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1、A Look BackChapter 22 looked at cost behavior and its use by managers in performing cost- volume-profit analysis. It also illustrated the application of cost-volume-profit analysis.A Look at This ChapterThis chapter explains the importance of budgeting and describes the master bud- get and its prepa
2、ration. It also discusses the value of the master budget to the planning of future business activities.A Look AheadChapter 24 focuses on flexible budgets, standard costs, and variance reporting. It explains the usefulness of these proce- dures and reports for business decisions.Master Budgets and Pl
3、anning CAPLearning Objectives23CONCEPTUAL C1 Describe the importance and benefits of budgeting and the process of budget administration. (p. 946) C2 Describe a master budget and the process of preparing it. (p. 950)ANALYTICAL A1 Analyze expense planning using activity-based budgeting. (p. 960)PROCED
4、URAL P1 Prepare each component of a master budget and link each to the budgeting process. (p. 952) P2 Link both operating and capital expenditures budgets to budgeted financial statements. (p. 956) P3 Appendix 23APrepare production and manufacturing budgets. (p. 966)LP23wiL10874_ch23_944-987.indd Pa
5、ge 944 8/14/10 8:00:13 PM user-f500wiL10874_ch23_944-987.indd Page 944 8/14/10 8:00:13 PM user-f500/Users/user-f500/Desktop/TEMPWORK/DontDelete_Jobs/MHDQ251:Beer:201/ch04/Users/user-f500/Desktop/TEMPWORK/DontDelete_Jobs/MHDQ251:Beer:201/ch04Bethesda, MDPeter Smathers Carter and Austin Branson s entr
6、e- preneurial adventure began with needlepoint belts they each re- ceived as gifts. Noting the interest the belts received, the duo began planning a company to manufacture cool hand-stitched belts. The result is Smathers and Branson (SmathersAndB), with annual sales now exceeding $2.5 million.The co
7、mpany s products are best summed up as “not your grandmother s needlepoint. ” Belt designs include a string of banded beer cans, a “jolly roger” with skull and crossbones, and a martini-sipping pink elephant. As Austin explains, “we keep having random brainstorming sessions and adding good patterns.
8、 ” Yet their belts are more than just funky designs. Peter and Aus- tin s belts are hand-stitched and use some of the best materials the finest threads from Europe, full-grain leather tanned in Asia, and belt buckles from the United States.Using top-quality materials and hand-stitching each belt rat
9、her than mass producing is not cheap, something the pair quickly realized in their budget planning process. Noting it takes about 40 to 50 hours to hand-stitch a single belt, Peter explains that “we calculated the materials and labor it cost our girlfriends to make the belts at around $300 per beltm
10、ore than the mar- ket would bear. ” The use of direct materials, direct labor, and factory overhead budgets led them to focus on reducing direct labor costs as essential. Now, the company employs almost 2,000 stitchers in Vietnam, enabling the duo to sell their hand- crafted belts at prices the mark
11、et will pay. Sales, production, and manufacturing budgets help Peter and Austin continue to plan their use of materials, labor, and overhead.As Austin puts it, “our original plan was to be finance majors. But the belts seemed more fun and unique and different. ” Keeping it fun and profitable however
12、 requires attention to plans. As the company continues to expand into additional product linesdog collars, key fobs, wallets, headbands, wallets, and flasksmaster budgets and the budgeting process become even more impor- tant. Budgets help formalize business plans and goals, and help direct and moni
13、tor employees. Peter and Austin also use budgeted income statements to determine how changes in the costs of ma- terial, labor, or overhead, impact the bottom line.While linking budgeted data to budgeted financial statements and using that information to control costs is important, both Peter and Au
14、stin stress the importance of having fun and a pas- sion for what they do as keys to their success. Austin explains “we re having a great time and growing rapidly. ”Sources: Smathers and Branson Website, January 2011; I, 2009; G; TDecision Insight“ This is incredible . . . people thought it was a fo
15、olish idea” AUSTIN BRANSONNot Grandma s NeedlepointwiL10874_ch23_944-987.indd Page 945 8/16/10 9:33:48 PM user-f500wiL10874_ch23_944-987.indd Page 945 8/16/10 9:33:48 PM user-f500/Users/user-f500/Desktop/TEMPWORK/DontDelete_Jobs/MHDQ251:Beer:201/ch04/Users/user-f500/Desktop/TEMPWORK/DontDelete_Jobs/
16、MHDQ251:Beer:201/ch04Chapter PreviewManagement seeks to turn its strategies into action plans. These action plans include financial details that are compiled in a mas- ter budget. The budgeting process serves several purposes, in- cluding motivating employees and communicating with them. The budget process also helps coordinate a company s activities toward common goals and
