Budgeting: Fourth Edition: A Comprehensive Guide

Table of Contents
Chapter 1 - Introduction to Budgeting

The Advantages of Budgeting

The Disadvantages of Budgeting

Capital Budgeting Problems

The Command and Control System

Behavioral Impacts

Bureaucratic Support

Information Sharing

Chapter 2 - Cost-Volume-Profit Analysis

Contribution Margin

Contribution Margin Income Statement

Breakeven Point

Margin of Safety

Cost-Volume-Profit Analysis

Sales Mix

Chapter 3 - The System of Budgets

The System of Budgets

Operating Decisions Impacting the System of Budgets

The Reasons for Budget Iterations

The Number of Budget Scenarios

Chapter 4 - The Revenue Budget

Overview of the Revenue Budget

The Detailed Revenue Budget

Responsibility for Revenue Information

Sources of Revenue Information

The Impact of Pacing on the Revenue Budget

The Inherent Variability of the Revenue Budget

Chapter 5 - The Ending Finished Goods Inventory Budget

Ending Inventory Assumptions

Impact of Changes in Ending Inventory

The Ending Finished Goods Inventory Budget

Chapter 6 - The Production Budget

The Production Budget

Other Production Budget Issues

Budgeting for Multiple Products

Chapter 7 - The Direct Materials Budget

The Direct Materials Budget (Roll up Method)

The Direct Materials Budget (Historical Method)

The Direct Materials Budget (80/20 Method)

Anomalies in the Direct Materials Budget

The Role of the Direct Materials Budget

Chapter 8 - The Direct Labor Budget

The Direct Labor Budget (Traditional Method)

The Direct Labor Budget (Crewing Method)

The Direct Labor Budget for Manufacturing Cells

The Cost of Direct Labor

Anomalies in the Direct Labor Budget

Chapter 9 - The Manufacturing Overhead Budget

The Manufacturing Overhead Budget

Overhead Allocation between Periods

Additional Issues

Chapter 10 - The Cost of Goods Sold Budget

The Cost of Goods Sold Budget

Chapter 11 - The Sales and Marketing Budget

Types and Timing of Sales and Marketing Expenses

Structure of the Sales and Marketing Budget

Sources of Sales and Marketing Expense Information

Analysis of the Sales and Marketing Budget

Diminishing Returns Analysis

Sales and Marketing Pacing

The Impact of Bottlenecks on the Sales and Marketing Budget

Sales and Marketing Metrics

Chapter 12 - The Research and Development Budget

General Funding for Research and Development

Research and Development Funding Decisions

Expected Commercial Value

Project Risk

Project Selection Issues

The Project Failure Rate

Structure of the Research and Development Budget

Ongoing Project Analysis

Research and Development Measurements

Treatment of Cancelled Projects

Chapter 13 - The Administration Budget

The Administration Budget

Cost Variability in the Administration Budget

Allocation of Administration Expenses

Service-Based Costing

Chapter 14 - The Capital Budget

Overview of Capital Budgeting

Capacity Expansion Strategy

Capacity Reduction Strategy

Risk Levels

Additional Risk Factors for International Investments

Bottleneck Analysis

Net Present Value Analysis

The Payback Method

Capital Budget Proposal Analysis

The Outsourcing Decision

The Capital Budgeting Application Form

The Post Installation Review

The Lease versus Buy Decision

Capital Budgeting with Minimal Cash

Chapter 15 - The Compensation Budget

The Compensation Budget

The Treatment of Hourly Pay and Overtime

The Benefits Budget

The Headcount Budget

The Link between Budgets and Bonus Compensation

Chapter 16 - The Master Budget

The Budgeted Income Statement

Components of the Budgeted Balance Sheet

Accounts Receivable

Inventory

Fixed Assets

The Financing Budget

The Budgeted Balance Sheet

Accompanying Documentation

Chapter 17 - Nonprofit Budgeting

The Revenue Budget

The Management and Administration Budget

The Fundraising Budget

Program and Grant Budgets

Chapter 18 - Flexible Budgeting

The Flexible Budget

The Flexible Budget Variance

Advantages of Flexible Budgeting

Disadvantages of Flexible Budgeting

Chapter 19 - Cost Variability

Mixed Costs

Labor-Based Fixed Costs

Costs Based on Purchase Quantities

Costs Based on Production Batch Sizing

Cost Based on Step Costs

Time-Based Costs

Experience-Based Costs

Incorporating Cost Variability into Reports

Chapter 20 - The Zero-Base Budget

Incremental Budgeting

Overview of Zero-Base Budgeting

The Zero-Base Budgeting Process

Step 1 - Develop Decision Packages

Step 2 - Rank Decision Packages

Advantages of Zero-Base Budgeting

Problems with Zero-Base Budgeting

Conditional Budgeting

Chapter 21 - Operating without a Budget

Alternatives to the Budget

Forecasting without a Budget

Capital Budgeting

Goal Setting without a Budget

Strategy without a Budget

Management Guidelines

The Role of Senior Management

Corporate Staff Roles

Board Approvals

Compensation without a Budget

Controls without a Budget

Behavioral Norms

Profit Knowledge

Information Exchange

Hiring, Promotions, and Continuity

Customer Ownership

Service Center Pricing

Accounting Reports

Transfer Pricing

Investor Relations

Implementation of the No-Budget Environment

Chapter 22 - The Rolling Forecast

The Rolling Forecast Process

The Rolling Forecast Format

Continuous Budgeting

Chapter 23 - Budgeting Procedures

Procedure – Formulation of the Budget

Procedure – Issue Budget Variance Reports

Procedure – Subsequent Account Changes

Chapter 24 - Budgeting Efficiencies

Budget Model Efficiencies

Spreadsheet Error Checking

Verification Opportunities

Simplification Opportunities

Simplification over Time

Budgeting Process Efficiencies

Participative Budgeting

Chapter 25 - Budget Reporting

General Reporting Format

Revenue Reporting

Selling Price Variance

Sales Volume Variance

Overview of Cost of Goods Sold Variance Reporting

The Purchase Price Variance

Material Yield Variance

Labor Rate Variance

Labor Efficiency Variance

Variable Overhead Spending Variance

Variable Overhead Efficiency Variance

Fixed Overhead Spending Variance

Problems with Variance Analysis

Which Variances to Report

How to Report Variances

Chapter 26 - Budgeting Controls

Budget Creation Controls

Budget Integration Controls

Appendix - Sample Budget

Glossary

Index