Tuesday, April 15, 2008
Today, I went into the lecture pretty exhausted as I was walking really fast so that I could get to the lecture on time. The lecturer talked about the Break Even Chart which is Revenue Vs Units graph. the line that passes through the origin is known as the total revenue line and the other line is the total cost line. The two lines intersect at the break even point and the break even revenue respectively. The region above the break even point is the profitable region and the region blow the break even point is called the region of loss. the total cost line will cut at the y intercept. The value is the fixed cost. Next, he talked about the profit and volume chart which he elaborate on based on the chart, where to find the total CM , the profit and the fixed cost. The line is also called the CM line which gradient gives the CM per unit.The rest of the evening, he talked about the budget. The budget is to plan and control. Plan is set up of target and control is to ensure that targets are achieved.
He went on to talked about the benefits of budgeting:
- Forces the organistaion to plan and improve coordination in the organisation.
- Provides a framework for Respoinsibility Accounting (CENTRES)
- Improves communication
- Improves control
- Improves motivation & promotes goal congruence
- Integration of Budgets makes better cash and working capital management.
Budget Period:
short: 1 year
long: 5 years
Goal congruence is when organisational, departmental and individual objectives made to coincide.
He went on to talk about the steps in budgeting and empahasizes on the preparation of functional and master budgets.
Sales budget -> Production Budget -> (D.M, D.L, OH Budget) -> Admin Budget -> (from here on is master budget but not master budget process!) Cash Budget -> Forecast, P & L and B.S Budget.
Labels: accountancy, accounting, budget, management accountancy, managerial accounting
what we could have been, 11:04 PM.
