Beruflich Dokumente
Kultur Dokumente
Responsibility Accounting
Chapter 6
Performance planning
Providing a frame of reference
Investigating variations
Corrective action
Planning again
Master
Master Budget
Budget based on one
expected scenario
Operating
Operating Financial
Financial
Decisions
Decisions Decisions
Decisions
Long-run Long-run
Planning Budgets
Strategy
Analysis
Short-run Short-run
Planning Budgets
Materials
Inventory B.
Procurement B.
Requirements
Sales Budget Production B.
Budget:
- Materials
Finished Goods - Labor
Inventory B. - Capacities
• June $200,000
• July $250,000
• August $264,000
• September $260,000
Total $239,500
Cash Budget
for the Month Ending August 31, 2004
Lubriderm Corporation has the following budgeted sales for the next six-month
period:
Month Unit Sales
June 90,000
July 120,000
August 210,000
September 150,000
October 180,000
November 120,000
There were 30,000 units of finished goods in inventory at the beginning of June.
Plans are to have an inventory of finished products that equal 20% of the unit
sales for the next month.
Five pounds of materials are required for each unit produced. Each pound of
material costs $8. Inventory levels for materials are equal to 30% of the needs
for the next month. Materials inventory on June 1 was 15,000 pounds
Budgeted Hours/Item
January – March 2004 3.00
April – June 2004 2.95
July – September 2004 2.90
October – December 2004 2.85
Cost Accounting Horngreen, Datar, Foster
Activity-Based Budgeting
Product A Product B
Units produced: 880 200
Labor-hours per unit: 3 3
Budgeted setup-hours: 5 5
Total budgeted machine setup related cost is $25,920 per month.
Product A Product B
$12,960 $12,960
$2,592 × 5 $2,592 × 5
– production
– service
Cost Center
Profit Center
Investment Center
BDH Corporation, which makes only one product, Kisty, has the
following information available for the coming year. BDH expects sales
to be 30,000 units at $50 per unit. The current inventory of Kisty is 3,000
units. BDH wants an ending inventory of 3,500 units. Each unit of Kisty
takes two units of component L. Component L is budgeted to cost $12
per unit. Current inventory of L is 4,000 units. BDH wants 6,000 units of
L on hand at the end of the next year. How much will the direct materials
budget show as the cost of materials to be purchased?
• $330,000
• $390,000
• $684,000
• $756,000
In the above-cited article, ABC and its parent company, Walt Disney Company,
say that the show "Who Wants to be a Millionaire," is the most profitable
television show ever - generating almost $1 billion in revenue in a little less than
two years on the air.
Each individual show costs about $700,000 to produce, including prize money
and host Regis Philbin's salary. Each show earns $2 million in advertising
revenue. The rights to air Millionaire are also sold to Canada for $250,000 per
episode.
The Millionaire show also sells a CD-ROM game for $20. About 4 million of
these games have been sold.
There is also an on-line version of the game that Millionaire fans can play. Users
of the game don't pay, but each "hit" is noted when advertising space is sold for
the site.
The article also points out that Disney also sells hats and t-shirts of the game,
and markets a special version of "Millionaire" to corporations that can be played
at conventions by employees and clients.
1. The Millionaire show itself generates about $1.3 million per episode in
net income ($2 million in revenue, $700,000 in expenses.) Give a
reason why this should be considered a profit center for evaluating a
manager's performance.
2. Do you think that one manager has responsibility for the Millionaire
show, as a profit center, or is it divided as a cost center and as a
revenue center?