures for the future is difficult? YES. Unless firms

have an ability to predict the future with accuracy, this is an extremely difficult

task

• However, once you are provided with the $ estimates, the preparation of the

budget is quite a simple task

3. Which budgets are prepared

• The types of budgets prepared will depend in part on the type of firm

• For example, the most extensive budgeting tends to be performed for a

manufacturing firm. Fewer budget exist in a service firm

Master Budget

• Regardless of firm types, firms typically will have an overall budget (umbrella

comprising all smaller budgets) called a master budget

• A master budget may be viewed as a set of interrelated budgets for a particular

future period

3.1 Manufacturing budgets

• A master budget for a manufacturing firm is commonly classified into a set of

operating budgets and financial budgets

find more resources at oneclass.com

Unlock document

This preview shows pages 1-2 of the document.
Unlock all 7 pages and 3 million more documents.

Already have an account? Log in

Document Summary

Week 7 accounting for decision making lecture notes. Any length of time: linked with the strategies of the firm. Li(cid:374)ks (cid:449)ith fi(cid:396)(cid:373)"s st(cid:396)ategies: strategic planning: longer term planning (3-5 years). Typically incorporated in a business plan: carried out by senior management, relates to (cid:271)(cid:396)oad issues (cid:396)elated to the (cid:271)usi(cid:374)ess"s di(cid:396)e(cid:272)tions for future, such as, expansion plans, addition or deletion of business segments, radical product/ service development. How budgets are prepared: budgets are prepared based on management assumptions regarding such things as, state of the economy for planning period, adding, deleting or changing product lines, nature and degree of competition, effects of government regulation. It is common to use past data, adjusted for future expectations. 3. 2 service budgets: examples of service firm budgets follow. Service firms will also commence with the sales budget. Factors to consider in sales forecasting include items such as: general economic conditions.

Related Questions

A decentralized organization is one in which:

a. each stockholder is given decision-making authority.

b. only top-level management is given decision-makingauthority.

c. each employee in the organization is given permission to makedecisions about their company.

d. managers at various levels throughout the organization aregiven decision-making authority.

A local chain department store grants each of its store managersthe authority to make buying decisions for their stores. Grantingmanagers this kind of authority is found in which type oforganization?

a. Desegmented

b. Centralized

c. Segmented

d. Decentralized

A local chain electronics store does not allow its store ordistrict managers to make important decisions about their stores.The main role of store managers is to supervise employees and makesure day-to-day transactions run smoothly while district managerssupervise store managers and report profitability data back totop-level management. Not allowing store or district managersdecision-making authority is most likely to be found in which typeof organization?

a. Centralized

b. Desegmented

c. Segmented

d. Decentralized

When a few individuals at the top of an organization retaindecision-making authority, the organization is referred to asa(n):

a. investment center.

b. centralized organization.

c. decentralized organization.

d. profit center.

Which of the following statements regarding the structure oforganizations is false?

a. In a decentralized organization, decision-making authority isconfined to top-level management.

b. Decentralization may make it difficult for managers to shareunique and innovative ideas.

c. When decision-making authority is spread among too manymanagers, managers may become so concerned with their own area ofresponsibility that they lose sight of the company's overallfocus.

d. In a decentralized organization, there may be a lack ofcoordination and communication between segments.

Which of the following is an advantage of decentralization?

a. It allows top-level management who normally work at corporateheadquarters to get involved with the day-to-day decisions thatneed to be made at lower levels.

b. It allows managers to focus on their own area ofresponsibility rather than what is best for the company as awhole.

c. It requires very little as far as manager training costs.

d. It allows decisions to be made in a more timely manner.

Which of the following is not an advantage ofdecentralization?

a. It allows lower-level managers to focus on their ownparticular goals and objectives without having to consider theoverall company's goals and objectives.

b. It allows top-level managers more time to devote tolong-range strategic planning.

c. It permits lower-level managers to gain valuable on-the-jobtraining in order to become better managers.

d. It often creates higher job satisfaction for managers.

Which of the following is often not a disadvantage ofdecentralization?

a. Lack of coordination and communication between segments.

b. Higher training costs for lower-level managers.

c. Lack of company focus as lower-level managers may makedecisions that benefit their own particular segment.

d. Decreased job satisfaction for lower-level managers.

Which of the following is a disadvantage ofdecentralization?

a. Lower training costs for lower-level managers.

b. Less timely decisions are able to be made on a day-to-daybasis.

c. Decreased job satisfaction for lower-level managers.

d. Lack of coordination and communication between segments.

"Responsibility accounting" is the concept that says:

a. managers should be responsible for both revenues and costs oftheir particular segment.

b. managers should be held entirely responsible for allinvestment decisions that impact the particular segment in whichthey are in charge.

c. managers should be held responsible for only those thingsunder their control.

d. managers should never be held entirely responsible for thingsthat happen within the particular segment in which they are incharge.

A budget for a single unit of a product or service is called asa:

a. real cost.

b. fixed cost.

c. total cost.

d. standard cost.

Which of the following statements is true regarding the budgetedcost for direct materials?

a. It must be determined after materials are purchased for theyear.

b. It can not be determined if a company uses a just-in-timeinventory system.

c. It would consist of two components - a standard quantity anda standard price.

d. It would be used on a static budget but not a flexiblebudget.

Variance analysis compares:

a. standard costs and actual costs.

b. static budgets and flexible budgets.

c. product costs and period costs.

d. practical standards and ideal standards.

Which of the following statements is false regarding taskanalysis?

a. It uses actual historical data in the determination ofstandard costs.

b. It emphasizes what it should cost to produce a product ratherthan historical costs.

c. It examines the production process in detail.

d. It may involve the use of engineers.

Task analysis:

a. is used to set standard costs.

b. is used to determine the tasks that production employeesshould complete on a daily basis.

c. is used to evaluate employee performance.

d. emphasizes the historical costs of a product.

A(n) ____ is attainable only when near-perfect conditionsexist.

a. static budget

b. ideal standard

c. flexible budget

d. practical standard

In most companies, machines break down occasionally andemployees are often less than perfect. Which type of standardacknowledges these characteristics when determining the standardcost of a product?

a. Practical standard

b. Ideal standard

c. Efficiency standard

d. Budgeted standard

Hathaway Inc. produces and sells golf umbrellas to localresorts. Hathaway anticipates April to be a busy month with thesale of 2,000 umbrellas. The company has prepared the followingstatic budget for April:

Sales revenue (2,000 units)	$60,000
Variable costs:
Direct materials	6,000
Direct labor	8,000
Overhead	2,500
Fixed costs	6,000
Net operating income	$37,500

During April, Hathaway actually produced and sold 2,300 umbrellas.What should be Hathaway's net operating income in April based on aflexible budget?

a. $35,025

b. $43,125

c. $44,025

d. $37,500

Hoppe Inc. manufactures widgets. Management has determined thateach widget has a standard materials cost of $3.50 when 2.5 ouncesof raw material at a cost of $1.40 per ounce are used. The staticbudget for the month of December showed an estimated production of4,000 widgets in December. During December, 4,300 widgets wereactually produced. The actual cost for each widget was $3.60 when2.25 ounces of raw material at a cost of $1.60 per ounce werepurchased and used. What should be the total direct materials costaccording to Hoppe's flexible budget for December?

a. $14,000

b. $15,480

c. $14,400

d. $15,050

Violetta Inc. manufactures plastic storage boxes. Management hasdetermined that each medium-sized box has a standard materials costof $1.20 when 4 pounds of raw material at a cost of $.30 per poundare used. The static budget for the month of March showed anestimated production of 15,000 boxes in March. During March, 17,000boxes were actually produced. The actual cost for each box was$1.56 when 3.9 pounds of raw material at a cost of $.40 per poundwere purchased and used. What should be the total direct materialscost according to Violetta's flexible budget for March?

a. $26,520

b. $23,400

c. $18,000

d. $20,400

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.

Put your name here

Course Title: HSM 543 Health Service Finance Class

Week 6: You Decide Assignment

Professorâs Name:

Scenario

you sat in the CFO chair, studied a real world hospital AccountsReceivable (AR) problem with your team, and came up with a ProcessImprovement Plan to reduce Days in Accounts Receivable and improvecash flow to you hospital. Well the great news is that your planworked! This morning your Days in AR stand at 67. Not perfect....but much better, and you have five payrolls of cash on hand rightnow. Things are looking up for Community Memorial! And then justbefore lunch you get a call from the Bill Jacobs, Human ResourceDirector at Commercial Intertech (CI), the largest employer in thecommunity. Bill says, "I wanted you to hear it from me first. Wesigned a contract yesterday with MegaPlan Health. They will be themanaged care organization for all 4,500 of our employees and theirfamilies. About 9,000 patients total. I'm sure that you will wantto get a contract with MegaPlan as soon as possible. I noticed thatyour hospital is not on their Preferred Provider Network (PPN), andI am pretty sure that you will want to be, so that our employeescan continue using the facility." By the time you thank Bill forthe heads up, the acid is already churning in your stomach. In thehospital world, MegaPlan is known for cut-throat tactics,negotiating steep discounts with hospitals, and fighting everyclaim the hospital makes. Commercial Intertech has every right tocontract with any health insurance provider they like, but now youhave a problem. If you cannot get a decent contract with MegaPlanand become part of their Preferred Provider Network (PPN), manylocal patients may bypass your hospital and go the next closest PPNfacility. Delivered to your office this afternoon, by nocoincidence, is a contract proposal from MegaPlan. It calls for thehospital to provide a 35% discount from charges to MegaPlan and allof its members. And it includes service pre-authorizationrequirements which will make life very difficult for your businessoffice. You know from experience that the hospital loses moneywhenever the discount from charges exceeds 20%.

Your Role

You are the hospital CFO, trying to solve the managed careproblem.

Key Players

Dr. John Evans, Chief of Staff

Katrina Eaton, CEO

Linda Freed, Business Office Manager

Nancy Stritmatter, CNO

Assignment

Given the scenario, your role and the information provided bythe key players involved, it is time for you to make adecision.

What will you do? Whose advice makes the most sense to you inthis situation, and how will you proceed?

Understanding

Here you are to demonstrate a strong grasp of the problem athand. Also, demonstrate an understanding of how the course conceptsapply to the problem.

Provide at least 3 paragraphs that contain at least 5sentences.

Analysis

Here, you are to apply original thought to solving the businessproblem. Also, apply concepts from the course material correctlytoward solving the business problem.

Provide at least 3 paragraphs that contain at least 5sentences.

Execution

Here you are to type your answer clearly and succinctly usingstrong organization and proper grammar. Use citations correctly

Provide at least 3 paragraphs that contain at least 5sentences

References

At the top of page 3, provide your references in APA Format.Provide at least 3 references for your paper.

Some of the Course Keys concepts

Financial planning

Strategic Budgeting

Strategic planning

Management and decision making

accounts receivable

Third party payers

Cost shifting

Incremental cost

Working capital

Current assets

current liabilities

financial statements

future trends

1102AFE Lecture Notes - Lecture 7: Participatory Budgeting, Cash Flow Statement, Decision-Making

Document Summary

Get access

Related Documents

1102AFE Lecture Notes - Lecture 1: General Insurance, Listing Rules, Consumer Protection

MAA103 Lecture Notes - Lecture 4: Income Statement, Target Costing, Cash Flow Statement

BUS 108 Chapter Notes - Chapter 1: Management Accounting, Cost Accounting, Standard Cost Accounting

Related Questions