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Master Budget
and Responsibility Accounting
Chapter 6
Budgets and the Budgeting cycle
Planning the performance of the company as a
whole, as well as planning the performance of
its subunits(such as departements or divisions).
 Providing a frme of reference, a set of specific
expectations against which actual results can be
compared.
 Investigating variation from palns. If necessary,
corrective action follows investigation.
 Planning again, in light of feedback and changed
conditions.

Advantages of Budgets
Compels strategic planning and
implementation of palns
 Provides a framework for judging
performance
 Motivates managers and employeres.
 Promotes coordination and communication
among subunits within the company.

Strategiy, Planning, and Budgets
Long – Run Planning
Long – Run Budgets
Short – Run Planning
Short – Run Budgets
Strategic
Analysis
Framework for Judging Performance
 Motivating Managers and Employees
 Coordination and Communication
 Administration of Bugets

Revenues Budget
Ending Inventory
Budget
Production Budget
Direct Materials
Costs Budget
Direct Manufacturing
Labor Costs
ManufacturingO
verhead Costs
Budget
Cost of Goods Sold
Budget
R & D / Design
Costs Budget
Marketing Costs
Budget
Distribution Cost
Budget
Customer Service
Costs Budget
Administrative
Costs Budget
Budgeted Income
Statement
Capital
Expenditures
Budget
Cash
Budget
Budgeted
Balance Sheet
Budgeted Statement
of Cash Flows