Budgeting and Standard Costing

The Chapter 11: BudgetingIn this chapter I introduce budgeting, including out-turn/year's forecast, and show how it ties into the management process. I do believe in budget, budget, budget. From a financial point of view, budgeting results in a set of financial documents in the form of an income statement, balance sheet and cash flow forecast. These statements are prepared, and approved prior to a defined future period, for the purpose of attaining specific objectives. I will also introduce the concept of preparing an out-turn or year's forecast at set times during the year. Here the focus is on the expected year end position.One example will take you through the preparation of a Cash Budget followed by interpreting the results. A second example will take you through the preparation of a Cash Budget, Income Statement and Balance Sheet.Chapter 12: Standard CostingStandard costing is similar to budgeting in many ways. Instead of looking a whole business, standard costing basically sets "budgets" for products or services. These can then be used to compare actual results or each product/service. We all set personal standards, e.g. how long it takes to get to work; will depend on road conditions, performance of vehicle and the abilities of the driver. Through to standards for personal behaviour.Following an introduction I will then provide worked example on the analysis of variances with suitable comments on the results. I will show both a tabular method for variance analysis and a formula method.The John Robertson, Dip ML (Lancaster), Phd. (Brunel), now retired, was Head of the Defence Management Group and Deputy Head of the Department of Defence Management and Security Analysis at Cranfield University, Shrivenham Campus.He taught accounting and finance to 2nd and 3rd year undergraduates following degrees in Engineering, Computing and Logistics, also full and part time Masters programmes in Defence Administration (MDA).He gave regular guest lectures in a number of Universities.A Fellow of the Chartered Institute of Management Accountants (FCMA)., and author of numerous articles on financial ratios and ratio models. Author of “Accounting Principles for Non-Accounting Students” 2nd edition; a research monograph, “Measuring Changes in Financial Health through Ratio Analysis”. Co-author of “Fundamentals of Managerial Accounting and Finance” 4th edition.