Budgeting and Planning


Budgeting and Planning:

After studying this chapter you should be able to:

  1. Understand why organizations budget and the processes they use to create budgets.
  2. Prepare a sales budget, including a schedule of expected cash receipts.
  3. Prepare a production budget.
  4. Prepare a direct materials budget, including a schedule of expected cash disbursements for the purchase of materials.
  5. Prepare a direct labor budget.
  6. Prepare a manufacturing overhead budget.
  7. Prepare a selling and administrative budget.
  8. Prepare a cash budget.
  9. Prepare a budgeted income statement.
  10. Prepare a budgeted balance sheet.

  1. Profit Planning
  2. Participative or Self Imposed budgeting
  3. Human Factors in Budgeting
  4. Zero Based Budgeting (ZBB)
  5. Budget Committee
  6. Master Budget
  7. Sales Budget
  8. Production Budget
  9. Inventory Purchases Budget for a Merchandising Firm
  10. Material Budgeting | Direct Materials Budget
  11. Labor Budget
  12. Manufacturing Overhead Budget
  13. Ending Finished Goods Inventory Budget
  14. Selling and Administrative Expense Budget
  15. Cash Budget
  16. Budgeted Income Statement
  17. Budgeted Balance Sheet
  18. International Aspects of Budgeting
In Business | Automating the Budgeting ProcessA number of companies, including Texaco, Fujitsu, Sprint, Nationwide Financial Services, Nortel Networks, Owens Corning, and Xilinx have been attempting to reengineer and automate the budgeting process. The goal is to eliminate the conventional iterative budgeting process that often finds preliminary budgets being passed up and down the management hierarchy many times before final agreement is reached–wasting much time and resulting in budgets that often don’t  reconcile. Apart from the tremendous technical challenges of integrating diverse budgets from many different operations, automation faces a high behavioral hurdle. As Greg Vesey of Texaco states, “Planning is the most political of all processes to fall under the finance function.” Consequently, as many as half of all automation efforts fail. Companies such as National Semiconductor Corp. have given up entirely and have returned to their old budgeting methods.

Source: Russ Banham, “The revolution in planning,” CFO, August 1999, pp. 46-56

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