会计学：企业决策的基础（管理会计分册）（原书第19版）课件 -Chap023-Operational Budgeting

Chapter23OperationalBudgetingIntroduction:Hillerich&BradsbyCo.Thefamily-ownedcompanythatmakesthefamousLouisvilleSlugger®baseballbat,Hillerich&BradsbyCo.,beganasawoodworkingshopin1856,makingeverythingfrombalustradestobedposts.By1875,thelittlecompanywasemploying20people.In1919,thecompanylauncheditsfirstnationaladvertisingcampaign.Justfouryearslater,thecompanywasproducingonemillionbatsayear.In1954,Hillerich&BradsbypurchasedaPennsylvaniatimbercompanytoensureanadequatesupplyofhigh-qualitywhiteashfortheirbats.In1970,thecompanybeganmakingaluminumbaseballbatsand,in1975,theybegansellingbaseballandsoftballgloves.In2019,Hillerich&Bradsbymarkedtheir135thanniversaryoftheLouisvilleSlugger®.Introduction:BudgetingCompaniessuchasHillerich&Bradsbyusebudgetinginthefollowingways:Toassigndecision-makingauthorityoverthecompany’sresources.Tocoordinateandimplementplans.Toholdemployeesaccountablefortheresultsoftheirdecisionmaking.Illustration:NetworkTechnologies,Inc.InJanuary2020,NancyConradfoundedNetworkTechnologies,Inc.(NTI).NTImanufacturesascreeningdevicedesignedtosafeguardpersonalcomputersagainstvirusestransmittedthroughnetworks.OperatingfromasmallmanufacturingfacilityinBaltimore,NTIstruggledthroughitsfirstninemonthsofoperations.However,thecompanyexperiencedaverystrongfourthquarterandmanagedtofinishtheyearwithtotalsalesof$900,000andanetincomeof$144,000.ProfitRich,YetCashPoorThefollowingprofitabilitymeasuresweretakenfromNTI’sfinancialreportfortheyearendedDecember31,2020.ProfitRich,YetCashPoor(cont.)EventhoughNTIappearstobeprofitablerelativetoindustryaverages,itisplaguedbyseverecashflowproblems.TheliquiditymeasurespresentedasfollowswerealsotakenfromNTI’sDecember31,2020,financialreport.Unliketheprofitabilitymeasures,thesemeasuresareallwellbelowindustryaverages.OperatingCashFlows:TheLifebloodofSurvivalInresponsetoasurgeindemandexperiencedinthefourthquarterof2020,NTIdisbursedlargesumsofcashtomanufacturegoodsavailableforsale.NTI’scashwasliterallytiedupindirectmaterials,workinprocess,andfinishedgoodsinventoriesasunitswereproduced.Furthermore,asthesegoodsweresold,cashremainedtiedupinaccountsreceivable.NTI’sOperatingCycleAsshown,NTI’soperatingcycleduring2020averaged247days.Inotherwords,cashwastiedupininventoryandreceivablesfor247daysbeforeconvertingbackintocash.Throughoutitsoperatingcycle,however,payrolls,materialspurchases,debtservice,andoverheadcostsallrequireddisbursementsofcashonatimelybasis(forexample,30days).NowonderNTI’s2020statementofcashflowsreporteda$250,000negativecashflowfromoperations!Budgeting:TheBasisforPlanningandControlAbudgetisacomprehensivefinancialplansettingforththeexpectedrouteforachievingthefinancialandoperationalgoalsofanorganization.Eventhesmallestbusinesswillbenefitfrompreparingaformalwrittenplanforitsfutureoperations,includingtheexpectedlevelsofsales,expenses,netincome,cashreceipts,andcashoutlays.Virtuallyalleconomicentities—businesses,governmentalagencies,universities,churches,andindividuals—engageinsomeformofbudgeting.Theextenttowhichplansareformalizedinwrittenbudgetsvaries.InternationalCaseinPoint:YahooOperationalbudgetingformultinationalcompaniescanbeverycomplex.Forexample,Yahoo!hasglobaloperationsinmorethan25worldwidelocationsandofferingsareavailableinmorethan30languages.BecauseYahoo!collectsrevenueandpaysexpensesinforeigncurrencies,Yahoo!experiencesforeignexchangeratefluctuationrisks.Managerstrytoforecastexchangeratesduringthebudgetingperiodandundertakemeasuresthatmanagetheimpactoftheexchangeratechangesontherevenue,assets,liabilities,andexpensesincurredintheseforeigncurrencies.BenefitsDerivedfromBudgetingCarefulplanningandpreparationofaformalbudgetbenefitsacompanyinmanywaysincluding:Enhancedmanagementresponsibility.Assignmentofdecision-makingresponsibilities.Coordinationofactivities.Performanceevaluation.EstablishingBudgetedAmountsComparisonsofactualperformancewithbudgetedamountsarewidelyusedinevaluatingtheperformanceofdepartmentsanddepartmentmanagers.Twobasicphilosophiesprevailtodaythatdictatethelevelsatwhichbudgetedamountsshouldbeset.Weidentifythesephilosophiesas:Thebehavioralapproach.Thetotalqualitymanagementapproach.Wefirstdiscussthebehavioralapproach,whichcurrentlyisthemorewidelyusedbudgetingphilosophy.TheBehavioralApproachTheassumptionunderlyingthebehavioralapproachisthatmanagerswillbemosthighlymotivatediftheyviewthebudgetasafairbasisforevaluatingaresponsibilitycenter’sperformance.Budgetedamountsaresetatreasonableandachievablelevels.Adepartmentthatoperatesinahighlyefficientmannershouldbeabletoexceedthebudgetedlevelofperformance.Failuretostaywithinthebudget,incontrast,isviewedasanunacceptablelevelofperformance.YourTurn:VPofProductionandSalesAssumethatyouarevicepresidentforproductionandsalesatNTI.Yourdepartmentisaprofitcenterandisevaluatedonprofits.Profitgoalsaresetforeachquarterduringtheyear.You,yoursalesmanager,BobPoole,andyourproductionmanager,JoeReco,sharea$1,500bonuseachquarteryouareabletomeetyourprofitgoal.Halfwaythroughthesecondquarterof2021,itbecomesclearthatthedepartmentwillnotbeabletomeetitsprofitgoalforthesecondquarter.Bobsuggeststhathecould“move”thebookingofsomesalesfromquartertwotoquarterthreetoincreasethelikelihoodofearningthequarter-threebonus.Joealsosuggestsusingsomeadditionalresourcesduringthesecondquartertogetaheadstartonmeetingthethird-quarterprofitgoals.Joestates,“Ifweuseovertimelaborduringthesecondquartertoincreaseinventoryoffinishedgoods,thenourcostsinquarterthreewillbelowerandwewillbemorelikelytomeetourprofitgoalandearnthequarter-threebonus.”WhatwillyousaytoJoeandBob?TotalQualityManagementApproachEveryindividualandsegmentoftheorganizationshouldstriveforimprovementconstantly.Theentireorganizationiscommittedtothegoalofcompletelyeliminatinginefficiencyandnon-value-addedactivities.Inshort,theorganizationstrivestoachieveperfectionacrossitsentirevaluechain.SelectingandUsingaBudgetingApproachManagersshouldparticipateactivelyinthebudgetingprocess.Departmentmanagersgenerallyarethebestsourceofinformationaboutthelevelsofperformancethatcanbeachievedwithintheirdepartments.Thesemanagersalsoshouldunderstandboththeintendedpurposeofthebudgetandthephilosophyunderlyingthedevelopmentofbudgetedamounts.SelectingandUsingaBudgetingApproach(cont.)Incomparingactualperformancewithbudgetedamounts,topmanagementshouldconsiderthephilosophyusedindevelopingthebudgetedamounts.Ifabehavioralapproachisemployed,ahighlyefficientunitmayexceedthebudgetedlevelofperformance.Ifatotalqualitymanagementapproachisused,ahighlyefficientunitshouldfallslightlyshortofthebudgetstandards.TheBudgetPeriodTheperiodcoveredbyabudgetshouldbelongenoughtoshowtheeffectofmanagementpoliciesbutshortenoughsothatestimatescanbemadewithreasonableaccuracy.Mostoperatingbudgetsandfinancialbudgetscoveraperiodofonefiscalyear.Companiesoftendividetheseannualbudgetsintofourquarters,withbudgetedfiguresforeachquarter.RollingBudgetingAnincreasingnumberofcompaniesuserollingbudgeting,wherebyanewquarterormonthisaddedtotheendofthebudgetasthecurrentquarterormonthdrawstoaclose.Thus,thebudgetalwayscoverstheupcoming12months.Oneadvantageofrollingbudgetingisthatitstabilizestheplanninghorizonatoneyearahead.Rollingbudgetingforcesmanagersintoacontinuousreviewandreassessmentofthebudgetestimatesandthecompany’scurrentprogress.TheMasterBudgetAtypicalmasterbudgetforamanufacturingcompanywouldincludethefollowing:OperatingbudgetsSalesbudgetProductionbudgetsincludingUnitstoproduceDirectmaterialsDirectlaborOverheadCostofgoodsmanufacturedandsoldbudgetTheMasterBudget(cont.)SellingandadministrativeexpensebudgetMarketingAdministrativeexpensesResearchanddevelopmentCashbudgetFinancialbudgetsBudgetedincomestatementBudgetedbalancesheetBudgetedcashflowsstatementCapitalexpendituresbudgetOrganizationalBudgetingStepsinPreparingaMasterBudgetThefollowingisthelogicalsequenceofstepsforpreparingtheannualelementsofthemasterbudget.Prepareasalesforecast.Preparebudgetsforproduction,manufacturingcosts,andoperatingexpenses.Prepareabudgetedincomestatement.Prepareacashbudget.Prepareabudgetedbalancesheet.PreparingtheMasterBudget:AnIllustrationWewillnowdevelopNTI’smasterbudgetfor2021.AprimaryobjectiveofthisprocessistohelpNTIavoidthecashflowproblemsexperiencedduring2020.SalesofNTI’sproductareexpectedtoincreasethroughout2021.However,thecompanywilldrasticallycutbackproductionduringthefirstquartertoliquidatesomeofthefinishedgoodsinventorycurrentlyonhand.AsofJanuary1,thereisnoworkinprocessinventory.Nocapitalexpendituresareplannedfor2021.NTI’sBeginningBalanceSheetManufacturingCostEstimatesInpreparationforthebudgetprocess,LisaScott,NTI’scostaccountant,hasthoroughlyanalyzedthecompany’svariableandfixedmanufacturingcosts.Directmaterialsconsistoftwospeciallycoateddisksthatcost$7.50each.Directlaborisone-eighthhourperdiskorone-quarterhourperfinishedunit.Sheisconfidentthatvariablemanufacturingcostsperunitwillnotincreaseduring2021.Shealsobelievesthatfixedmanufacturingoverheadwillholdsteadyatapproximately$15,000perquarter.ManufacturingCostEstimates(cont.)Onthebasisofheranalysis,shecompiledthefollowingmanufacturingcostestimates.TheSalesBudgetBobPoole,NTI’smarketingdirector,isoptimisticthatdemandforthecompany’sproductwillcontinuetogrowin2021.Heestimatesthatsaleswillreach8,000unitsinthefirstquarterand10,000unitsinthesecondquarter.Salesestimatesforthethirdandfourthquartersare30,000unitsand40,000units,respectively.Tokeepitsproductaffordabletoawiderangeofusers,NTIiscommittedtoholdingitssellingpriceperunitat$75throughouttheyear.TheSalesBudget(cont.)BobPoole,NTI’smarketingdirector,isoptimisticthatdemandforthecompany’sproductwillcontinuetogrowin2021.Heestimatesthatsaleswillreach8,000unitsinthefirstquarterand10,000unitsinthesecondquarter.Salesestimatesforthethirdandfourthquartersare30,000unitsand40,000units,respectively.ProductionBudgetUponexaminingperformancereportsfor2020,JoeReco,NTI’sproductionmanager,concludedthathehadoverreactedtotherapidsalesgrowthexperiencedinthefourthquarter.Basedonnewinventorypoliciesandestimates,theunitproductionbudgetwascreated.TheProductionBudget:CostBudgetsFromNTI2021UnitsofProductionBudgetsNTI:BudgetedCostofGoodsManufacturedandSoldAmanufacturingcompany’scostofgoodssoldisequaltoitsbeginningfinishedgoodsinventory,plusthecostofgoodsmanufacturedduringtheperiod,lessitsendingfinishedgoodsinventory.SellingandAdministrativeExpenseBudgetBudgetedIncomeStatementThebudgetedincomestatementsarebasedonestimatesfrom:Salesbudget.Costofgoodssoldbudget.Sellingandadministrativeexpensebudget.Additionally,managementmustmakeestimatesrelatedto:Interestexpense.Incometaxes.BudgetedIncomeStatement:NTICashBudgetEstimatesTheestimatesanddatanecessarytopreparethecashbudgetandbudgetedbalancesheetsarecalledcashbudgetestimates.Theseincludebudgeteddisbursementsfor:PayablesPrepaymentsDebtserviceTaxesInaddition,NTImustbudgetcashreceiptsfrom:CollectionofreceivablesCurrentPayablesBudgetOurpreparationofacashbudgetbeginswithestimatingtheportionofbudgetedcostsandexpensesthatwillrequirecashpaymentinthenearfuture.Certainexpenseswillnotrequireanoutlayofcash.Theseinclude:Expensesthatresultfromtheexpirationofprepaiditems(suchasinsurancepolicies)andThedepreciationofplantassets.However,onlythosecostsandexpensesfinancedbycurrentpayables(whichincludeimmediatecashpaymentsaswellasaccountspayableandaccruedexpenses)willrequirecashpayments.NTI:BudgetforCurrentPayablesandDisbursementsfor1stQuarterPrepaymentsBudgetNTIprepaysforitsinsurancepolicies.Therefore,thismustbeconsideredwhenpreparingthecashbudget.DebtServiceBudgetThepurposeofthisscheduleistosummarizethecashpayments(bothprincipalandinterest)requiredtoserviceNTI’sdebteachquarter.NTIhastwonotespayableoutstandingonJanuary1,2021.The12percent,$36,000notepayableistheloanfromNancyConrad,NTI’spresident.Theloanagreementcallsforquarterlypaymentsof$9,000plusinterestaccruedontheoutstandingbalanceataquarterlyrateof3percent.Thedebtserviceonthisnoteinthefirstquarterequals$9,000inprincipalplusinterestof$1,080

($36,000×3%),oracashoutlayof$10,080.Thenote’sdebtserviceinthesecondquarterequals$9,000inprincipalplusinterestof$810

($27,000×3%),oracashoutlayof$9,810.DebtServiceBudget(cont.)The14percent,$246,000notepayableistoNTI’sbank.Theloanagreementcallsforpaymentoftheentire$246,000attheendofthefirstquarterof2021,plusinterestaccruedataquarterlyrateof3.5percent.Thus,thedebtserviceonthisnoteinthefirstquarterequals$246,000plusinterestof$8,610

($246,000×3.5%),oracashoutlayof$254,610.Thereisnodebtservicecostassociatedwiththisnoteinthesecondquarter.BudgetedIncomeTaxesEachquarter,NTImakesincometaxpaymentsequaltoitsincometaxliabilityatthebeginningofthatquarter.NTI’s$64,000liabilityatthebeginningofthefirstquarterwastakenfromitsJanuary1,2021,balancesheet.The$46,124liabilityatthebeginningofthesecondquarterissimplytheincometaxliabilityattheendofthefirstquarter.EstimatedReceiptsfromCustomersAllofNTI’ssalesaremadeonaccount.Assuch,thesolesourceofcashreceiptsisthecollectionofaccountsreceivable.Inanattempttoimprovecashflowperformancein2021,NTI’screditmanager,RichardBaker,setthefollowinggoalsforhisdepartment:Tocollecttheentire$225,000ofaccountsreceivablereportedontheJanuary1,2021,balancesheetbytheendofthefirstquarterTocollect75percentofquarterlysalesduringthequarterinwhichtheyaremadeandcollecttheremaining25percentinthesubsequentquarter.Ifsuccessful,BakerestimatesthatNTI’saveragecollectionperiodwillbereducedfrom81daysto30days.YourTurn:ManageroftheCreditDepartmentAssumeyouarethemanagerofNTI’screditdepartment.NancyConrad,thefounderofNTI,hasaskedyoutomanagereceivablesandpayablesbyleadingandlagging.Leadingreceivablesimpliescollectingcashfromcustomersmorequicklythanpreviously.Laggingpayablesmeansdelayingpaymenttocreditors.YouareconcernedthatwhatConradissuggestingisunethical.Whatshouldyoudo?NTI:BudgetforAccountsReceivableCollections1stQuarterNTI:CashBudget1stQuarterTheBudgetedBalanceSheetPrimaryBenefitsofBudgetingAdvancewarningofandassignmentofresponsibilityforconditionsthatrequirecorrectiveaction.Forexample,NTInowknowsthatoneresultoftheexpectedincreaseinsalesbetweenthefirstandfourthquarters(8,000unitsto40,000units)isalargeincreaseinneededdirectlaborhoursfromthe400hoursinthefirstquarterto10,000hoursbythefourthquarter.Hiringadditionalskilledlaborandtrainingthemwillbeassignedtohumanresourcespersonnel.PrimaryBenefitsofBudgeting(cont.)Coordinationofactivitiesamongalldepartmentswithintheorganization.Theincreaseddemandfordirectlabor,describedpreviously,willrequiresignificantcoordinationbetweentheadministration(particularlyhumanresources,payroll,etc.)andthemanufacturingdepartment.Also,NTImightneedtoaddoneortwoworkshiftsand/orfindadditionalproductionspacetoaccommodatetheadditionalworkers.PrimaryBenefitsofBudgeting(concluded)Thecreationofstandardsforevaluatingperformance.BecauseLisaScott,NTI’scostaccountant,analyzedthedirectlaborrequiredtoproduceafinishedunit,thecompanynowhasanexpectedorstandardamountoftimetoproduceafinishedunit(one-quarterhour).Thisstandardallowsforplanningthenumberofemployeestohireandallowsforanevaluationoftheefficiencyofcurrentemployees.FlexibleBudgetingAflexiblebudgetisonethatcanbeadjustedeasilytoshowbudgetedrevenue,costs,andcashflowsatdifferentlevelsofactivity.Thus,ifachangeinvolumelessenstheusefulnessoftheoriginalbudget,anewbudgetmaybepreparedquicklytoreflecttheactuallevelofactivityfortheperiod.NTI:1stQuarterPerformanceReportBudgetedProductionCostsatVariousProductionVolumesFlexibleBudgetingPerformanceReportComputersandFlexibleBudgetingAdjustingtheentirebudgettoreflectadifferentlevelofsalesorproductionwouldbeasizabletaskinamanualsystem.Inacomputer-basedsystem,however,itcanbedonequicklyandeasily.Oncethecost-volume-profitrelationshipshavebeenenteredintoabudgetingprogram,thecomputerinstantlyperformsthecomputationsnecessarytogenerateacompletemasterbudgetforanylevelofbusinessactivity.Ethics,Fraud,&CorporateGovernanceAlthoughwediscussbudgetswithinthecontextoffor-profitenterprises,thebudgetingprocessisjustasimportantforgovernmentalandnot-for-profitentities.Forinstance,giventhescarcityoffinancialresourcesfacedbymanystates,electedofficialshavefiduciaryresponsibilitiestoensurethatappropriatedbudgetaryfundingisallocatedinaprudentandethicalfashionthatbestservestheneedsoftheirconstituents.Ethics,Fraud,&CorporateGovernance(cont.)Thereisagrowingconcerninmanystatesthatjudicialbudgetaryrequestshavebeendeniedbygovernorsandstatelegislaturesinordertofreeupresourcesformorepoliticallypopularpriorities,suchashighwayfunding.Manyarguethatthepoliticalgamesmanshipassociatedwithbudgetaryprocessesmaythreatenjudicialindependencebypreventingstatecourtsfromacquiringthefundingrequiredtoperformtheirconstitutionalfunctionsproperly.Asfinancialresourcesaredivertedforalternativepurposes,theresultingshortfallsjeopardizeastate’sabilitytodefendtheindigent,tohireprobationofficers,andtoexpanddesperatelyneededcourtroomspace.LearningObjectiveSummaryLO23-1LO23-1:Explainhowacompanycanbe“profitrich,yetcashpoor.”

Companiesmustoftentieuplargesumsofcashindirectmaterials,workinprocess,andfinishedgoodsinventories.Asfinishedgoodsaresold,cashcontinuestoremaintiedupinaccountsreceivable.Thus,acompanymaybereportingrecordprofits,yetstillexperiencecashflowproblems.LearningObjectiveSummaryLO23-2LO23-2:Discussthebenefitsthatacompanymayderivefromaformalbudgetingprocess.

Thebenefitsofbudgetingarethebenefitsthatcomefromthinkingahead.Budgetinghelpstocoordinatetheactivitiesofthedifferentdepartments,providesabasisforevaluatingdepartmentperformance,andprovide