管理会计（第10版）课件全套 麦克雷尼 第1-12章 Introduction to management accounting-Managing working capital

ManagementAccountingforDecisionMakersTenthEditionChapter1IntroductiontomanagementaccountingLEARNINGOUTCOMESYoushouldbeableto:Discusstheissuestobeconsideredwhensettingthelong-termdirectionofabusinessIdentifythepurposeofabusinessanddiscussthewaysinwhichabusinessmaybeorganisedandmanagedExplainthechangesthathaveoccurredovertimeinboththeroleofthemanagementaccountantandthekindofinformationprovidedbymanagementaccountingsystemsExplaintheroleofmanagementaccountingwithinabusinessanddescribethekeyprinciplesuponwhichmanagementaccountingrestsMajortasksoftheboardSettingtheoveralldirectionandstrategyforthebusinessMonitoringandcontrollingtheactivitiesofthebusinessCommunicatingwithshareholdersandothersconnectedwiththebusinessTheboardofdirectorsischargedwiththreemajortasks:BoardofdirectorsFinanceHumanresourcesOperationsMarketingFigure1.1AdepartmentalstructureorganisedaccordingtobusinessfunctionsFigure1.2Adivisionalorganisational

structureBoardofdirectorsNorthDivisionSouthDivisionEastDivisionWestDivisionFinanceMarketingOperationsFinanceMarketingOperationsFinanceMarketingOperationsFinanceMarketingOperationsOtherOtherOtherOtherThechangingbusinessenvironmentIncreasingsophisticationofcustomersDevelopmentofglobaleconomyRapidchangesintechnologyDeregulationofdomesticmarketsIncreasingpressurefromownersIncreasingvolatilityoffinancialmarketsIdentifiedreasonsinclude:Figure1.3Thelevelofsatisfactionwith,andusageof,strategicplanningSource:Rigby,D.andBilodeau,B.(2018)ManagementToolsandTrends2018,BainandCompany.Figure1.4ThestrategicmanagementframeworkPerform,reviewandcontrolSelectstrategicoptionsandformulateplansIdentifyandassessthestrategicoptionsUndertakeapositionanalysisEstablishmission,visionandobjectivesSWOTanalysisofthebusinessWeaknessesSWOTanalysisOpportunitiesStrengthsThreatsThechangingbusinesslandscapeImportantchangesinclude:GrowthoftheservicesectorEmergenceofnewindustriesGrowthofe-commerceAutomatedmanufacturingLeanmanufacturingGreaterproductinnovationGrowthofoutsourcingFasterresponsetimesRiskReturnFigure1.5RelationshipbetweenriskandreturnFigure1.6MainusersofaccountinginformationrelatingtoabusinessBusinessCompetitorsLendersManagersSuppliersInvestmentanalystsCommunityrepresentativesGovernmentEmployees

andtheirrepresentativesCustomersOwnersInfluencePrinciplesfocusedonfouroutcomesRelevanceTrustAnalysisFigure1.7FourprinciplesfocusedonfouroutcomesTotalvalueorcost

(£)TotalquantityofinformationCostValueOptimalquantityFigure1.8RelationshipbetweenthecostandvalueofprovidingadditionalmanagementaccountinginformationInformationanalysisInformationidentificationInformationreportingInformationrecordingFigure1.9ThemanagementaccountinginformationsystemFigure1.10Thefourphasesinthedevelopment

ofmanagementaccountingPhase1Internalprocessesofthebusiness,includingdeterminingthecostofgoodsandservicesprovidedandexercisingfinancialcontrolPhase2Short-termplanningandcontrol

Phase3Phase4Generatingshareholdervalueandmoreexternalfocus,particularlyconcentrationoncustomersandcompetitors

Controllingcostsandwastereduction

©

PearsonEducationLtd.2014Figure1.11DecisionsrequiringmanagementaccountinginformationInvestmentappraisalandcontrolManagementdecisionsDeterminingcostsandbenefitsResourcemanagementCostmanagementandcontrolFormulatingobjectivesandstrategiesPerformanceevaluationandcontrolFigure1.12ThechangingroleofthemanagementaccountingandfinancefunctionSource:CharteredInstituteofManagementAccountants,WhatBigDataandAImeanfortheFinanceProfessional,,accessed17November2019.ManagementandfinancialaccountingreportscomparedNatureofthereportsproducedLevelofdetailExistenceofregulationsReportingintervalTimeorientationRangeandqualityofinformationThemajordifferencesconcern:Chapter2RelevantcostsandbenefitsfordecisionmakingManagementAccountingforDecisionMakersTenthEditionLEARNINGOUTCOMESYoushouldbeableto:IdentifyandquantifythecostsandbenefitsthatarerelevanttoaparticulardecisionDefineanddistinguishbetweenrelevantcosts,outlaycostsandopportunitycostsSetoutrelevantcostsandbenefitsanalysisinalogicalformsothattheresultscanbeclearlycommunicatedtomanagersUserelevantcostsandbenefitstomakedecisionsCost-benefitanalysisOutcomesfromacourseofactionaimedatachievingbusinessobjectivesBenefitsCostsResourcessacrificedtoachievethoseobjectivesInvolvesweighingupagainstDefinitionofcostTheamountofresources,usuallymeasuredinmonetaryterms,sacrificedtoachieveaparticularobjectiveTwotypesofcostThevalueofanopportunityforgoneOpportunitycostAcostalreadyincurredHistoriccostFigure2.1AdecisionflowdiagramforidentifyingrelevantcostsRelevantcostIrrelevantcostDoesthecostrelatetotheobjectivesofthebusiness?NoDoesthecostvarywiththedecision?Doesthecostrelatetothefuture?NoNoYesYesYesWhatistheminimumpricethegarageshouldchargeforthelorryaftertheenginehasbeenfitted? £ Opportunitycostoflorry 9,000 Costofnewengine 2,500

11,500

Agaragebuysalorryfor£10,000.

Itrequiresanewenginecosting£2,500thatwilltake20hourstofit.

Thetechnicianswillbepaid£15perhourtofittheengine.

Thetechniciansareshortofworkbutthegaragewishesto

retaintheirservices.

Thelorrycouldbesoldimmediatelyfor£9,000.Whatistheminimumpricethegarageshouldchargeforthelorryaftertheenginehasbeenfitted? £Opportunitycostoflorry 9,000Opportunitycostoftechnicians’time1,000Costofnewengine 2,500

12,500

Agaragebuysalorryfor£10,000.

Itrequiresanewenginecosting£2,500thatwilltake20hourstofit.

Thetechnicianswillbepaid£15perhourtofittheengine.

Thetechniciansarebusyandarechargedoutat£50perhour.

Thelorrycouldbesoldimmediatelyfor£9,000.Figure2.2AdecisionflowdiagramforidentifyingtherelevantcostoflabourJayLtdisbiddingforacontractthatwillrequire800unitsofAlpha.

Thismaterialiscurrentlyheldandinformationisasfollows:Alphaisnolongerusedbythebusiness.WhatistheminimumpriceforAlphaforinclusioninthecontractbid?

800×£12=£9,600HistoriccostResalevalueReplacementcost£/unit£/unit£/unit101214JayLtdisbiddingforacontractthatwillrequire800unitsofAlpha.

Thismaterialiscurrentlyheldandinformationisasfollows:Alphaisinregularuse.WhatistheminimumpriceforAlphaforinclusioninthecontractbid?

800×£14=£11,200HistoriccostResalevalueReplacementcost£/unit£/unit£/unit101214Arethematerialsheldininventories?

YES

NOSalesvalue

oralternativeuseDotheyneedtobereplaced?

YES

Currentpurchasecost

NOCurrentpurchasecostFigure2.3AdecisionflowdiagramforidentifyingtherelevantcostofmaterialsRelevantandirrelevantcostsCoststhatarethesameirrespectiveofwhichdecisionismadeRelevantcostsFuturecoststhatvarywiththedecisionunderconsiderationCoststhatwereincurredasaresultofapastdecisionOpportunitycostsThecostofbeingdeprivedofthenextbestoptionThosethatvarywiththedecisionThosethatdonotvarywiththedecisionFutureoutlaycostsIrrelevantcostsFutureoutlaycostsPast

costsChapter3Cost–volume–profitanalysisManagementAccountingforDecisionMakersTenthEditionLEARNINGOUTCOMESYoushouldbeableto:Prepareabreak-evenchartanddeducethebreak-evenpointforsomeactivityDemonstratethewayinwhichmarginalanalysiscanbeusedwhenmakingshort-termdecisionsDiscusstheweaknessesofbreak-evenanalysisDistinguishbetweenfixedcostandvariablecostandusethisdistinctiontoexplaintherelationshipbetweencost,volumeofactivityandprofitThebehaviourofcostsRemainconstant(fixed)whenchangesoccurtothevolumeofactivity

VaryaccordingtothevolumeofactivityCostsmaybeclassifiedas:FixedVariableCost(£)Volumeofactivity(unitsofoutput)F0Figure3.1GraphoffixedcostagainstvolumeofactivityRentcost(£)Volumeofactivity

R0Figure3.2GraphofrentcostagainstthevolumeofactivityCost(£)Volumeofactivity

0Figure3.3GraphofvariablecostagainstthevolumeofactivityElectricitycost

(£)Volumeofactivity

0Theslopeofthislinegivesthevariablecostperunitofactivity

Fixedcost

element

Figure3.4GraphofelectricitycostagainstthevolumeofactivityCost(£)Volumeofactivity(unitsofoutput)0FTotalcostFixedcostVariablecostFigure3.5GraphoftotalcostagainstvolumeofactivityFigure3.6Abreak-evenchartRevenue/Cost(£)Volumeofactivity(unitsofoutput)0FTotalcostFixedcostVariablecostBreak-evenpointTotalsalesrevenuePROFITLOSSCalculatingthebreak-evenpointFixedcost

Salesrevenueperunit−Variablecostsperunit

b=

Break-evenLoadfactor%604020800100Percent2019839620162015728893722018201773949573Figure3.8Break-evenandloadfactorsatRyanairSource:BasedoninformationcontainedintheRyanairHoldingsplcAnnualReport2019.Contributionmarginratio(CMR)

Contribution×100%

SalesrevenueCMR=Figure3.9aBreak-evenchartforCottageIndustriesLtd’s

basket-makingactivitieswithoutthemachineFixedcostsRevenue/Cost(£000)Volumeofactivity(numberofbaskets)015432Total

revenue100400300200500Total

costsBreak-even

pointPROFITLOSSFigure3.9bBreak-evenchartforCottageIndustriesLtd’s

basket-makingactivitieswiththemachineRevenue/Cost(£000)1Fixedcosts5432Volumeofactivity(numberofbaskets)01004003002005006Total

costsBreak-even

pointTotal

revenueLOSSPROFIT600Figure3.10Ryanair’smarginofsafetySource:BasedoninformationcontainedintheRyanairHoldingsplcAnnualReport2019.CalculatingthetargetprofitFixedcost+Targetprofit

Salesrevenueperunit−Variablecostperunit

t=

Where:t=therequirednumberofunitsofoutput

toachievethetargetprofitVolumeofactivityProfitFigure3.11TheeffectofoperatinggearingProfit(£)Volumeofactivity0LOSSPROFITBreak-evenpointLoss(£)FixedcostFigure3.12Profit–volumechartRevenue/Cost(£)Volumeofactivity(unitsofoutput)0FixedcostsABTotalcostTotal

revenueFigure3.13Theeconomist’sviewofthebreak-evenchartWeaknessesofbreak-evenanalysisThreegeneralproblemsNon-linearrelationships

SteppedfixedcostsMulti-productbusinesses

Make-or-buydecisions

Pricing/assessingopportunitiestoentercontracts

Closingorcontinuationdecisions

MarginalanalysisDeterminingthemostefficientuseofscarceresources

Figure3.14Thefourkeyareasofdecisionmakingusing

marginalanalysisChapter4FullcostingManagementAccountingforDecisionMakersTenthEditionCompareandcontrastthefullcostingandvariablecostingapproachesDiscusstheusefulnessoffull(absorption)costinformationtomanagersLEARNINGOUTCOMESYoushouldbeableto:Deducethefull(absorption)costofacostunitinasingle-productandamulti-productenvironmentDiscusstheproblemsofdeducingfull(absorption)costinpracticeFigure4.1UsesoffullcostbymanagersAssessingrelativeefficiencyUsesoffullcostExercisingcontrolPricingandoutputdecisionsAssessingperformanceFigure4.2KeystepsinprocesscostingStep1Step2Step3Step4Step5MeasurethetotalproductionoutputCalculatetheequivalentunitsofoutputthisrepresentsMeasurethetotalcostofproductionCalculatetheaveragecostperequivalentunitofoutputAllocatethetotalcostbetweencompletedunitsandWIPDirectandindirectcostAllotherelementsofcost:thatis,thosethatcannotbedirectlymeasuredinrespectofeachparticularunitofoutputCategoriesofcostDirectcostCostthatcanbeidentifiedwithspecificcostunits–theeffectofthecostcanbemeasuredinrespectofeachparticularoutputIndirectcostor

overheadsSource:Al-Omiri,M.andDrury,C.(2007)AsurveyoffactorsinfluencingthechoiceofproductcostingsystemsinUKorganizations,ManagementAccountingResearch,

Vol.18,pp.399–424.Figure4.3PercentageoffullcostcontributedbydirectandindirectcostFullcostofthejobDirectcostofthejobFairshareofindirectcost(overheads)Figure4.4TherelationshipbetweendirectcostandindirectcostTotal(orfull)costFixedcostVariablecostFigure4.5Therelationshipbetweenfixedcost,variablecostandtotalcostTotal(orfull)costofaparticularjobFixedcostIndirectcost(overheads)DirectcostVariablecostFigure4.6Therelationshipbetweendirect,indirect,variableandfixedcostsofaparticularjobAparticularsail(job)AscertainthetotaloverheadsforMarineSuppliersLtdfortheperiodDeriveasuitableoverheadabsorptionrateforthebusinessasawholeApplytheoverheadabsorptionrate(basedonthespecificsofthejob,forexampledirectlabourhours)OverheadsDirectlabour

Costofdirectlabour

forthesailDirectmaterials

CostofdirectmaterialstomakethesailDirectcostFigure4.7Howthefullcostisderivedforthesail

byMarineSuppliersLtdinActivity4.9Totaloverheadsformonth(£20,000)Job1(£10,000)Job2(£10,000)DirectlabourhourbasisJob1(£14,000)Job2(£6,000)MachinehourbasisFigure4.8TheeffectofdifferentbasesofchargingoverheadstojobsinExample4.3DealingwithoverheadsonadepartmentalbasisExpertiseAccountabilitySizeandcomplexityReasonsfordividingabusinessintodepartmentsinclude:Figure4.9Acostunit(JobA)passingthroughAutosparkle

Ltd’sprocessPreparationdepartmentCustomersFinishingdepartmentPaintshopdepartmentJobA

*Direct

materials

*Direct

labour

*Ashareof

the

Preparation

department’s

overheads

Fullcostofthejob++=Costaccumulated*Anyfurther

directcost

*Ashareof

the

Paintshop’s

overheads

*Anyfurther

directcost

*Ashareof

the

Finishing

department’s

overheads

Figure4.10AnalysisofthenumberofcostcentreswithinabusinessSource:BasedoninformationtakenfromDrury,C.andTayles,M.(2006)ProfitabilityanalysisinUKorganisations,BritishAccountingReview,vol.38,pp.405–25.TypesofcostcentresServicecostcentresProductcostcentresDividingoverheadsbetweencostcentresCostapportionmentCostallocationFigure4.11ThestepsinhavingoverheadshandledonacostcentrebasisStep1Step2Step3Step4Step5Step6Step7Allocatespecificcostcentreoverheadstotherelevantcostcentre

Apportiongeneraloverheadsbetweencostcentres

AscertainthetotalforallocatedandapportionedoverheadsforeachcostcentreApportionservicecostcentrecoststoproductcostcentres

AscertainthetotaloftheoverheadsforeachproductcostcentreCalculateacostcentreoverheadabsorptionrateforeachproductcostcentre

Costunitsabsorboverheadsastheypassthrough

productcostcentresFigure4.12DemandformoreaccuratecostingSource:Clinton,D.andWhite,L.(2012)Rolesandpracticesinmanagementaccounting:2003–2012,StrategicFinance,vol.94,pp.37–43.%30201040050%No

greaterSlightly

greaterSomewhat

greaterSignificantly

greaterMuch

greater20122003Figure4.13DerivingthecostofonecostunitwhereproductionisinbatchesThefullcostofthebatch,derivedon

a‘job-costing’basisThenumberofcostunits(products)inthebatchThefullcostofonecostunit(product)dividedbyequalsNon-manufacturingoverheadsMaybeincludedaspartoffullcostBUTAnarbitrarybasisofassignmenttoproductsisoftenused

Mustbeexcludedforexternalreportingpurposes

Source:FigureadaptedfromCIMA(2009)ManagementAccountingToolsforTodayandTomorrow,p.12.Figure4.14Theuseoffullcostinformation4530

15600%SmallMediumLargeVerylarge<50employees50–250employees250–10,000employees>10,000employeesVariablecostingversusfullcostingVariablecostingFixedcostchargedtoperiodwhenincurred

Includesonlyvariablecost(directandindirect)incostofproductFullcostingAlsoincludesafairshareofindirectcost(fixedandvariable)incurredduringtheperiod

Includesdirectcost(fixedandvariable)incostofproduct

Chapter5Costingandcostmanagement

inacompetitiveenvironmentManagementAccountingforDecisionMakersTenthEditionLEARNINGOUTCOMESYoushouldbeableto:Discusstheprinciplesandpracticalaspectsofactivity-basedcostingExplaintheroleofvaluechainanalysisandbenchmarkinginmanagingcostsDescribethemethodsthatmaybeusedtomanagecostsoverthelifecycleofaproductDescribethenatureofthemodernproductcostingandpricingenvironmentExplaintheimportanceoftotalqualitymanagementinthemodernenvironmentandidentifythemaintypesofqualitycoststhatmaybeincurredCostingandpricingproductsinthetraditionalwayArelativelyuncompetitivemarketAlowlevelofindirectcostrelativetodirectcostDirectlabour-intensiveanddirectlabour-pacedproductionCostingandpricingproductsinthemodernenvironmentAhighlycompetitiveinternationalmarketAhighlevelofoverheadsrelativetodirectcostCapital-intensiveandmachine-pacedproductionShortproductionlifecyclesIdentifysupportactivitiesfortheproduct/

serviceIdentifycosttobeattributedtoeach

supportactivityIdentifycostdriverforeachsupportactivityEstablishcostpoolforeachsupportactivityAllocatetotalcoststorelevantcostpoolsChargetheproduct/

servicewiththecostineachpoolusingcostdriverFigure5.1KeystepsintheABCprocessBenefitsofABCProvidesmanagerswithabetterunderstandingofthebusinessProvidesmoreaccuratecostforeachunitofproductorserviceSource:AdaptedfromInnes,J.andMitchell,F.(1990)ActivityBasedCosting:AReviewwithCaseStudies,CIMAPublishing.WithkindpermissionofElsevier.Figure5.2Traditionalversusactivity-basedcostingSource:AdaptedfromInnes,J.andMitchell,F.(1990)ActivityBasedCosting:AReviewwithCaseStudies,CIMAPublishing.WithkindpermissionofElsevier.Figure5.2

Traditionalversusactivity-basedcosting(Continued)CriticismsofABCTime-consumingandcostlyABCreportsmaybedifficulttounderstandFewbenefitswhereproductsorservicesprovidedhavesimilaroutputandprocessesNotallcostscanbeidentifiedeasilywithparticularactivitiesLackofinformationconcerningcostscanleadtoarbitraryallocationsIdentifyingcostdriversmaybedifficultUsespastcostsandignoresopportunitycostsFigure5.3IllustrationofRoyalMail’scostingsystemSource:RoyalMailGroupLtd(2015)ABCCostingManual2015–16,November.DiagramadaptedfromOfcom(2018)ReviewofRegulatoryFinancialReportingforRoyalMail,19December,.uk,p.23.Figure5.4ThepercentageofbusinessesindifferentsectorsthatuseABCManufacturingRetailServiceFinancial

andcommercial0102060504030%70Figure5.5ThetotallifecycleofaproductorserviceTotallifecycle

ofaproductorservicePost-productionphaseProduction

phasePre-productionphaseResearchanddevelopment,

productionset-up,

pre-productionmarketingcostsManufacturingand

marketingcostsAfter-salesserviceandproductionfacility

decommissioningcostsTargetcostingminusTargetprofitSellingprice

TargetcostequalsFigure5.6ThetargetcostingprocessDeterminethetargetpriceoftheproductDecideonthetargetprofitrequiredDeterminethetargetcostbydeductingthetargetprofitfromthetargetpriceCalculatetheestimatedcostoftheproductComparethetargetcostwiththeestimatedcostWherenecessary,reducetheestimatedcostinlinewiththetargetcostSource:AdaptedfromCIMA(2009)ManagementAccountingToolsforTodayandTomorrow,p.12.Figure5.7Theuseoftargetcosting1510

5200%SmallMediumLargeVerylarge<50employees50–250employees250–10,000employees>10,000employeesFigure5.8ThekaizencostingprocessDeterminethecurrentcostoftheproductSetcostreductiontargetforthenextperiodDetermineactualcostreductionachievedComparetargetcostreductionswiththeactualcostreductionsachievedWhereasignificantdeviationoccurstakeappropriateactionFigure5.9TherelationshipbetweenthethreetypesofcostingPre-productionTargetcostingKaizencostingTotallife-cyclecostingProductionPost-productionSource:AdaptedfromPorter,M.(1985)CompetitiveAdvantage:CreatingandSustainingSuperiorPerformance,TheFreePress.1998byMichaelE.PorterReceivingandstoringrawmaterialsanddistributingtoproductionPrimaryactivitiesInputOperationsOutputsMarketingandsalesServicesTransforming

rawmaterials

into

finishedgoodsCollecting,storinganddistributingfinishedgoodsIdentifyingcustomerneedsandgeneratingsalesEnsuringthegoodsoperateeffectivelyaftersaleSecondaryactivitiesManaginghumanresources,forexamplehiringtraininganddevelopingstaff

Technologicaldevelopment,forexampleR&Dandproductdesign

Procuringsuppliesandresources

Infrastructure,forexampleadministrationfinanceandqualityassurance

Figure5.10Themainlinksinthevaluechainofamanufacturingbusiness302010400%SmallMediumLargeVerylarge50orfeweremployees51to250employees251to10,000employeesMorethan10,000employeesSource:AdaptedfromfigureinCIMA(2009)ManagementAccountingToolsforTodayandTomorrow,p.19.Figure5.11UseofvaluechainanalysisSource:BasedoninformationinRigby,D.(2018)ManagementTools,.Figure5.12ThebenchmarkingprocessDecideontheproduct,processorfunctiontobebenchmarkedIdentifyasuitablebenchmarkSelectsuitablemeasuresforthebenchmarkingprocessCollectandanalyseinformationrelatingtothemeasuresselectedIdentifyareasforimprovementbasedontheinformationanalysedIntroducenewpracticesandsetappropriatetargetsFigure5.13Theuseof,andsatisfactionwith,benchmarkingSource:Rigby,D.(2018)InsightsManagementTools,Benchmarking,Bain&Company,2April,.Source:BasedoninformationinRigby,D.ManagementTools,Bain&Company,/publications/articles/management-tools-benchmarking.aspx.Figure5.14DeliveringimprovementsinqualityImplementnewprocessesandcollectinformationrelatingtoqualitymeasuresAnalyseinformationcollectedandtakeactiontoensurequalityimprovementDevelopstafftrainingandincentiveschemesaimedatqualityimprovementDesignnewprocessestoachievezerodefectsIdentifyareasforqualityimprovementDevelopsuitablemeasuresofproductqualityFigure5.15Theuseof,andsatisfactionwith,totalqualitymanagementSource:Rigby,D.(2018)InsightsManagementTools,TotalQualityManagement,Bain&Company,2April,.Figure5.16ThemaincategoriesofqualitycostsPreventioncostsProcedurestoavoidqualityproblemsAppraisalcostsInternalfailurecostsExternalfailurecostsProcedurestocheckqualityProcedurestodealwithqualityproblemsbeforeproductpassestocustomerProcedurestodealwithqualityproblemsafterproductpasses

tocustomerTransformingcostovertime(Hopwood)SpreadthewordSpreadtheresponsibilityThinklocalBenchmarkcontinuallyFocusonmanagingcostsratherthanreducingcostsChapter6BudgetingManagementAccountingforDecisionMakersTenthEditionLEARNINGOUTCOMESYoushouldbeableto:ExplainthebudgetingprocessandtheinterlinkingofthevariousbudgetswithinthebusinessDefineabudgetandshowhowbudgets,strategicobjectivesandstrategicplansarerelatedDiscussthecriticismsthataremadeofbudgetingIdentifytheusesofbudgetingandconstructvariousbudgets,includingthecashbudget,fromrelevantdataPerformandcollectinformationonactualperformanceIdentifyandassessstrategicoptionsUndertakeapositionanalysisEstablishmission,visionandobjectivesSelectstrategicoptionsandformulatelong-term(strategic)plansPreparebudgetsIdentifyvariancesbetweenplanned(budgeted)andactualperformanceReviseplans(andbudgets)ifnecessaryRespondtovariancesandexercisecontrolFigure6.1TheplanningandcontrolprocessFigure6.2TheinterrelationshipofoperatingbudgetsFinishedinventoriesbudgetProduction

budgetRawmaterialsinventoriesbudgetOverheadsbudgetTrade

receivablesbudgetTradepayablesbudgetCapitalexpenditurebudgetRawmaterialspurchasesbudgetSales

budgetDirectlabourbudgetCashbudgetFigure6.3Theverticalrelationshipbetweenabusiness’ssalesbudgetsOverallsalesbudgetSalesbudget

NorthregionSalesbudget

SouthregionSalesbudget

EastregionSalesbudget

WestregionProvideasystemofauthorisation

BudgetsPromoteforwardthinkingandidentificationofshort-termproblems

ProvideabasisforasystemofcontrolMotivatemanagers

tobetterperformanceHelpco-ordinatethevarioussectionsofthebusiness

Figure6.4BudgetsareseenashavingfivemainbenefitstothebusinessFigure6.5Stepsinthebudget-settingprocessIdentifythekey,orlimiting,factorPreparethemasterbudgetsCommunicatethebudgetstoallinterestedpartiesMonitoractualperformancerelativetothebudgetCommunicatebudgetguidelinestorelevantmanagersEstablishresponsibilityforthebudget-settingprocessPreparethebudgetfortheareaofthelimitingfactorPreparedraftbudgetsforallotherareasReviewandco-ordinatebudgetsStep1Step2Step3Step4Step5Step8Step7Step6Step9Figure6.6BudgetingandbusinesssizeSource:Panko,R.(2018)Whysmallbusinessesneedbudgets,ClutchCo.,23October,https://clutch.co/accounting/resources/why-small-businesses-need-budgets.(%)5201510010%28%11%27%12%2%Cameinonplan26%to50%ov