RSM322H1- Midterm Exam Guide - Comprehensive Notes for the exam ( 49 pages long!)

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5 Oct 2017

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A (cid:271)udget is (cid:373)a(cid:374)age(cid:373)e(cid:374)t"s fo(cid:396)e(cid:272)ast of (cid:396)e(cid:448)e(cid:374)ues, e(cid:454)pe(cid:374)ses, o(cid:396) p(cid:396)ofits i(cid:374) a futu(cid:396)e ti(cid:373)e pe(cid:396)iod. Knowledge: budgets communicate key planning assumptions such as product prices, units sales, and input prices. Partition decision rights: budget sets guidelines on resources available for each segment. Pe(cid:396)fo(cid:396)(cid:373)a(cid:374)(cid:272)e e(cid:448)aluatio(cid:374): respo(cid:374)si(cid:271)ilit(cid:455) (cid:272)e(cid:374)te(cid:396)"s a(cid:272)tual pe(cid:396)fo(cid:396)(cid:373)a(cid:374)(cid:272)e is (cid:272)o(cid:373)pa(cid:396)ed to (cid:271)udget. Responsibility centers: 1 profit center and 2 cost centers. Measurement: monthly reports compare actual revenues and expenses to budget. Favorable (f) variance: actual revenue > budgeted revenue actual expense < budgeted expense. Unfavorable (u) variance: actual revenue < budgeted revenue actual expense > budgeted expense. Ratification and monitoring by board of directors and members. Responsibility centers in 4 colleges: 2 cost centers, 2 profit centers. E(cid:373)pi(cid:396)e (cid:271)uildi(cid:374)g: (cid:396)e(cid:395)uest (cid:862)too la(cid:396)ge(cid:863) a (cid:271)udget. Externalities: cost centers are more likely to add unprofitable programs than profit centers. Responsibility centers: 2 cost (manufacturing and marketing) Budgets are internal contracts between operating segments.

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