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Module 3 - Coggle Diagram
Module 3
Part A
Plans & Budget
(pg102)
Part B
Master Budgets
Impact of External & Internal factors
(table 3.2) (Pg109)
Operational Budget (Pg110)
(Refer KE Slide formula)
Step 1: Sales Bud
Step 2: Production Bud
Step 3: Direct material cost Bud
Step 4: Direct Mfg labour costs Bud
Step 5: Mfg overhead cost Bud
Step 6: Finished Inventory Bud
Step 7: COGS Bud
Step 8: Period cost Bud
Financial Budget (Pg114)
Refer KE Slide
Income Statement
(Revenue, Exp, Net Profit)
Cash Budget
(Operations, Investing, Financing)
Capital Expenditure Budget (Pg115)
Decentralized Budget
(Roll up/bottom up)
Flexible Budgets (pg116)
Refer KE Slide
Stage 1: Planning stage - Scenario
(give difference scenarios)
(sell more unit, selling price lower)
Stage 2: Change/Controlling
after adjusting to ensure make sense
Budget is static & Fixed. Hence need to flex
Part C
Variance Analysis
(1) Favorable
actual revenue > budgeted
Actual Cost < budgeted
(2) Unfavourable
Actual revenue < budgeted
Actual cost > budgeted
(1) Cannot use Budgeted minus Actual =
Static analysis (WRONG)
(2) Need to flexible the budget
(a)
Price Variance (KE slide Eg 3.9)
Step 1: Actual Qty x Actual Price
Step 2: Act Qty x Bud Price (what we would bud if we knew)
Compare Two
(AQ x AP) - (AQ x BP)
(b) Efficiency Variance (Quantities) (KE Slide Eg 3.13)
Step 1: AQ x BP
Step 2: BQ for AQ x BP
Step 3: Compare Step 1 and 2
(AQ x BP)
- Bud Qty allowed for Act Qty x Bud Price
(BQ for AQ x BP)
Sales Volume Variance
Sales Price Variance
KE Slide Eg 3.14
Sales Volume Variance
(AQ - BQ) x Bcm
Actual Qty Sold - Bud Qty Sold) x Bud contribution Margin per unit sold (Selling price - Variable cost)
KE Slide Eg 3.15
Sales Price Variance
(AP - BP) x Actual Qty Sold (AQ)
Direct Material Flexible Bud Variance
2 more items...
1) Strategic planning - 2 to 5 years, less detail, broad plan
2) Operational planning - usually 1 year, very detailed,
(a) Master Budget (Operational & Financial Budget)
Responsibility Centre (Pg105)
Revenue, Cost, Profit and Investment
Part D:
Behaviour Aspect
Top Down Approach
Bottom Up Approach
(Pg133)
Bottom up
- Adv - Increase goal congruence, more responsibility
Top down
- Disadv - Padding budget, Budgetary Slack, Dysfunctional
Setting Realistic Budget
(Pg135)
Not using budget to evaluate performance/bonus
Give reward provide accurate bud estimates
Incentives (pg136)
Monetary (Extrinsic)
Individual, Group, share/equity, salary increase, bonus, promotion, dismissal
Non-Monetary (Intrinsic)
Psychological, Social factor, Responsibility, challenges, freedom, acknowledgement
Part E:
Alternative Budget
Shortcoming Traditional Bud (Pg137)
Time Consuming, constrain responsiveness , barrier to change, cost reduction and not value creation etc
Incremental Budgeting (Pg138)
Top-down
take last year - rolling the mover by add %
Problem - fails to plan future, builds in mistake of the past, ignore changing internal & external factors
Zero-based (pg138)
Bottom up
build from scratch
Issue: build amt required linking strategy and what it actually cost to perform
Activity-based Budget (pg139)
(Module 6)
Beyond Budgeting (pg141)
Refer KE Slide
Leadership Principles & Management Processes