Part1 Core Concepts课程.docVIP

SU1: Budgeting Concepts and Forecasting Techniques CORE CONCEPTS Budgeting Concepts A budget is a planning tool, a control tool, a motivational tool, and a communication tool. A budget helps communicate to all employees what goals the firm is trying to accomplish. Without a master budget, each department might think the firm has different goals. The budget is a formal quantification of management’s plans. A budget lays out in specific terms an organization’s expectations about the consumption of resources and the resulting outcomes. The budget lays out the specific revenue targets and expense limitations for each functional area and department of the organization on a month-by-month basis. A budget cannot simply be a lump-sum total for a year. Incremental goals must be achieved each month or week. This is especially true in seasonal businesses such as agricultural supply. Controllability is the extent to which a manager can influence activities and related revenues and costs. Controllable costs are those that are under the discretion of a particular manager. Noncontrollable costs are those to which another level of the organization has committed, removing the manager’s discretion. The principle of controllability must be kept in mind when the budget is used as the basis for managerial evaluation. The planning process coordinates the efficient allocation of organizational resources. Participation in the budget preparation process is up and down the organization. Standard costs are predetermined expectations about how much a unit of input, a unit of output, or a given activity should cost. The use of standard costs in budgeting allows the standard-cost system to alert management when the actual costs of production differ significantly from the standard. A purely top-down (authoritative) approach to standard setting has the advantage of ensuring total consistency across all functional areas. It is also far less complex and time-consuming than coordinating input from th