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Master Budget and Flexible Budgeting
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Overview
Compute and prepare a flexible budget, and then write a 1–2-page comparison of a stable inventory policy and a stable production policy.
By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:
Competency 2: Prepare budgets.
o Apply budgeting process general principles.
o Compute components of flexible budgets.
Master Budget and Flexible Budgeting
Competency 4: Apply cost analysis to assist management decision making.
o Determine factory overhead at varying production levels.
o Analyze the advantages and disadvantages of a stable production policy.
o Analyze the advantages and disadvantages of a stable inventory policy.
Context
For manufacturing companies, labor is a significant cost in the production cycle, from the raw materials stage to shipping of the finished product to the customer. As robotics increasingly replace humans on the assembly line, direct labor costs have become a smaller percentage of total production costs. The transition to robotics has also impacted indirect manufacturing costs, such as depreciation, insurance, and taxes on the robots.
By definition, direct labor is the effort of employees who transform direct materials into a finished product. Meanwhile, indirect labor costs consist of the wages of production employees who do not work directly on the product but are required for the manufacturing facility to operate. These labor costs require the organization to adopt accounting procedures for handling and recording the various payroll costs.
Master Budget and Flexible Budgeting
Questions to Consider
To deepen your understanding, you are encouraged to consider the questions below and discuss them with a fellow learner, a work associate, an interested friend, or a member of the business community.
• Why is it important to distinguish between variable costs and fixed costs for budgeting purposes?
• Why is it important for organizations’ executive leadership to include front line managers in the budgeting process?
Resources
The following resources are required to complete the assessment.
The following optional resources are provided to support you in completing the assessment or to provide a helpful context. For additional resources, refer to the Research Resources and Supplemental Resources in the left navigation menu of your courseroom.
• Cutler, T. R. (2010). The language of cost. Industrial Engineer, 42(9), 47–50.
• Jagolinzer, P. (2000). Cost accounting: An introduction to cost management systems. Cincinnati, OH: South-Western College Publishing.
• Kren, L. (2014). Tracking value created by efficiency improvements in a traditional overhead cost management system. Engineering Management Journal, 26(1), 3–7.
• Lee, R. T. (2013). Target: Carrying costs. Industrial Engineer, 45(8), 38–42.• Marshall, P. D., & Dombrowski, R. F. (2003, February/March). A small business review of accounting for primary products, byproducts and scrap. National Public Accountant, 10–13.
• Pachura, R. (1998). When is enough, enough?. IIE Solutions, 30(10), 33–35.
• Rao, S. S. (1997). ABCs of cost control. Inc. Tech, 19(9), 79–81.
• Rikhardsson, P. M. (2004). Accounting for the cost of occupational accidents. Corporate Social – Responsibility and Environmental Management, 11(2), 63–70.
• The payroll handover. (1997, August). Management Today, 13.
VanDerbeck, E. J. (2013). Principles of cost accounting (16th ed.). Mason, OH: South-Western Cengage Learning.o Chapter 7.
Master Budget and Flexible Budgeting
Assessment Instructions
For this assessment, complete the following two parts:
Part 1: Use the Assessment 3 Template (linked in the Resources) to compute and prepare a flexible budget for Central Manufacturing Company.
Part 2: Using the information in the template, write a 1–2-page Microsoft Word document in which you include the following:
• Analyze the advantages and disadvantages of a (a) stable production policy and (b) stable inventory policy for a company that has greatly fluctuating sales during the year regarding a master budget and a flexible budget.
• Provide support for your response, and follow APA style for citations and references.
Use 12-point font and double space your paper.
Submit both the completed template and the Word document for this assessment
Master Budget and Flexible Budgeting
Below is a partial answer to the above homework questions by one of our writers. If you are interested in a custom non plagiarized top quality answer, click order now to place your order.
Master Budget and Flexible Budgeting Assessment
Production policies put in place by a manufacturing company is meant for a heavy outcome in return. Stable production policies formulated by the company help guide the production process. Production policy of the manufacturing company allows it to draw a budget that the company can use to measure its performance. Stable production costs enable the management to group costs incurred in course of production as either fixed or variable.
Flexible Budgeting
The company groups its production costs as either as fixed or as variable costs. Fixed costs are costs that do not change with the change in output; the manufacturing company’s fixed costs projected do not change despite the change in units of production in the flexible budget. Variable costs changes with the change in production output level. Variable costs include; direct material, direct labor, and any other variable overheard that is incurred in the production (Klychova et al., 2014).
Stable production policy gives an organization an opportunity to prepare a flexible budget, carry out planning and performance evaluation and other types of budgeting. Planning and performance policy ensures that budgets are set ahead of the budget period based on the anticipated customers in the surrounding. Performance evaluation tends to compare if the budget is reflected in the actual performances (López & Hiebl, 2014). If the actual result conflicts with the budget, management will review their plans and check on the areas of weakness……
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