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Cover
Accounting: What the Numbers Mean, 5/e
David H. Marshall, Millikin University
Wayne W. McManus, International College of the Cayman Islands
Daniel F. Viele, Webster University
Cost Analysis for Planning

Chapter 14 Outline


Introduction

  1. Why Budgets are Useful
  2. Definition of Performance Reporting

Cost Classifications

  1. Relationship of Cost to Volume of Activity
    1. Variable cost.
    2. Fixed cost.
    3. Mixed cost.
  2. According to a Time-Frame Perspective
    1. Committed cost
    2. Discretionary cost

Budgeting

  1. The Budgeting Process in General
    1. Usefulness of budgets--A function of management philosophy.
      1. Budget as a guide to action.
      2. Top management dictated, or participative approach.
    2. Starting point for budget.
      1. Actual performance of current period.
      2. Zero-based budgeting approach.
  2. The Budget Time Frame
    1. Single period.
    2. Multi-period, rolling budget.
    3. Different periods for different budgets.
  3. The Budgeting Process
    1. Broad assumptions about the economy, industry, and company.
    2. Operating budget.
      1. Sales/revenue forecast.
      2. Purchases/production budget.
      3. Operating expense budget(s).
      4. Income statement budget.
      5. Cash budget.
      6. Balance sheet budget.
    3. Sales forecast is the key.
  4. Illustration of the Purchases/Production Budget
    1. Using the cost of goods sold model.
    2. Based on gross profit ratio.
  5. Operating Expense Budget Challenges
  6. Budgeted Income Statement Discussion
  7. Illustration of the Cash Budget
  8. Budgeted Balance Sheet Discussion

Standard Costs

  1. Standards Defined - A Unit Budget Allowance
  2. Using Standard Costs
    1. For planning and control.
    2. Focus may be on dollar amounts and/or quantities.
  3. Developing Standards
    1. Ideal, or engineered, standards.
    2. Attainable standards.
    3. Past experience standards.
  4. Costing Products with Standard Costs
    1. A budget for each component.
    2. Illustration of product cost development.
  5. Other Uses of Standards








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