Essay on Master Budget

2052 Words Apr 29th, 2012 9 Pages
CHAPTER 6

MASTER BUDGET AND RESPONSIBILITY ACCOUNTING

I. LEARNING OBJECTIVES

1. Describe what the master budget is and explain its benefits

2. Describe the advantages of budgets

3. Prepare the operating budget and its supporting schedules

4. Use computer-based financial planning models in sensitivity analysis

5. Explain kaizen budgeting and how it is used for cost management

6. Prepare an activity-based budget

7. Describe responsibility centers and responsibility accounting

8. Explain how controllability relates to responsibility accounting

II. CHAPTER SYNOPSIS

Chapter 6 introduces the important topic of budgets. Budgets are the primary financial planning tool used by businesses. The
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Sensitivity analysis is a “what-if” technique typically performed with computer software to determine how the financial results will change if one or more of the variables or assumptions in the original budget change.

(Exhibits 6-4 and 6-8 display sensitivity analysis results.)

Do Chapter Quiz #6. Assign Problem 6-29 PHGA.

Companies are under increasing pressure in today’s competitive business environment to reduce costs in order to maintain or lower selling prices. Kaizen budgeting is a budgeting technique that incorporates continual reductions in costs into the company budget. Managers are thus required to reduce costs throughout the year or they will not be able to meet their budgetary targets.

Do Chapter Quiz #7. Assign Exercise 6-25 PHGA, EXCEL.

Many companies have turned from traditional costing systems to activity-based costing systems to provide them with better cost information. For companies using activity-based costing systems, a switch to activity-based budgeting makes sense. An activity-based budget is prepared by focusing on the budgeted costs of activities needed to produce and/or sell products and service instead of using the traditional approach.

Do Chapter Quiz #8. Assign Exercise 6-24 PHGA, EXCEL.

An

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