Budgeting and Decision Making

This book is the last of seven books which introduces the basic principles of accounting. In this book you will learn about planning for success through budgeting. Key budgets, such as the sales, production, direct materials purchases, direct labor, overhead, selling and administrative, and cash budgets are all discussed in detail. Critical elements of budget analysis, including flexible budgets, standard costs, and variance analysis are discussed. Key topics including sunk costs, outsourcing, special orders, make versus buy, and evaluation of long-term projects.

Content :-

• Part.1 Budgeting: Planning for Success
• Importance of Budgets
  1. Forms and Functions
  2. Avoiding Business Chaos
  3. An Electrifying Case in Budgeting
  4. Recapping Benefits of Budgeting
• Budget Processes and Human Behavior
  1. Budget Construction
  2. Mandated Budgets
  3. Participative Budgets
  4. Blended Approach
  5. Organizational Structure Considerations
  6. Flattening the Organization Chart
  7. Budget Estimation
  8. Slack and Padding
  9. Zero-Based Budgeting
  10. The Impossible Budget and Employee Capitulation
  11. Ethical Challenges in Budgeting
• Components of the Budget
  1. Sales Budget
  2. Production Budget
  3. Direct Material Purchases Budget
  4. Direct Labor Budget
  5. Factory Overhead Budget
  6. Selling and Administrative Expense Budget
  7. Cash Budget
  8. Budgeted Income Statement and Balance Sheet
  9. External Use Documents
  10. Performance Appraisal
• Budget Periods and Adjustments
  1. Continuous Budgets
  2. Flexible Budgets
  3. Encumbrances
• Part. 2 Tools for Enterprise Performance Evaluation
• Responsibility Accounting and Management by Exception
  1. Centralized Versus Decentralized Decision-Making
  2. Responsibility Centers
  3. Cost Center
  4. Profit Center
  5. Investment Center
  6. Affixing Responsibility
  7. Responsibility Center Reports
  8. The Power of a Data Base System
  9. Traceable Versus Common Fixed Costs
  10. Management by Expansion
• Flexible Budgets
  1. Flexible Budget for Performance Evaluations
  2. Flexible Budgets for Planning
  3. Flexible Budgets and Efficiency of Operation
• Standard Costs
  1. Setting Standards
  2. Philosophy of Standards
  3. The Downside of the Standards
• Variance Analysis
  1. Variances Relating to Direct Materials
  2. An Illustration of Direct Material Variance Calculations
  3. Journal Entries for Direct Material Variances
  4. When Purchases Differ From Usage
  5. Variances Relating to Direct Labor
  6. An Illustration of Direct Labor Variance Calculations
  7. Journal Entries for Direct Labor Variances
  8. Factory Overhead Variances
  9. Variable Versus Fixed Overhead
  10. Variances Relating to Variable Factory Overhead
  11. Exploring Variable Overhead Variances
  12. An Illustration of Variable Overhead Variances
  13. Journal Entry for Variable Overhead Variances
  14. Careful Interpretation of Variable Overhead Variances
  15. Variances Relating to Fixed Factory Overhead
  16. An Illustration of Fixed Overhead Variances
  17. Journal Entry for Fixed Overhead Variances
  18. Recapping Standards and Variances
  19. Examining Variances
• Balanced Scorecard Approach to Performance Evaluation
  1. The Balance Scorecard in Operation
• Part.3 Reporting Techniques in Support of Managerial Decision Making
• Variable Versus Absorption Costing
  1. Absorption Costing
  2. Variable Costing
  3. Variable Costing in Action
  4. A Double-Edge Sword
  5. Avoiding a Downward Spiral
  6. Confused?
  7. An In-Depth Comparison of Variable Costing and Absorption Costing Income Statements
  8. The Impact of Inventory Fluctuations
• Segment Reporting

1. Internal Reporting of Segment Data
2. The Problem of Segment Income Measurement
3. Contribution Income Statement Format
4. External Reporting of Segment Data

• Measures of Residual Income
  1. Keeping Residual Income in Perspective
• Concepts in Allocating Service Department Costs
  1. The Direct Method of Allocating Service Department Cost
  2. The Step Method of Allocating Service Department Cost
  3. Multiple Steps and Simultaneous Allocations
• Leveraging the Power of Modern Information Systems
  1. Line Item Versus Object of Expenditure
  2. Business Dashboard
• Part 4. Analytics for Managerial Decision Making
• Cost Characteristics and Decision-Making Ramifications
  1. Sunk Costs Versus Relevant Costs
  2. A Basic Illustration of Relevant Cost/Benefit Analysis
  3. Complicating Factors
• Business Decision Logic
  1. Outsourcing
  2. Outsourcing Illustration
  3. Capacity Considerations in Outsourcing
  4. Illustration of Capacity Considerations
  5. Qualitative Issues in Outsourcing
  6. Special Orders
  7. Capacity Constraints and the Impact on Special Order Pricing
  8. Discontinuing a Product, Department, or Project
  9. The 80/20 Concept
• Capital Expenditure Decisions
  1. Management Stewardship
  2. Logic and Justification of Capital Decisions
• Compound Interest and Present Value
  1. Compound Interest
  2. Future Value of Annuities
  3. Future Value of an Annuity Due
  4. Future Value of an Ordinary Annuity
  5. Present Value
  6. Present Value of an Annuity Due
  7. Present Value of an Ordinary Annuity
  8. Electronic Spreadsheet Functions
  9. Challenge Your Thinking
• Evaluation of Long-Term Projects
  1. Net Present Value
  2. Impact of Changes in Interest Rates
  3. Emphasis on After Tax Cash Flows
  4. Accounting Rate of Return
  5. Internal Rate of Return
  6. Payback Method
  7. Conclusion
• Appendix